Suncorp Group Ltd (ASX: SUN) shares are in the news today after providing a natural hazard update. The Suncorp share price is down slightly.
Suncorp’s update
Suncorp said that it was providing the update relating to the financial impact from the Queensland and NSW hail event on 31 October 2020, as well as the total expected natural hazard costs of the first four months of FY21.
As of 6 November 202, it had received around 6,400 claims in total. This number is expected to increase as more claims come in.
Including the above above hail event, Suncorp estimates the current total hazard cost across Australia and New Zealand for the four months to 31 October 2020 is between $348 million to $408 million, which excludes associated risk margin or claims handling expenses.
Suncorp reminded investors its FY21 natural hazard allowance is $950 million, split evenly across the two halves. It also has a reinsurance program which has aggregative excess of loss protection, which provides $400 million in excess of a retention of $650 million with an event deductible of $5 million.
That inclusion means Suncorp will retain the first $5 million of each event. The maximum retention for a single event in Australia is $250 million under Suncorp’s main catastrophe event.
Summary thoughts
I don’t think Suncorp is a terrible business, but it’s not one I’m looking to buy. Insurance is somewhat like a financial commodity (so there’s not a lot of pricing power), whilst its profit can be (and is) hit heavily by both damaging storms and recessions. There are other ASX dividend shares I’d rather buy first such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).