Suncorp's NZ insurance assets deliver strong growth
Brisbane-based general and life insurer Suncorp [ASX: SUN] recorded stronger investment returns and earnings growth from its New Zealand units, Vero and AA Insurance, than from its Australian business lines in the year to June 30, boosted in part by the strength of the kiwi dollar and its impact on translation into the Australian parent's results.
Suncorp declared a full year profit after tax of A$730 million, including a one-off non-cash write-down on intangible assets of A$496 million, with the New Zealand insurance trading result rising 20.3 percent to A$89 million, although the increase in New Zealand dollar terms was a more modest 6.6 percent, to NZ$97 million. The improved result excludes previous years' travel insurance trading results, as Suncorp withdrew from New Zealand travel insurance in the last financial year.
The company also disclosed an additional A$35 million in provisioning at group level for claims arising from the Canterbury earthquakes, although it expects almost all claims relating to the 2010 and 2011 events to be finalised by the end of this calendar year, with building work to be completed through 2015.
In the year under review, general insurance claims from New Zealand totalled just A$46 million from total claims of A$538 million across Australasia, with storms in September and April the main sources of claims. However, the loss ratio in New Zealand increased to 57.6 percent from 55.8 percent the year before, with natural hazard expenses A$26 million higher than was allowed for.
Total net incurred claims across all product lines were up 18.2 percent at NZ$564 million, while "other underwriting expenses" were up 19.8 percent at $NZ97 million.
Growth in premium income came mainly from rate increases and "significant growth in personal line units", while reduced customer acquisition costs also helped the kiwi unit's bottom line, with operating expenses falling from 35.3 percent to 33.4 percent of revenue.
"Vero and AA Insurance are well placed to continue to compete and grow at or above system, particularly in the personal lines market," the company's profit presentation notes say. "Underlying margin has continued to improve and will continue as benefits from simplification projects and improved operational efficiency are realised", using systems already implemented in Suncorp's Australian operations.
Gross written premiums across all products rose 20.8 percent for the New Zealand unit, at A$1.14 billion, although in New Zealand dollar terms the increase to NZ$1.26 billion was a 6.9 percent rise.
Life insurance premium income in New Zealand totalled A$182 million (NZ$200 million), up 22 percent in Australian dollar terms from a year earlier.
Investment returns were stronger across all asset classes - cash, fixed interest, and Australasian and international equities, and property - to deliver a 3.5 percent net investment return, compared with 3.3 percent from Australian investment operations.
The ASX-listed shares last traded at A$14.12, and have gained 7.8 percent this year.