Mulcahy said: “We have had a series of unusual weather events over three years and claims are going up. Premiums will go up.”
Suncorp has put additional reinsurance in place to protect against further exposure to bad weather. A retention buy down program will protect against natural hazard losses below the current catastrophe retention of $200 million.
The company has revised its insurance trading ratio to nine to 12 per cent for the year to June. This is down from previous guidance of 13 to 16 per cent.
Totally predictable to anyone who knows about the general insurance cycle. That's why I said SUN had peaked back in August 07, when you could have received $20 per share:-
re: macquarie upgrades suncorp (TheWord) Code: SUN - SUNCORP-METWAY LIMITED. (Google SUN) Post: 2066354 Reply to: #2066284 from Goblin Views: 184 Posted: 28/08/07 20:20 Sentiment: None Disclosure: No Stock Held From: 220.237.xxx.xxx
Whadayaknow about general insurance, Gobbler?
I know quite a lot, actually. They have their own cycle of expanding and contracting margins, based on price competition.
Apart from woeful management, the biggest factors which drove FAI and HIH to the wall was price competition, after an extended period of fat margins. Both companies were their own worst enemies and cut profit margins to the bone in a battle for gross premium revenues. They ignored their actuaries' pleas for higher reserving, because that would have exposed the fact that they were writing business at ever decreasing margins and, eventually, at losses.
The consequence was that, even well run operations like IAG, QBE, SUN, etc. had to try and match the reductions to win any business at all. The good operators survived, but they certainly didn't thrive during that destructive period.
At present, general insurers' margins are the highest they have been in a long time. How do I know? Have a look at the main general insurers' gross margins and compare them with historical averages [hint: www.apra.gov.au gives you all the statistical history you need, if you know how to use it].
QBE recently reported gross margins of 22% for 1H07. Do you know how outrageously above mean that is? Has profitability peaked for the current cycle? You tell me.
Believe me, before this is over, their insurance margins will be even lower than 9% to 12%, too.
SUN Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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