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Suncorp's NZ general insurance lifts earnings 12%, still focused on costs

Thursday 4th August 2016

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Suncorp Group's New Zealand general insurance units Vero and AA Insurance lifted annual earnings as they benefitted from growth in more profitable motor business, although the local group is still focused on stripping out costs. 

The NZ insurance business's profit rose 12 percent to $178 million on a 3.2 percent increase in gross written premium (GWP) to $1.34 billion in the 12 months ended June 30, Suncorp said in a statement to the ASX. The Vero and AA Insurance divisions lifted motor GWP 11 percent and home GWP 5.9 percent, which provided a bigger increase in net earned premiums than corporate property, which has different reinsurance arrangements. 

"New Zealand continues to build a balanced multi-channel business across both personal and commercial classes and is positioned for above system growth in a competitive and challenging market," Suncorp said. "Reducing expenses and claims costs through productivity efficiencies is an ongoing focus." 

Suncorp's New Zealand net incurred claims increased 8.9 percent to $612 million while acquisition costs rose 5.2 percent to $263 million, and its operating expenses ratio fell to 32.4 percent from 33.4 percent a year earlier. 

Across the wider group, Suncorp's net profit fell 8.4 percent to A$1.04 billion as its broader general insurance business faced lower margins. Suncorp's banking, life insurance and New Zealand units all delivered gains. 

The board declared a final dividend of 38 Australian cents per share, taking the annual payment to 68 cents, down from 76 cents in 2015 when Suncorp also paid a 12 cents per share special dividend. 

The insurer today said it had paid $4.9 billion in Christchurch earthquake claims, some 92 percent of the total expected cost. 

"Progress in settling Christchurch earthquake claims continues and Suncorp remains protected against further significant deterioration in earthquake costs due to the original catastrophe reinsurance and the additional adverse development cover purchased for the February 2011 event," it said. 

Suncorp purchased natural hazards aggregate cover for the New Zealand unit which provides A$300 million of cover once the retained portion of an event greater than A$5 million exceeds a total of A$460 million, it said. 

The New Zealand life division, which operates under the Asteron brand, increased in-force life premiums to A$219 million. The insurer again complained about "unsustainable sales practices, particularly in high upfront commissions", saying its new commission options launched in November "resulted in over half of new business across the past six months being sold on more sustainable commission terms".

Suncorp's ASX-listed shares closed yesterday at A$13.21, having gained 8.8 percent so far this year.

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