One of Australia’s largest insurers has announced a $122 million dip in net profit after tax, citing a competitive market, numerous natural hazards and recurring investment volatility as key reasons behind the half-year result.
Suncorp’s general insurance business saw its after-tax profits fall from $419 million at half-year 2015 to $297 million for the six months to 31 December.
Suncorp Commercial Insurance CEO Anthony Day says numerous small events combined over the last 12 months to put a small strain on the business.
“Towards the end of last calendar year we had a number of events occur in a short period of time, whether it be the bushfires in the Great Ocean Road, or over in Perth where we had a number of storms,” Day says.
“None of them were large, by our terms, but they were all significant smaller events that occurred. And that hits your profitability straight away.”
Day says the events highlight the importance of the insurer’s partnership with brokers, as strong relationships ensure they always have good local knowledge on the ground.
“The broker relationships are key to us. And commercial insurance is dominated by the brokers,” he says.
“Our recent research shows our retentions are up with brokers and we’re able to be really transparent in what we’re doing with them and create partnerships.”
On top of recurring investment volatility, Day adds that a low pricing cycle also contributed to the net-profit dip.
“Over the last period we’ve been in a relatively soft market, particularly in the commercial lines,” he says.
“I am starting to see that come off a little bit, the rate decreases are slowing, and I think that we’re getting towards the bottom of the market in that regard.”
Commercial Insurance Gross Written Premium grew by 2.2% with a strong growth across the compulsory third party (CTP) portfolio, partially offset by a negative impact from the Western Australian Workers Compensation portfolio.
Meanwhile, Day attended his first board meeting with the Insurance Council of Australia last week since being welcomed to the Board of Directors a fortnight ago.
“I’ve been in the industry for nearly 35 years, so it’s time to contribute back to the industry. I’m very pleased to be a part of that and hopefully I can contribute in the right way,” he says.
Challenges facing the insurance industry that Day is keen to address include scheme reforms, reducing red tape, and ensuring the industry works together to deliver the government a consistent message when it comes to future reforms.
“Understanding the challenges of working with brokers, underwriters and other stakeholders is something I can bring to the Board,” he says.
With the recently announced changes to Suncorp’s operating model, Day has been appointed Chief Executive Officer Insurance, taking accountability of product development and pricing, capital and reinsurance, as well as claims management and operational delivery.
Day’s new role will be effective from 1 March.