Suncorp has announced a significant increase in its half-year profits driven by its insurance customers, soaring more than fivefold to $203 million. This surge comes amidst a backdrop of rising premiums for home, contents, and motor policies, placing financial strain on households.
Based in Brisbane, the company’s robust performance echoes that of its competitor QBE, both reporting substantial profit margins from general insurance, a sector witnessing notable inflation due to double-digit annual premium hikes.
Suncorp’s overall net profit rose by 5.4% to $582 million, with its insurance division playing a pivotal role in bolstering earnings despite declines in its banking and personal injury sectors.
The consumer insurance segment, encompassing popular brands like Aami, GIO, Suncorp Insurance, and Shannons, experienced a remarkable increase of over 530% in profits, with underlying profit margins showing significant growth as well.
This impressive outcome is attributed to strong premium growth, augmented customer numbers, and targeted price adjustments, according to Suncorp. The company maintains a keen awareness of affordability challenges faced by customers and is committed to enhancing operational efficiencies.
Suncorp’s share price surged to levels not seen in over five years following the announcement.
The general insurance industry has been notifying customers of double-digit premium increases across various products, citing factors such as extreme weather events, high labor costs, and expenses related to building replacement, car parts, and repairs.
In its financial commentary, Suncorp emphasized its support for customers affected by severe weather events and advocated for policy reforms and mitigation investments to mitigate extreme weather risks and reduce insurance premiums, particularly in high-risk areas.
Suncorp is poised to transition into a pure-play insurer after receiving approval from the Australian competition tribunal to divest its banking business to ANZ, despite regulatory opposition.
Meanwhile, profitability has expanded across the general insurance sector, exemplified by QBE’s doubling of net profit for calendar year 2023 to $1.4 billion. Unlike supermarkets and banks, which have faced political scrutiny amidst inflationary pressures, insurers have not encountered similar scrutiny despite their increased profitability.
Consumers are grappling with rising utility bills, while electricity retailers continue to expand profits. Former competition watchdog Allan Fels highlighted the susceptibility of banking and insurance customers to “loyalty taxes” in his recent report, advocating for policy measures to address this issue.
Australia’s private health insurers, including market leader Medibank and NIB, have also reported significant profit growth in recent years, underscoring the broader trend of profitability expansion across the insurance industry.
