Australian insurer Suncorp Group has said that its efforts to find a buyer, a partner or a reinsurance deal for its life insurance unit were progressing well -- a move which would see it follow companies like Commonwealth Bank of Australia and National Australia Bank in cutting exposure to a sector under pressure from offshore competitors, reports Reuters.
Suncorp’s life insurance business, which according to Goldman Sachs analysts has a book valuation of about A$1.5 billion (US$1.1 billion), saw underlying net profit climb 56% to A$39 million on higher prices and lower costs for the half year ended 31 December 2017. Reported NPAT is reduced to A$30 million due to the revaluation of deferred acquisition costs given the rise in long dated yields.
Mr Steve Johnston, Suncorp CFO, said: “Pleasingly, planned margins have seen the benefit of repricing over the past year. Experience has also been modestly positive which is an encouraging sign given the adverse trends that others in the industry have experienced, particularly in income protection. The ‘other income’ line includes the realisation to profit of pricing initiatives.”
He said that Suncorp remains committed to improving the profitability of the Australian life business through a comprehensive optimisation programme, which is already beginning to deliver an improvement in claims outcomes, reduced costs and a more sustainable business. The optimisation programme sits alongside a strategic review which is on-going.
The company says it will update the market on the outcome of the strategic review of its life insurance unit by the end of June.
Overall, Suncorp's insurance operations delivered a net profit after tax of A$264 million, including the A$30 million after tax contribution from life. This is a 28.5% fall from the corresponding period the year before.
GWP was flat at A$4,004 million for the first half to 31 December 2017 compared to A$4,031 million for the six months to 31 December 2016. Strong consumer growth was offset by reform headwinds.
Mr Johnston said: “The transitionary impact of these reforms are now behind us and we are confident that our headline results will now more closely reflect the strong operating momentum the business has.”
The Brisbane-headquartered financial group, which also has banking and wealth management units, says that its total first-half profit slid by a sixth on a jump in claims after a powerful hailstorm in the city of Melbourne and a spike in costs, but predicted better earnings next year.
Net profit fell by 15.8% to A$452 million for the six months to 31 December 2017 -- its weakest half-year profit in three and a half years.
Suncorp, whose brands include AAMI and GIO, said it expects revenue to grow by between 3% and 5% in the next financial year on higher home and car insurance sales, and it is confident that efforts to cut costs, partly through developing its online offerings, would bear fruit.