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UPDATE 2-Australian insurer Suncorp's claims hit $237 mln as bushfires rage on

Published 09/01/2020, 05:56 pm
© Reuters.  UPDATE 2-Australian insurer Suncorp's claims hit $237 mln as bushfires rage on
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* Strong reinsurance programme in place for H2: Suncorp

* Total H1 claims at A$519 mln, surpass allowance

* Shares gain slightly after the announcement (Recasts text, adds analyst comment, and background)

By Aby Jose Koilparambil

Jan 9 (Reuters) - Australian insurer Suncorp Group SUN.AX said on Thursday it has received since September 2,600 bushfire-related claims worth up to A$345 million ($237.05 million), of which nearly a third was recorded in the first few days of the month.

Suncorp on Thursday joined its larger rival Insurance Australia Group IAG.AX , which flagged costs of A$280 million last week related to the bushfires, which have scorched huge swathes of land killing 26 people and killing or injuring an estimated one billion animals, including livestock.

Although wildfires in summers are not uncommon, the current bushfire season started earlier than normal following a three-year drought that has left much of the country's bushland vulnerable to such calamity.

As the intensity of the fires peaked last week, Suncorp said it received claims worth as much as A$105 million in the first five days of January, taking the total in the first half of fiscal 2020 to A$519 million, surpassing its allowance for the period by A$109 million.

Market participants, however, see a limited impact of the losses on the company's bottom line due to an elaborate web of reinsurance programmes.

"Suncorp has a strong reinsurance program in place for the second half of the financial year so there is a low probability of our natural hazard allowance of $820 million being exceeded for FY20," the company spokeswoman told Reuters.

Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit their own total loss in case of a disaster.

Shares of Suncorp, which is scheduled to report its first-half results on Feb. 11, slightly extended their gains on the news before closing 1.3% higher at A$13.19 on Thursday.

"Suncorp has displayed fiscal discipline in its reinsurance along with the way it has priced its premiums, and shareholders have taken heart from that," said James McGlew, executive director of corporate stockbroking at Argonaut.

"There are no red flags as Suncorp's balance sheet is okay and they will be able to pay their clients in a timely fashion ... If it (bushfires) was to go on for another 6-8 weeks, that will then start to put pressure on the insurers."

Australia's weather agency forecasted no significant rainfall or signs of cooler weather in the next few months, and said that only a large downpour will halt bushfires sweeping across the country.

The Brisbane-based company, which took a A$178 million hit from a Sydney hailstorm last year, had increased its natural hazard allowance to A$820 million for financial year 2020, from A$720 million and bought another A$200 million of natural perils reinsurance cover. = 1.4554 Australian dollars)

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