Brisbane-based insurer and banking group Suncorp (SUN) has effectively cut its 2014-15 profit forecast after yesterday revealing a larger than expected cost from Cyclone Marcia’s sweep through central Queensland last month.
The news saw the shares sold down by well over 1.7% to a close of $13.75.
Suncorp told the market in an update that cyclone Marcia was expected to cost the company between $120 million and $150 million in insurance claims.
Combined with last November’s Brisbane hailstorm losses, the cost of Marcia is expected to push Suncorp’s annual natural hazard expenses to between $690 million and $720 million – well above its yearly allowance of $595 million.
SUN 1Y – QLD damage bill increases at Suncorp
Chief executive Patrick Snowball said the extra expenses of Marcia on top of the Brisbane hail storm in November meant it was unlikely Suncorp could achieve its target for a return on equity of 10%.
Suncorp had reaffirmed the 10% return target as recently last month when releasing its interim profit announcement.
That reaffirmation was despite an admission that increased competition in the general insurance sector, and low interest rates, would weigh on its earnings growth for the year through June.
Suncorp reported a 15% rise in its first-half net profit to $631 million but at the time said top-line growth was likely to be in the low single digits for the full year because of that higher competition and low interest rates.
Mr Snowball told the ASX Suncorp has more than 30 of its people in areas hit by Marcia, assessing about 100 properties a day. A panel of builders had already begun work on some properties, he added.
In its February profit statement, Suncorp revealed that its general insurance business (AAMI, APIA, Shannons, GIO and Suncorp) had an after tax profit for the December half of $419 million, down from $470 million for the six months to the end of December 2013.
Marcia and the wrap up of the cost of the Brisbane storm will hit the general insurance business hard in this half.
