Suncorp says insurance premium growth of 16.3pc ‘required’ amid ongoing cost pressures, natural disasters

Financial group Suncorp has posted a whopping 16.3 per cent increase in its insurance premiums, blaming it in part on ongoing inflationary pressures.

Rival insurers QBE and IAG earlier this month reported double-digit increases of their own premiums, highlighting concern among analysts at ongoing pressures in the insurance industry despite the continued squeeze on consumers.

Profit after tax in the first half was up marginally to $580 million, from $552m in the prior comparable period.

Suncorp on Monday, in reporting its half-year results, said its 16.3 per cent increase — to a total of $6.9 billion — was a reflection of customer growth and targeted price increases.

“(They were) required to respond to increasing reinsurance costs, elevated natural hazard experience and ongoing inflationary pressures,” the company said.

Suncorp operates a raft of insurance brands including Australian Pensioners’ Insurance Agency, GIO, AAMI, Bingle and Terri Scheer.

Its banking arm was last week approved by the Australian Competition Tribunal for takeover by big four bank ANZ in a transaction worth $4.9 billion

Chief executive Steve Johnston conceded it had been a challenging six months for customers given long-term inflationary pressure and six severe weather events in November and December.

“Against this backdrop, the group has continued to work hard to support its customers while also delivering improved earnings driven by increased customer demand for our products and services, and positive investment performance over the half,” he said.

“The growth in gross written premiums is also reflective of targets price increases in response to higher reinsurance costs, ongoing supply chain inflationary pressures resulting in higher repair costs for cars and homes and an elevated level of natural hazards.

“We remain acutely alert to the affordability challenges facing customers and continue to focus on driving greater efficiencies in our own business.”

Mr Johnston added Suncorp supported investment in mitigation and other policies that would reduce the risk of extreme weather, critical to reduce insurance premiums for consumers.

Mr Johnston said excesses had not increased at the same pace as written premiums, but he expected “over the next little while, consumers will start to look at excesses as being a means via which they can adjust the headline premium they receive”.

“The reinsurers have been passing risk to us as a primary insurer . . . so we’re taking on more risk, and some of that ultimately will be passed to consumers,” he told analysts. “I think that dynamic is working through.

“I don’t step back from the affordability challenge, I don’t step back from the need for us as an insurer alongside the rest of the industry to get more innovative around product design and get more contemporary about how we think about the challenge of insurance affordability, but at the moment i think the book, the business and the portfolios are holding up quite well.”

In banking, home lending was up 2.2 per cent in the half with Suncorp expecting modest growth in line with the rest of the system amid “intense, industry-wide competition”.

Brisbane-based Suncorp is still awaiting approvals from Federal Treasurer Jim Chalmers and the Queensland Government for its takeover by ANZ. The State Government has been broadly in favour of the deal given ANZ has made several commitments about jobs and investment in Queensland to get it across the line.

Suncorp expects the transaction to be finalised about the middle of the year.