Squeeze on insurance

Suncorp to increase premiums amid bank sale process

Suncorp is planning a push to grow its commercial insurance arm as the $4.9bn sale of its bank gathers pace amid a lofty 14 per cent jump in cash earnings to $660m.

Unveiling its first half result on Monday, Suncorp said it was planning to further turn the screws on pricing to offset inflation and reinsurance costs amid a broader goal to amp up returns from its insurance arm.

Suncorp said it lifted gross written premium, the measure used by insurers to reflect price growth as well as volume increases, by 16.3 per cent in six months.

The insurer said this was not the last of the increases, with plans to continue to push premium growth in the “low to mid-teens” over the remainder of the year.

Suncorp chief executive Steve Johnston said the insurer was conscious of the impacts from the price rises but warned insurance was becoming more expensive, with modern cars and houses more complex and costly to repair and replace.

“It’s demonstrably clear, the input costs in insurance have gone up incredibly steeply in the past 3-4 years,” he said. “Put simply, the impacts of climate change, a reassessment of Australia and New Zealand risk by global reinsurance partners, the planning mistakes of the past and now inflation have converged to put the upward pressure on insurance pricing that we are currently experiencing.”

Suncorp’s home premiums lifted 12 per cent in the six months to December, while motor had an even more marked rise, up 18.2 per cent in the half.

The insurer pointed to “ongoing inflationary pressures in supply chains, resulting in higher repair costs and extended repair times in the motor portfolio” as driving the price rises.

But Mr Johnston said many customers were sticking with their insurance, in a good indication “of the value our customers continue to see in our products and brands, and the protection they provide”.

Better known by some as the operator of AAMI, GIO, Bingle, Vero and several other brands, Suncorp is a sprawling insurer across the Australian and New Zealand markets with a banking arm widely expected to be sold to ANZ.

Suncorp recorded a slight lift in the underlying insurance ratio to 10.2 per cent, up from 10 per cent, with plans to lift to at least the midpoint of its 10-12 per cent goal.

But Suncorp disappointed analysts with its 5.4 per cent lift in group net profits to $582m for the first half after a bingle on past claims overshooting internal targets.

Suncorp faced a string of revisions on prior year reserves, slicing returns, with the insurer taking a $107m hit at its latest results. Suncorp is now awaiting sign-off on the sale of its bank, which saw profits plunge 25 per cent to $192m in the period.