Suncorp says premiums will rise
Home and car insurance premiums are expected to rise by up to five per cent next year because the cost of repairs are higher, Suncorp says.
The insurance giant issued the warning as it reported a full year net profit of $1.08 billion, which was slightly weaker than analysts had expected.
Chief executive Michael Cameron said home and motor insurance premiums rose by three to five per cent in 2016/17, and he expects they will rise by another three to five per cent in 2017/18.
"The costs of repairing motor vehicles and costs of repairing homes are increasing," he said.
"Years ago, when you broke your bumper bar it was an easy fix.
"These days it's quite a big job with expensive parts so there is a cost inflation there and across the industry we are seeing price increases reflect those costs."
Suncorp's net profit in the year to June 30 was up 3.6 per cent on the prior year, weaker growth than expected.
Its shares fell 93 cents, or 6.4 per cent, to $13.57.
Mr Cameron defended the group's performance and said the share price reaction had more to do with Suncorp's plans to spend an additional $100 million in 2017/18 on accelerating its strategy to improve customer service.
"I expect to see more strength in the share price as we provide more colour with what we are doing with that $100 million," he said.
He said Suncorp would convert its entire network to a new branding and store layout that has so far been rolled out to 150 stores, and merging all its services apps into a single product for customers.
Suncorp also intends to increase its dividend payout ratio above the top end of its 60-80 per cent range to offset the impact on cash earnings of the additional investment.
The group's Australian insurance business achieved a 30 per cent rise in profit, helping to offset lower margins in banking and a profit fall in its New Zealand business.
SUNCORP PROFIT MISSES EXPECTATIONS:
* Net profit up 3.6pct to $1.075b
* Revenue up 12.3pct to $17.39b
* Final dividend up two cents to 40 cents, fully franked
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