Suncorp Group's New Zealand insurance arm boosted first-half profit by 79 per cent as the latest round of premium hikes coincided with a dip in how much it paid out in claims.
The Brisbane-based financial services firm is a major Kiwi player in general and life insurance, with a suite of New Zealand brands including Vero Insurance, the AA Insurance joint venture, Asteron Life and AA Life joint venture.
Within the New Zealand operations, the general insurance arm more than doubled profit to $103 million, as gross written premiums rose 8.2 per cent to $831m. Suncorp NZ benefited from the round of price rises insurers have been imposing, and its Vero and AA brands also grabbed more market share. The gains were shared fairly evenly across the motor, home and commercial businesses.
The latest result echoes Suncorp's 70 per cent annual earnings increase in the June 2018 year, which the insurer put down to higher premiums and unit growth.
Government figures show consumer prices for dwelling insurance rose 6.8 per cent and vehicle insurance was up 4.1 per cent in the six months through December last year. Contents premiums rose a more modest 1.2 per cent, whereas life premiums were up 0.3 per cent.
Dwelling insurance premium prices have soared about 193 per cent since the Canterbury earthquakes devastated the country's second-biggest city in 2010 and 2011 and blindsided global reinsurers who hadn't anticipated the impact of New Zealand's policies providing full replacement coverage rather than the international norm of sum insured.
Meanwhile, New Zealand's expanding population and record new car sales had lifted not only the number of vehicle policies, but also the volume of claims made.
Suncorp said it's facing fewer motor vehicle claims, after making several underwriting changes and is noticing a dwindling number of large home claims. The insurer's net incurred claims shrank 2.3 per cent to $340m in the six-month period.
Suncorp's New Zealand acquisition costs rose 14 per cent at $161m, which it said was due to increased commission payments that accompanied its gross written premium gains. About 45 per cent of Suncorp's New Zealand general insurance is sold through brokers.
The New Zealand life insurance arm posted an unchanged profit of $17m. Suncorp's combined New Zealand operations posted a profit of $120m, up from $79.1m a year earlier.
The Australian group was less upbeat, with a 45 per cent slide in net profit to A$250m ($260.5m) as the firm wrote down impaired assets and faced greater regulatory costs. Group revenue was up 3.8 per cent at A$8.14 billion.
The board declared an interim dividend of 26 Australian cents per share to be paid on April 19, down from 33 cents a year earlier.
Suncorp said it expects to face higher regulatory costs in New Zealand, with a raft of reforms flagged for insurers and the wider financial services sector.
ASX-listed Suncorp last traded at A$13.49, and is up 3.6 per cent over the past year.