Suncorp profits hit by extreme weather and claims Bad Bank

Suncorp profits hit by extreme weather and claims bank Bad Debt Iris Lai
Suncorp Metway Ltd [87,834] reported a 32.8% decline in net profit in the first half of the year on rising bad debts in the banking sector and claims related to weather conditions.

The insurer of the first-half profit fell to A $ 258 million (U.S. $ 167.8 million) from 384 million a year earlier. Earnings were hit by rising bad debts in banking and development of insured claims from extreme weather events.

Natural disasters have resulted in total claim costs U.S. $ 320 million before reinsurance recoveries. Suncorp (ASX: Sunday), it is estimated that the insurance business will be hit by A $ 180 million in costs before claiming reinsurance recoveries for bushfires and northern Victoria Queensland floods in February, which is outside the fiscal first half, which ended on 31 December.

Weather events "clearly impact on the group's insurance exchange ratio," whereas the overall coverage of the program was initiated, all other major events in claims cost the company A, a maximum of 10 million per event, limited to A $ 300 million, said Suncorp.

The insurer based in Melbourne, a 34% of the activity of Nonlife Insurance in New South Wales, Queensland 25% and 20% for Victoria, in which natural perils cost occurred during the year.

Investment research and consulting firm Morningstar analyst David Walker said Suncorp financial position based on its exposure to the recent event of the year the weather was similar to other Australian Nonlife insurers such as Insurance Group Australia [86837]. Reinsurance recoveries were triggered to support claims of rising costs.

During the year, Suncorp sought to increase prices and premium rates will be increased "more" to offset the losses, "said Walker. The increase in premium will be taken on all lines, although some lines will face difficulties, "said Walker.

The Suncorp Nonlife insurance unit reported a 47% increase in profit before tax of U.S. $ 253 million in the fiscal first half. Sever weather events have resulted in net claims incurred a $ 3.2 billion, up 21.6% from U.S. $ 2.6 billion a year earlier.

Net premiums earned increased by 1.5% to U.S. $ 3 billion in the first half. The unit Nonlife gross premiums written are forecast growth between 4% to 6% for the whole year, said in a statement Suncorp.

Overall, Suncorp has seen an increase of 5.9% of gross premiums of $ 3.3 billion. The three lines of insurance grew by 4.4% to $ 1.1 billion in gross premiums written for the automotive sector, 9.3% growth to A $ 873 million for the commercial sector, and 8.7% growth to A $ 761 million for the home sector. Workers' compensation industry has fallen from 17.8% to A $ 74 million.

Suncorp banking unit posted a loss of U.S. $ 355 million on loans and advances and profit before tax decreased by 68% to A $ 97 million for the year of the first half. The unit of management has seen an increase of 31% of profit after tax of $ 135 million.

Suncorp said the bank is on track to achieve its forecast full-year growth. However, "a combination of moderate economic growth, the average rise in funding costs and realignment and contraction of the portfolio reduces the revenues in the fiscal year 2009, said Suncorp.

The insurance business is not affected by its banking unit with negative results, since both units are separately capitalized, "said Walker.

Suncorp came close to selling its banking arm last year. After the Australian government guaranteed bank deposits and wholesale fund raising last October, the group abandoned talks with potential bidders as it was "assessing the implications for the potential sale of its banking and management operations heritage, "said Suncorp.

At present, Suncorp Chairman John Story said its banking business remains at the heart of the strategy of Suncorp, but the company remains open to approaches to banking.

The break-up of Suncorp Insurance and banking companies to give the insurance a better position to raise capital, "said Walker. He added the insurance could be better managed "as a specialist in Nonlife insurance. Bancassurance is a risk and capital intensive and the breakdown of business should be good for the insurance unit, said he says.

The financial group has "faced many external challenges and reduce the half-year dividend in the short term in order to" contribute to isolate the group "over the impact of deteriorating economic conditions," said Story. Half of the year fell a dividend of A $ 0.2 $ 0.52 a year earlier.

Revenues setback with the departure of some long service Suncorp executives. Suncorp said the Chief Executive Director and CEO John Mulcahy will leave the firm in March. His post will be temporarily occupied by the Chief Financial Officer Chris Skilton. But he also revealed Skilton planned to leave the company after the appointment of a CEO. Clayton Herbert, Executive General Manager Group Finance, will be chief financial officer.

(By Iris Lai, head office in Hong Kong: Iris.Lai @ ambest.com)

Copyright © 2009 hours Best Company, Inc. Suncorp Metway Ltd [87,834] reported a 32.8% decline in net profit in the first half of the year on rising bad debts in the banking sector and claims related to weather conditions.