Queensland insurance giant Suncorp (ASX: SUN) has suffered a drop in first half profit because of the Melbourne hail storm in December.
Suncorp's first-half profit fell 15.8 per cent to $452 million after Melbourne's hail storm contributed to a blowout in natural hazards costs.
While premium revenue for the six months to December 31 rose by 1.8 per cent, the group's natural hazard costs climbed $65 million above allowance to $395 million.
The group flagged the potential damage of the hailstorm in early January, where the company estimated net costs to cover the damage done to the Victorian capital would fall between $160 to $170 million.
Despite this, the company says second-half reserve releases will be above 1.5 per cent of net earned premium because of low inflation and long-tail claims management.
The company has held its interim dividend at a fully franked 33 cents, and is hoping to return the surplus capital to shareholders at the end of the financial year, according to a statement released to the ASX.
"The group is well capitalised with $381 million in CET1 (common equity tier one) capital held above its operating targets," says Suncorp.
"Suncorp remains committed to returning excess capital to shareholders."
Suncorp's Australian insurance division net profit dropped by 28.5 per cent to $264 million, with net earned premium growth offset by the higher than anticipated natural hazard costs.
Australian Life Insurance underlying profit after tax was up $39 million, up 56 per cent for the half, which the company says reflects their work done in repricing and optimisation programs.
The company has also been investing excess capital in order to improve the business, which should pay off in the second half according to managing director Michael Cameron.
"Today's result provides evidence that our strategy, our team, and our organisation will deliver an improved second half and a significant uplift in performance in the FY19 and 20," says Cameron.
Shares in Suncorp are down 2.85 per cent to $12.94 at 1.15pm AEDT.
Business News Australia
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