Suncorp Strategy Ticks the Right Boxes, but It’s No Game Changer

Suncorp’s two-part investor forum outlined how it plans to achieve previously announced targets of 1) an underlying insurance margin of 10%-12% and 2) a banking cost-to-income ratio of 50%. We think the insurance margin is achievable, with our forecast at 11% in fiscal 2023. This is decent step up from 8.9% in fiscal 2020 but is similar to the average over the last five and 10 years. We expect margin improvements to come from premium price increases, more digital sales and client interactions, and using scale to drive down repairer costs. Suncorp’s scale benefits are not new, but with margins and returns falling, we believe insurers will have renewed focus on claim approvals and repair costs. IAG and Suncorp account for more than half of the motor and home insurance market, and we expect they can assert some pricing power on repairers reliant on their business.