Insurer Suncorp's NZ profits drop due to flood and cyclone claims

Wednesday, 9 August 2023

Council contractors are finally on the ground cleaning up mess and sodden furniture strewn on a Mt Eden street.

Insurer Suncorp has reported “a material increase in earnings”, but the profit on its New Zealand operations has dropped 30% as a result of the impact of extreme weather events.

The insurer, which is listed on the Australian ASX sharemarket, is the second-largest insurer in New Zealand, and owns Vero and has a majority stake in AA Insurance.

In the year to June 30, the Suncorp Group posted a profit after tax of A$1.15 billion (NZ$1.2b).

Home and car owners in New Zealand saw their insurance costs rise sharply during the year, but as a result of the huge number of claims following the Auckland Anniversary weekend flooding in January, and Cyclone Gabrielle in February, the profit after tax for Suncorp New Zealand fell on the previous year.

Suncorp Group chief executive Steve Johnston said the New Zealand business had achieved strong growth in premiums.

“These outcomes are particularly pleasing given the challenging backdrop over [the financial year], including the global pandemic, social and economic disruption, and market volatility, supply chain challenges and unprecedented natural hazard events from three consecutive La Nina weather patterns.”

Suncorp New Zealand delivered a profit after tax of $115 million, down from $165m the previous year.

Residents clean up in Camphora Place in Auckland's Ranui following devastating floods in January.

That was a result of huge claims from home, car and business owners after the extreme weather events in January and February.

Insurance policies are renewed each year, giving the likes of IAG and Suncorp the ability to lift premiums quickly.

In New Zealand, Suncorp businesses reported an increase in the gross premiums they collected of 14.3%.

In all, it collected $2.44b in premiums from policyholders.

That was up from $2.133b in the previous 12 months.

Over the past three years, New Zealand insurance customers had seen their premiums rise by just over 42%.

In June, IAG said it had been increasing premiums by about 20% on car insurance and about 20% to 30% on house insurance.

Suncorp has been moving to digitise its business as a way of cutting costs.

The flood and cyclone in New Zealand were the second and third-largest insurance events in New Zealand history after the Canterbury earthquakes.

Suncorp New Zealand chief executive, Jimmy Higgins said “this result has been heavily impacted by the recent large scale weather events, in addition to some smaller but impactful rain events throughout the year.

“So far, we’ve paid out to customers more than 66% of the 32,000 claims from the North Island floods and Cyclone Gabrielle events this year, and all our efforts remain on supporting our customers back into their homes and businesses.”

Higgins said the impact of the increased cost of reinsurance and inflationary pressures would flow through to customer premiums.

He said there remained considerable uncertainty for those in areas that had suffered losses in recent weather events and were looking for greater clarity on land categorisations from local councils.

Insurers are working closely with local and central government to better understand the options for customers to be able to move forward, including the potential buyout solutions being proposed.