Suncorp’s (ASX:SUN) natural hazard costs aligned to guidance; shares gain

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Suncorp’s (ASX:SUN) natural hazard costs aligned to guidance; shares gain

 Suncorp’s (ASX:SUN) natural hazard costs aligned to guidance; shares gain
Image source: Image source: © Trottmannmarlon | Megapixl.com

Highlights: 

  • Suncorp managed 35 different events and over 120,000 natural hazard claims in FY2022.
  • The insurance company confirmed reinsurance recoveries costing around AU$1 billion, much aligned with its provided guidance. 
  • The company also shared that total reinsurance premiums for FY2023 have shot up considerably, likely to be increased to AU$1,160 million in FY2023.

Shares of the ASX-listed insurance company, Suncorp Group Limited (ASX:SUN), were spotted trading 1.188% higher at AU$11.07 per share at 10:12 AM AEST on the ASX today (4 July).  

Suncorp shared an important update regarding the weather-related incidents impacting areas like New South Wales and parts of South-East Queensland. In this update, the insurance company also shared hazard costs for FY22 and the status of its FY23 reinsurance program.  

The share price of Suncorp has lost around 1.03% in last year on the ASX. Meanwhile, Suncorp’s share price also fell around by 4% on a year-to-date basis (as of 10:12 AM AEST on the ASX today, 4 July). 

Image Source © 2022 Kalkine Media ®

 Why Suncorp shares began trading strong today? 

Suncorp shared a price-sensitive update on the ASX today, which mainly reflects the company’s FY22 natural hazard costs and its successful placement of the FY23 reinsurance program. 

Suncorp’s CEO, Steve Johnston, revealed that the company dealt with 35 separate events with more than 120,000 natural hazard claims in FY22. As a result, the company is reported to have spent approximately AU$1.1 billion on net reinsurance recoveries. This aligns with Suncorp’s previous guidance, reflecting Australia’s prevailing La Niña weather pattern. 

Furthermore, Johnston also encouraged its customers to put forward their claims due to the weekend weather incidents as the company is ready to receive claims. 

Details of Suncorp’s FY23 reinsurance placement: 

Suncorp believes that its reinsurance strategy is designed to achieve a balance between the cost of the program and a decent level of earnings along with capital volatility. 

Suncorp has determined to maintain its maximum event retention at AU$250 million in the FY23 reinsurance program. However, the company has lifted the upper limit from AU$6.5 billion to AU$6.8 billion. This suggests that one prepaid reinstatement will now cover losses up to AU$6.8 billion and two further prepaid reinstatements cover losses up to AU$500 million.

This limit covers home, automobile and commercial property portfolios across Australia and New Zealand.

Image source: © Shutter999 | Megapixl.com

Furthermore, Suncorp has also purchased three dropdowns of aggregate protection as a part of its main catastrophe program.   

Dropdown 1 and Dropdown 2 are unchanged from FY22. Meanwhile, the attachment point of Dropdown 3 has been elevated from AU$50 million to AU$100 million. On the other hand, the amount of cover provided has been reduced from AU$100 million to AU$50 million.

Suncorp stated that its natural hazard allowance for FY23 might go up to AU$1,160 million because there are changes in the reinsurance program and also the FY22 hazard experience is different.

Furthermore, Suncorp also anticipates that the changes in the reinsurance program and natural hazards allowance would increase the company’s target capital by AU$135 million. On the contrary, Suncorp’s Excess Technical Provisions in the capital will likely reduce by around AU$170 million for FY22. 

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