Friday 10th August 2018
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Suncorp New Zealand will manage its costs more closely in the coming year as the insurer thinks deeply about its pricing, although chief executive Paul Smeaton is still upbeat about the expected moderation in economic growth.
The local unit of Brisbane-based Suncorp Group lifted annual profit 70 percent to $148 million in the June 2018 year, bolstered in part by raising premium prices in response to higher reinsurance costs and attracting new customers. The insurer, whose brands include Vero Insurance and Asteron Life, expects gross written premium growth in the low single digits for the coming year after an 8.2 percent gain to $1.54 billion over the past year.
"What we're very focused on is management of claims and costs. The reason being, to ensure that we have a sustainable business going forward we have to think very carefully about affordability of pricing," which ultimately underpins net profit, Smeaton told BusinessDesk.
He expects top-line revenue growth to slow as New Zealand's inbound net migration continues to taper off. The country's expanding population has underpinned economic growth in recent years and been a boon for general insurers as a rising number of motorists seek cover for what's typically a person's second-most expensive asset behind a house.
Even if the economy slows, Smeaton said "our outlook is actually still quite positive for New Zealand".
That echoes other executives in the top-end of town, with ASB Bank chief executive Vittoria Shortt saying this week "New Zealand’s sound economic fundamentals have contributed to a positive operating environment" with low unemployment, strong terms of trade and a resilient housing market.
Chief executives in a KPMG survey this week tended to register a "slight softening" in confidence as the run of robust growth comes to an end, but are far more upbeat than wider business confidence surveys which are the most pessimistic they've been since the global financial crisis a decade ago.
Those confidence surveys are being taken seriously by policymakers with the Treasury noting the pessimism alongside other data raised risks of slower economic growth than predicted in the May budget.
Suncorp NZ's focus on pricing comes after premiums were raised last year as insurers passed on higher reinsurance costs they bore as a result of the Kaikoura earthquake in 2016. Government data show dwelling insurance prices climbed 18 percent in the 2018 June quarter from the same period a year earlier, while contents insurance was up 5.9 percent and vehicle insurance rose 5.7 percent.
Excluding construction, New Zealand businesses have struggled to pass on higher prices to customers who have been sitting on flat wages for several years and can more accurately compare prices using online tools.
Smeaton said that makes putting the customer first a top priority, such as through Suncorp's digital channels and sales incentives encouraging client retention over acquisition.
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