Suncorp Group (SUN) – Rough Weather

Suncorp Group provides insurance products to retail, corporate, and commercial customers in Australia and New Zealand. The company was founded in 1902 and is headquartered in Brisbane, Australia.‍

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Suncorp has flagged a net cost from the hail and storms that have hit south-east Queensland and parts of northern NSW recently of circa $350 million after reinsurance cover, with more than 10,000 claims logged as at close of business on 25 November. The latest update takes total natural hazards costs to $1.15–$1.28 billion for the fiscal year to date, some $330 million above a first-half FY26 allowance $885 million, noting there remain some weeks to go until 31 December. Ord Minnett notes Suncorp has no reinsurance policies on events costing under $150 million, i.e. the smaller natural disaster events. These events add up, however, coming in at $620 million in the first half to date, which does not leave much capacity for larger events in its $885 million allowance.

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Suncorp is waiting for more favourable reinsurance pricing before taking out further policies, but the track record of claims so far this fiscal year signals that policy renewal in July next year will be tough, which will then leave Suncorp’s coverage as under-done going into FY27.  Post the update, we have downgraded our FY26 EPS estimate by a significant 12%. Even then, we highlight heightened earnings risk for the rest of FY26 and potentially into FY27. For the moment, our EPS estimates for FY27 and FY28 have been downgraded only by a nominal 0.1% for both years.

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Between weather-related volatility and an industry-wide slowdown in premium rate growth, the outlook for Suncorp (and its peers) remains challenging. This leads Ord Minnett to cut its target price on Suncorp to $20.50 from $22.50, and maintain its Hold recommendation despite the apparent value on offer.