Profit squeezed after storms blow budget for Suncorp

SUNCORP has blown past its insurance budget for wild weather for the fifth time in a row, squeezing profits in the Brisbane-based financial giant.

Hailstorms in Melbourne in December and Toowoomba in October were among bad weather events that have triggered up to $416 million worth of claims for the first half of 2018 financial year, the insurance-banking group told the stockmarket yesterday. Suncorp, whose brands include AAMI and Apia, had set a $346 million allowance for such events. That means Suncorp has underestimated the allowance for every first-half result after 2013.

The latest miss comes despite Suncorp lifting the budget from $310 million from the same time 12 months ago, when the insurer was hit by South Australian storms and a New Zealand earthquake.

Exceeding the allowance affects profits, with the company to reveal half-year earnings results on February 15. Shares in Suncorp closed down 16¢ or 1.15 per cent at $13.72 yesterday.

October’s hailstorms in Toowoomba and Newcastle cost $37 million. In November, $27 million in hail damage hit Lismore and Bundaberg.

But the biggest bill came from a Melbourne hailstorm six days before Christmas, which cost between $160 million and $170 million. Suncorp was assessing 600 vehicles daily at one facility.

Scott Guse, an insurance expert with KPMG, said allowances were set for insurers in expectations of catastrophes such as hailstorms or cyclones.

Exceeding the allowance would affect profitability and could mean an insurer had underpriced premiums.

“(Underestimating allowances is) an easy thing to do. You are trying to estimate what the weather’s going to do,” he said.

Asked about the repeated misses, Suncorp said: “Natural hazard allowance is reviewed annually and was increased substantially in fiscal 2018.”

Suncorp has one slab of reinsurance protection — insurance for insurers — if a series of disasters each worth more than $10 million strike.

If $475 million worth of such insurance catastrophes occur, Suncorp can then access $300 million in cover for further wild weather.