Suncorp Group’s Australian insurance division delivered profit after tax of $755 million, up 333.9 per cent, which the organisation said reflects continued momentum in revenue growth, a reduction in operating expenses and a significant turnaround in investment income.
Group net profit after tax of $1.148 billion, and cash earnings of $1.254 billion were both up significantly on financial year 2022, which was impacted by mark-to-market losses on investment portfolios.
Gross written premium (GWP) growth of 10.6 per cent in the Australian General Insurance business and 14.3 per cent in New Zealand reflected targeted price increases required to address material rises in reinsurance, natural hazard costs and economy-wide inflation.
Motor gross written premium (GWP) grew 13.8 per cent, reflecting average written premium growth driven by pricing for claims inflation. Unit growth in the Motor portfolio was 2.4 per cent.
While the underlying business demonstrated strong momentum, Suncorp’s results were impacted by elevated natural hazard activity, resulting in the company exceeding its natural hazard allowance by $97 million ($2 million favourable in Australia and $99 million unfavourable in New Zealand).
Increased working claims and natural hazard costs were partially offset by the release of the majority of the business interruption provision. Overall net incurred claims increased by 19.6 per cent to $6.373 billion. Excluding discount movements, net incurred claims increased by 9.9 per cent, reflecting the impact of portfolio growth, reversion to pre-COVID-19 driving patterns, persistent inflation particularly in the Motor portfolio, and natural hazard experience. This was partly offset by the release of the business interruption provision. Prior year reserve releases were 1.3 per cent of net earned premium.
Volatility continued in investment markets, although the impact of higher running yields more than offset any unfavourable mark-to-market movements across the company’s $16.2 billion investment portfolio. The net gain from yields and investment markets was $724 million compared to a loss of $190 million in FY2022.
Suncorp’s operating expenses fell 1.9 per cent to $2.727 billion, largely reflecting efficiency benefits from the strategic programme of work, and a decrease in project costs relative to the prior period that more than offset significant inflationary pressures.
Steve Johnston, Suncorp Group CEO, said the organisation’s strong set of results demonstrated the progress made over the past three years to execute strategic initiatives under the FY2023 plan, while facing a challenging operating environment.
“Our dedicated focus on digitising and automating, reinvigorating our leading brands, becoming more efficient and improving how we serve our customers, has helped us to deliver strong top-line growth across our businesses and improve underlying margins,” said Johnston.
“These outcomes are particularly pleasing given the challenging backdrop over the FY2023 plan period including the global pandemic, social and economic disruption and market volatility, supply chain inflationary challenges, and unprecedented natural hazard events from three consecutive La Nina weather patterns.”
According to Johnston, Suncorp’s underlying business is “significantly more resilient” than when the company laid out its three-year plan in 2020. However, while the company remains well protected through its comprehensive reinsurance programme, natural disasters have resulted in a continued reassessment of risk by its reinsurance partners.
“This, combined with broader inflationary pressures across the economy, continues to impact the cost of reinsurance across the industry, and is a major contributor to the rising costs of everyone’s insurance premiums, particularly when household budgets are under pressure,” he added.