How many bits of bad weather will it take to bring Suncorp to its knees: hopefully that will never happen, but the long suffering shareholders must be wondering if they have done something wrong.
Those terrible storms in Brisbane on Sunday night have hit the company’s share price hard with new lows being established Monday and yesterday.
The shares fell to a new 52 week low of $6.32 yesterday down 28c on the day.
The group of course has a lot to blame for this problem: after all it more than doubled its bet on insurance by paying $7.9 billion in cash and shares for Promina, just before a series of bad weather events hit in Queensland, NSW, Melbourne and New Zealand from early 2007 onwards.
Some, like the Central Queensland floods and the Queens Birthday storm in NSW, were costly events. Some were smaller, but annoying, a hailstorm here, and there. And then the savage storms on Sunday night.
Now while they don’t rank in intensity or cost to the terrible hailstorm that pulverised eastern parts of Sydney in 1999, it is but another reminder of the exposure Suncorp has to bad weather and insurance events.
But there are fears about the impact on Suncorp and yesterday it said that claims from the storms may threaten its ability to pay a dividend in 2009 were "premature."
Suncorp said through a spokesman yesterday that it took over 1,000 customer calls on Monday and has been sending assessors into storm-damaged areas to start the claims paying process by assessing each policyholder’s damage.
A spokesman says the company expects the number of claims to rise significantly from the initial 1,000 calls.
Brisbane has been declared a national disaster area: homes were also damaged on the Gold Coast and to the north around Caboolture.
In a note to clients Monday night, Merrill Lynch said "SUN shares have fallen by another 6% on early trading this morning as concerns on their capital position are renewed in light of storm damage in SE QLD yesterday.
"The extent of damage is not clear yet, although management’s earliest thoughts are that the damage is not as extensive as that caused by some of the events that impacted the accounts in the last financial year.
"SUN had budgeted for $200m of weather-related losses last year and reported $415m of such costs. Thus far, this fiscal year has been relatively benign on the weather front.
"The key issue is the capital position. SUN has pulled almost every lever it can to bolster its capital strength (underwritten DRPs, asset sales, equity sell-down, rundown of the CPs, lower ACE targets etc).
"Based on a 5% ACE ratio (and allowing for a NOHC for Vero), we estimate SUN will have just over $50m of surplus capital relative to its ‘core capital’ requirements at 30 Jun 09.
"There is little leeway for the Group to experience ‘cat’ style losses. SUN has a maximum event loss retention of $150m on the first event and $100m on the second. It then has coverage to $550m, which protects it against subsequent events with $10m reinstatement charges."
"By choice we believe SUN will address its capital issues through lower dividends. We think there is a chance that SUN may not even pay a dividend in 2009.
"In our view, the company needs to act decisively in this environment on capital, management & prospective bank strategy / positioning / ownership – the three key stock issues in our view."
Meanwhile, Brisbane area customers of Insurance Australia have lodged around 1,300 claims, according to a statement late yesterday.
NRMA Insurance Queensland state manager Brett Robinson said the insurer’s main priority is to ensure impacted customers are getting the right help quickly.
RACQ Insurance said it had a first estimate of $25 million for claims from the storm, mostly from homeowners. It had received around 1500 claims in the first 24 hours after the storms hit.
QBE Insurance and IAG shares fell yesterday in tandem with Suncorp. IAG shares were off 11c at $3.77 and QBE shares were down 4.2% to $23.02.
