Portfolio sale dents Aussie insurer profits

Portfolio sale dents Aussie insurer profits

Portfolio sale dents Aussie insurer profits

Suncorp Group’s net profit after tax (NPAT) is expected to be between $480m and $500m, down on 2012’s $724m, but taking into account the sale of the non-core portfolio to Goldman Sachs.

The NPAT includes a full year after-tax loss of approximately $630m following the sale of the non-core bank to Goldman Sachs, which saw the insurer pocket $940m.

NPAT from core businesses, however is expected to be in the range of $1,210m to $1,250m, up from $1,033m in 2012. Suncorp’s general insurance NPAT is expected to be in the range of $870m to $890m, an increase on $493m in the prior year.

Premium increases have been recorded across all portfolios with gross written premiums rising by approximately 8%.

The group’s reported insurance trading ratio (ITR) and underlying ITR are both expected to be above 13%. This is above the group’s target to ‘meet or beat’ an underlying ITR of 12%.

Natural hazard costs are expected to be approximately $600m, ahead of the natural hazard allowance of $520m.

Suncorp also confirmed placement of its 2014 reinsurance program that applies from 1 July 2013, which is said to be broadly similar in structure to the 2013 program.

The upper limit on Suncorp’s main catastrophe program has increased from $5.3bn to $5.8bn as a result of exposure growth and an increase in sums insured.

As additional protection for the 2014 year, horizontal cover of $250m was purchased for third and fourth events in excess of $250m.

Suncorp’s insurance concentration risk charge will be $250m under both current capital requirements and new rules that become effective on 1 January 2014.

The cost of the catastrophe reinsurance program will marginally increase for the 2014 financial year due to the additional cover, exposure growth and the increase in sums insured. On a risk adjusted  basis, costs are marginally down.

Suncorp also has multi-year arrangements in place that provide specific protection for natural hazard events in Queensland and New Zealand. In Queensland, a 30% quota share arrangement applies to the home portfolio. In New Zealand, dropdowns have been purchased to reduce the first event retention to NZ$50m and second and third event retentions to NZ$25m.