Suncorp confirmed yesterday that its over-exposure to insurance is still hurting the company.
In an investor day update the company and its senior management team devoted much of their briefing to the performance of the company’s various insurance brands, GIO, Suncorp, APIA and especially AAMI and Vero, as well as the life business.
And it’s no wonder, Suncorp is the biggest insurer in Queensland, and it has had a tough 12 months, culminating in the floods in south east Queensland in January and elsewhere through the state, as well as cyclone Yasi.
And the company is the second biggest insurer in New Zealand and its business and that of its competitors has been whacked by the two Christchurch earthquakes: the one last September and then February’s devastating shaker and its multi-billion dollar damage bill.
Suncorp revealed yesterday the two earthquakes in New Zealand have cost it a combined $2.1 billion in gross claims, made up of $500 million in September and $1.6 billion in February.
Including the two quakes and the floods and cyclone in Australia, Suncorp said it had received 100,000 claims worth more than $3.4 billion in the seven months since September of last year.
Analysts say that is far worse than expected and will cost reinsurers $2 billion and Suncorp a net cost of $120 million (compared with the early $60 million estimate in February).
The floods in Queensland have been a multi million dollar headache as well and the company was forced to buy $242 million in additional reinsurance covers this year to ensure it has full protection between now and the end of next month in New Zealand.
The pressure for premium hikes here and in NZ continue: premiums across the Tasman have already risen 10% and there will be more when re-insurance for the 2012 financial year are completed shortly.
Some of those costs could be heavy, with reinsurers also being hit hard by the March 11 disasters in Japan, and the tornados in the US.
At the briefing the company said it is aiming to increase its insurance margin by three percentage points next financial year (no doubt by hoping and praying that there are no more disasters, storms, floods and especially quakes in NZ).
The company is also aiming to increase market share in commercial insurance by 3% and to double its profit in New Zealand over the next three years (with the same proviso, no more quakes or storms).
It claimed yesterday that it will get $235 million in synergies from its building blocks company reorganisation program, which aims to simplify the business and combine back office operations for different insurance brands.
In its Metway Bank business, Suncorp said it was aiming for one to 1.3 times system housing lending growth by December 2010 and a return on equity of over 15% at the core bank, which includes personal banking, mortgages and lending to small and medium sized businesses.
Suncorp split its bank into core and non-core lending after it ran into trouble with bad loans during the financial crisis.
The non-core assets, including lease finance, structured finance, development finance and property investment, are being allowed to run off over time.
Suncorp said it wanted one million customers and a cost to income ratio in the mid-40s by 2013.
No mention of earnings, but the losses from the floods and the second NZ quake will be large, as will the cost of the extra reinsurance.
Suncorp shares fell 3c to $8.36 after hitting a day’s high of $8.47.
