Suncorp still has reinsurance available to cover its February 2011 Canterbury earthquake costs, unlike its competitors

New Zealand’s second largest general insurer, Suncorp Group New Zealand, appears to be in a different position to its competitors, which are finding it more difficult to recover from the Canterbury earthquakes.

Suncorp – the parent company of Vero and AA Insurance – confirms it still has reinsurance available to cover its outstanding February 2011 quake claims.

A spokesperson has told Interest.co.nz: “We also have ADC [adverse development cover] in place, and once the ADC is exhausted we are still well protected by the cover in our main cat [catastrophe] programme and our escalation options.

“Suncorp does not anticipate the need to purchase any additional cover. Whilst uncertainty still exists, we are comfortable that our existing reinsurance programme will protect us from any material impact on our profit.”

The company’s results for the year ended June 2015 confirm the insurer has paid $4.9 billion to cover 92% of its expected quake claim costs.

Suncorp hasn’t responded to Interest.co.nz’s questions around how much of the costly ADC cover it has bought and how much of this it has used up.

Other general insurers digging into their own pockets to cover Feb quake claims

New Zealand’s largest general insurer, IAG, which owns State, AMI, Lumley and NZI, has used up the $5b of reinsurance it’s bought for the February 2011 quake.

As at December 2015, it had spent $5.3b settling 85% of its claims from all the Canterbury quakes by number.

IAG has been making up the shortfall by getting help from its Group. Berkshire Hathaway mid-last year also bought a 3.7% stake in company, that would inject A$700 million of capital over the next five years and see Warren Buffett’s company pay 20% of its claims in return for 20% of its premiums.

We will have a clearer idea on where things are at with IAG when its 2016 annual results are released on August 19.

Tower is in a similar position. It expects to foot a $75m bill, as its reinsurance cover for the February event has run out.

And, the Medical Insurance Society, more commonly known as MAS, has made provisions to cover $59m of its February quake claims not covered by reinsurance.

Growth in motor insurance boosts NZ business’s 2016 profit

Looking at Suncorp’s results more broadly, its New Zealand general insurance business increased profit by 12% over the year, to $178 million.  

Its Gross Written Premium (GWP) increased by 3% to $1.34b, as it grew both its direct and intermediated distribution channels.

During the year Vero partnered with The Warehouse Group Financial Services to underwrite Warehouse Money’s personal insurance products.

Suncorp’s New Zealand Motor business increased its GWP by 12%. It says this was “driven by strong unit growth underpinned by favourable market conditions and expansion into new channels”.

Its Home GWP increased by 7%, “due to a combination of increases in new business, stable retention and premium increases as a result of improved product offerings”.

However Suncorp New Zealand’s commercial lines suffered a 4% GWP drop “due to continued underwriting discipline in a competitive market for existing and new business”.

Its loss ratio decreased from 53.8%, from 54.0%, meaning that for every $100 it receives in premiums, it pays $53.80 in claims. 

As for the company’s New Zealand life insurance business, which consists of Asteron Life and AA Life, it grew its in-force portfolio by 8% to $230m, “through its sustainable intermediary relationships and a market leading customer retention strategy”.

Across the wider group, Suncorp’s net profit fell 8% to A$1.04b. A final dividend of A38c per share took the annual payment to A68c.

Suncorp Group’s results announcement has seen its share price increase to A$13.50.