Suncorp's NZ insurance business posts 57% drop in first-half profit on quake costs
Suncorp Group's New Zealand insurance units posted a 57 percent decline in first-half profit, mainly reflecting the Kaikoura earthquake and additional 'over-cap' claims from the 2010/11 Canterbury earthquakes.
Suncorp New Zealand's general insurance and life insurance businesses had a profit of $37 million, down from $87 million a year earlier. The decline was mostly in Suncorp's NZ general insurance business, which operates Vero Insurance and AA Insurance in a joint venture, recording a 72 percent drop in profit to $19 million. Its life insurance businesses, Asteron Life and AA Life (a JV), had a 5.3 percent drop in earnings to $18 million.
The parent company today reported a 1.3 percent gain in first-half profit to A$537 million while also saying it was looking at strategic alternatives for its life insurance arm, which could include a sale or partnership. Suncorp's New Zealand life insurance business isn't covered in the review.
The parent company's results pack, released to the ASX today, shows operating expenses for New Zealand rose to A$203 million from A$186 million, offsetting lower expenses from Suncorp's insurance and banking & wealth businesses across the Tasman. The parent's results show net costs for natural hazard events included A$28 million of internal reinsurance on the Kaikoura earthquake. That was the Australian group's third-largest of 11 natural disaster events in the first half after storms in South Australia and Victoria in November and December.
Net of internal reinsurance, the Kaikoura earthquake costs were $20 million.
"Risk of further aftershocks from the Kaikoura earthquake remain over the coming months, however, the SNZ balance sheet remains well protected by the group reinsurance programme," the company said. "Reinstatement of catastrophe cover following the Kaikoura event will result in higher reinsurance expenses for the FY2017 year."
The parent's accounts show that net incurred claims from New Zealand rose 23 percent to $372 million. The actual claims expense in New Zealand soared 179 percent to $1.33 billion but was offset by a 455 percent surge in reinsurance and other recoveries to $955 million. Its insurance trading ratio dropped to 3.8 percent from 14.8 percent.
SNZ recorded the strongest gain in gross written premiums in home insurance, which rose 8.7 percent to $226 million in the first half. Commercial insurance rose 1 percent to $298 million while motor insurance rose 6.5 percent to $164 million.
The parent company today announced "an optimisation programme" for its Australian Life insurance division and is exploring "strategic alternatives" for that business. Suncorp NZ chief executive Paul Smeaton said the New Zealand life business was "out of scope" for the optimisation programme and operates as a strategically important standalone entity.
Suncorp's ASX-listed shares rose 0.2 percent to A$13.05 and have gained 20 percent in the past 12 months.