NATURAL DISASTERS PUMMEL SUNCORP PROFIT
Written on the 24 August 2011
THE worst period of natural disasters in the region’s history has hit Suncorp Group Limited’s (ASX:SUN) bottom line as the banking giant posted net profit decline of 42 per cent.
NPAT was $453 million for FY11, down from $780 million in the previous financial year.
The general insurance arm of the company recorded after-tax profit of $392 million while natural hazard claims were $325 million above expectation and additional reinsurance protection cost $232 million.
Throughout the year, Suncorp has managed more than 100000 flood, cyclone, earthquake and other natural hazard claims at an estimated gross cost of $4 billion.
Although the natural disasters increased the cost of the company’s reinsurance program for the current financial year and required its natural hazards allowance to be increased from $460 million to $500 million, Suncorp remains confident its new pricing engine and premium increases will cover this additional cost.
Due to strong growth in all sectors, Suncorp’s core bank reported a profit after tax of $259 million while the non-core bank incurred an after tax loss of $175 million.
Chief executive Patrick Snowball (pictured) says the results confirmed the substantial improvement in the underlying strength and performance of Suncorp’s business.
“The core bank continued to show its potential by achieving system lending, increasing its footprint and expanding margin in a challenging environment while the non-core bank run off continues ahead of schedule,” he says.
“Suncorp’s life profit was impacted by higher claims, policy lapses and the divestment of businesses, but growth in the direct channel, which now accounts for about a quarter of all new business was encouraging.
“Delivering operating and capital strength as we have during the past is a pre-requisite for building stakeholder confidence in an uncertain external environment.”
SUN shares remained steady this morning at $7.19 per unit.