CORRECT: Suncorp posts 15% gain in first-half profit; flags potential reinsurance impact
o-last paragraph to show ongoing claims are industry wide)
By Fiona Rotherham
Feb. 11 - Suncorp Group, the general and life insurer, lifted its dividend payment after recording a 15 percent jump in first-half profit, while warning of a potential A$118 million impact relating to reinsurance for the Canterbury earthquakes, the Brisbane floods and Cyclone Yasi.
Net profit rose to A$631 million for the six months ended Dec. 31, from $548 million a year earlier, boosted by the performance from its New Zealand general insurance business, which consists of Vero and AA Insurance. The New Zealand general insurance business contributed an insurance trading result of $100 million, up from $74 million in the previous six months, the company said in a statement.
Gross written premium in New Zealand grew by 2.8 percent half-on-half although there was a double-digit softening in premiums for commercial property insurance. Benign weather conditions and lower earthquake claim costs for the half than the previous one contributed to the improved result, said Vero Insurance chief executive Gary Dransfield.
Group revenue was $8.46 billion for the period, a slight 2.5 percent rise on the previous corresponding period and Suncorp is now targeting single-digit top-line growth of between 4 percent to six percent due to an easing in the general insurance market, increased competition, and low interest rates.
Suncorp group CEO Patrick Snowball said the group would continue to target a return on equity of at least 10 percent for the 2015 financial year despite the A$250 million impact of the Brisbane hailstorm, the worst storm in three decades. The group will pay a fully-franked interim dividend of A38 cents, up 3 Australian cents, on April 1 to shareholders on the registered at Feb.20.
The insurance giant also advised of a potential issue relating to the placement of catastrophe reinsurance cover in 2011 after the combination of the September 2010 Canterbury earthquakes, the Brisbane floods and Cyclone Yasi.
"This potential issue is contrary to Suncorp's understanding of its additional reinsurance purchases made in 2011," it said
While uncertain whether there will be any financial impact, it has said Suncorp's maximum exposure won't exceed A$118 million after tax. It hasn't recognised the financial impact in the current results and will provide a further update after consulting reinsurance brokers and advisers.
Dransfield said it was too early to say how much of that exposure related to the Canterbury earthquakes but any fallout would have the backing of the parent group's reserves and he had notified the Reserve Bank about the issue.
He said the insurer was now expecting it will take until early 2016 to finally settle claims relating to the Canterbury Earthquake Recovery programme, about a year behind its original target.
It has paid out $4.1 billion to date, or 83 percent of an estimated total bill of $5 billion, as at the end of January .
'We can't put a hard date on when the last one will be given the litigation underway but we're expecting by the end of this calendar year that over 95 percent of all commercial claims will be finished and over 90 percent of residential claims. The only ones to be finalised by the start of 2016 will be unresolved litigation," he said.
Dransfield said the industry was still getting thousands of claims lodged for residential claims transferred from the Earthquake Commission that are over the $100,000 cap.
Vero also announced today an offer to home insurance customers of the full replacement value if their home is destroyed by fire or other non-natural disasters and up to an extra 10 percent cover for natural disasters.
The free benefit, which is conditional on customers having their sum insured at the same or higher than their home's rebuild cost, was aimed at encouraging the estimated half of New Zealand homeowners who haven't yet measured the cost of rebuilding their home since the industry switch to sum assured to do so, Dransfield said.