Sun­corp warns of ris­ing prices

Townsville Bulletin - - NEWS - LIAM WALSH

IN­SUR­ANCE gi­ant Sun­corp pre­dicts pre­mi­ums will con­tinue to rise across the in­dus­try, say­ing it will com­pen­sate for more nat­u­ral dis­as­ters and in­creas­ing costs.

Yes­ter­day’s com­ments come as Bris­bane- based Sun­corp, Queens­land’s big­gest com­pany, posts prof­its of $ 1.075 bil­lion for the full year.

The re­sult from Sun­corp, whose brands in­clude AAMI and Apia, in­cluded higher earn­ings at its in­sur­ance arm and a muted profit from its smaller bank­ing di­vi­sion.

Share­hold­ers re­ceived a higher div­i­dend pay­out this year of 73c per share, up from 68c a year be­fore.

How­ever, that is still be­low lev­els of 75c made in 2013.

The re­sult is the se­cond de­liv­ered by chief ex­ec­u­tive of­fi­cer Michael Cameron, and fea­tured a year of dis­as­ters in­clud­ing Cy­clone Deb­bie smash­ing north­ern Queens­land and a heavy hail­storm in Syd­ney in Fe­bru­ary.

Luck­ily for Sun­corp, its own rein­sur­ance pro­tec­tion shielded it from heavy ex­penses re­lated to Deb­bie. But the hail­storm sav­aged the com­pany for $ 110 mil­lion.

Sun­corp’s ac­counts flagged that car and home in­sur­ance pre­mi­ums lifted by “low to mid­dle sin­gle digit price in­creases” in the year.

“In the con­sumer port­fo­lio, the favourable pric­ing en­vi­ron­ment is ex­pected to con­tinue as in­dus­try- wide pric­ing is ad­justed to ad­dress claims cost in­fla­tion and the in­creas­ing in­ci­dence of nat­u­ral haz­ards,” the ac­counts said.

The in­dus­try had been hit with a tough en­vi­ron­ment for pre­mium in­creases in re­cent years, af­ter an ini­tial jump in pric­ing fol­low­ing dev­as­tat­ing floods in Queens­land in 2011.

Cit­i­group an­a­lysts re­cently said reg­u­la­tory statis­tics sug­gested that in­dus­try- wide price in­creases were be­ing driven by in­creas­ing costs of claims.

Af­ter years of bleed­ing cus­tomers, Mr Cameron said among pos­i­tives for Sun­corp was growth in this area.

“We’ve ac­tu­ally ( now) grown cus­tomers by 147,000 or­gan­i­cally, with a fur­ther 252,000 ac­quired through the en­try into the South Aus­tralian CTP scheme,” he said.

The Aus­tralian in­sur­ance arm’s over­all prof­its rose from $ 558 mil­lion to $ 723 mil­lion.

This was helped by higher than ex- pected re­leases of re­serves – money tucked away for ex­pected in­sur­ance claims.

The bank­ing and wealth- man­age­ment arm’s profit was down from $ 418 mil­lion to $ 400 mil­lion.

Some signs of a turn­around were ap­par­ent – home loan growth re­vived in the se­cond half af­ter hav­ing fallen back­wards in the first.

Still, over­all loan growth was muted at 1.9 per cent com­pared to the over­all in­dus­try.

Sun­corp’s chief fi­nan­cial of­fi­cer Steve John­ston ar­gued the bank was “very well po­si­tioned” given reg­u­la­tory and rep­u­ta­tional prob­lems for Big Four lenders and rat­ings pres­sure on other re­gional banks.

Sun­corp shares dipped sharply when the share mar­ket opened and at 11.45am were down 6.4 per cent.

PRE­MIUM PAIN: De­mo­li­tion worker Co­nan Mac­Don­ald at the for­mer Cafe 22 build­ing in Proser­pine which was de­stroyed by Cy­clone Deb­bie. Pic­ture: LACHIE MILLARD

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