Suncorp Group's outlook challenged from higher risks, costs challenges

Despite this, SGL's prescribed capital amount coverage remains robust.

Suncorp Group Limited (SGL) faces a one-notch downgrade in its Fitch Prism Model score following the sale of its banking subsidiary in July 2024, Fitch Ratings said.

Despite this, SGL's prescribed capital amount coverage remains robust, and its net written premium-to-capital ratio continues to show strength. 

The group reported a combined ratio improvement to 92.7% in fiscal year 2024 (FY 2024), up from 93.4% in FY 2023, aided by premium increases and lower-than-expected natural hazard costs. Net profit after tax rose to $800m (A$1.23b) in FY 2024, compared to $700m (A$1.08b) the previous year.  

SGL's profitability, supported by a strong reinsurance framework, remains challenged by higher natural peril risks and escalating reinsurance costs. 

The insurer has consistently adjusted its natural hazard allowance to reflect the increasing frequency and severity of extreme weather events.  

SGL’s shift toward a non-life insurance focus is expected to enhance its business profile over time. The sale of its banking assets, which accounted for 71% of consolidated assets at the end of FY 2023 but only contributed 35% of net profit, allows the company to concentrate on core non-life operations. 

As the second-largest non-life insurer in Australia and New Zealand, SGL maintains a favourable market position supported by established brands, despite challenges from higher risk exposure and evolving capital dynamics, Fitch Ratings assessed.

($1.00 = A$1.53)