Wednesday 22nd February 2012
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Australia-based insurer Suncorp Group said an increase in the ultimate claims costs of Christchurch's Feb. 22 earthquake last year has led to it charging a further A$38 million against its first-half results.
As at June 30 last year, it had estimated the gross costs would be A$2 billion but more recent estimates had increased this to A$2.3 billion. Suncorp’s reinsurance cover for the year ended June 30, 2011 provided full cover for New Zealand events between A$200 million and A$2.5 billion.
“For NZ events over A$2.5 billion, Suncorp shares a small portion of the gross costs with reinsurers,” the company said. Even though the current estimate is still below A$2.5 billion, the company has allowed the A$38 million to ensure a 90 percent level of confidence of sufficiency and to allow for changes in the Australian/New Zealand dollar exchange rate.
“Should claims arising from the February 2011 earthquake settle in accordance with Suncorp's current estimate, the risk margin will reduce by A$38 million with a corresponding increase in profit,” the company said.
A Suncorp spokesman told Business Desk the company had already allowed NZ$50 million for the Feb. 22 earthquake in its results for the year ended June 30.
Suncorp said its New Zealand operations contributed an insurance trading result of A$13 million in the six months ended Dec. 31. That compares with an A$198 million trading loss in the six months ended June 2011 and a A$5 million loss in the six months ended December 2010.
While gross written premium rose 21 percent in Australian dollar terms, additional reinsurance costs caused a 5.2 percent reduction in net earned premium, Suncorp said.
“Despite global financial market volatility and a protracted recovery from the Christchurch earthquakes, the prospects for the New Zealand economy remain positive,” the company said.
“The December 2011 earthquake has added to claims management and rebuilding challenges in Christchurch,” it said.
In January, Suncorp said it expected Christchurch's Dec. 23 earthquake would cost it between A$10 million and A$20 million.
“Insurers, government agencies and others are stepping up efforts to address recovery issues. There is also growing national recognition of the need to better align insurance premiums and underwriting with the reality of New Zealand's earthquake experience.”
Overall, Suncorp's first-half net profit rose 74 percent to A$389 million despite its general insurance net profit falling 45 percent to A$162 million – Suncorp also has banking and life insurance operations.
On the ASX, Suncorp shares fell 2.7 percent to A$8.20, down from October's high at A$8.85 but well above August's low at A$6.03.
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