Suncorp’s Buy-Back and Rising Claims Pose Questions for Future Margins

Strategic Simplification Completed

Suncorp Group’s FY25 results reveal a company transformed. The insurer has completed its strategic simplification journey, divesting Suncorp Bank and New Zealand Life, and repositioning itself as a pure-play general insurer focused on Australia and New Zealand. This pivot underscores management’s commitment to sharpening operational focus and delivering value to shareholders and customers alike.

Strong Financial Performance

The headline net profit after tax surged to $1.823 billion, buoyed by $252 million from the sale of Suncorp Bank and $99 million from New Zealand Life. Beyond these one-off gains, the core insurance business showed resilience, with gross written premiums climbing 6.3% to $15.009 billion. This growth was supported by pricing adjustments in response to claims inflation and a natural hazard allowance that proved conservative given the year’s 17 declared weather events and over 120,000 natural hazard claims.

Investment returns also contributed positively, with net investment income rising to $766 million, helped by favourable market movements late in the period. Meanwhile, disciplined cost management saw the general insurance expense ratio improve to 18.6%, despite increased investment in digital platforms and operational transformation.

Customer Focus and Innovation

Suncorp continues to invest heavily in customer experience and resilience. The launch of digital tools like the Interactive Haven risk assessment and the Home claims call scheduler reflect a drive to simplify and personalise insurance services. The company’s use of artificial intelligence to handle millions of digital interactions and streamline claims processing signals a forward-looking approach to operational efficiency.

Moreover, Suncorp’s advocacy for insurance affordability and accessibility is gaining traction, emphasizing mitigation investments, incentives for resilient home improvements, and calls to reduce taxes on insurance products. These efforts aim to address the broader economic pressures faced by households and businesses in Australia and New Zealand.

Capital Management and Outlook

With a robust capital position, Common Equity Tier 1 capital $997 million above target midpoint, Suncorp announced an on-market share buy-back program of up to $400 million starting September 2025 through FY26. This move signals confidence in the company’s future cash flows and a commitment to returning excess capital to shareholders.

Looking ahead, Suncorp expects mid-single digit premium growth as inflationary pressures ease and reinsurance markets stabilize. The underlying insurance trading ratio is forecast to remain strong, supported by prior pricing actions and improved reinsurance conditions, though offset by a higher natural hazard allowance to build margin resilience.