Suncorp is reviewing its pricing for hail risk after “elevated” natural catastrophe costs dented its first-half earnings.

Net profit after tax for the half was $263 million, plummeting 76.1% from a year earlier, and cash earnings dropped 67.4% to $270 million, the insurer announced this morning.

The insurance service result – a measure of underwriting performance – slumped 72.6% to $253 million.

“I would acknowledge that this has been a challenging half for the whole insurance industry as we’ve responded to the extreme weather,” CEO Steve Johnston said at today’s earnings briefing.

“While Suncorp’s ... reported profits and shareholder returns have been challenged by an elevated level of natural hazard costs and lower investment returns over the half … the business continues to perform strongly.”

Nine declared natural hazard events in the July-December period triggered more than 71,000 claims at a net cost of about $1.3 billion. Suncorp first flagged the impact in an update last month.

Hail losses dominated, accounting for 26,400 claims at a cost of $708 million. 

“On the hazard book, we’ve obviously had a pretty challenging half with a high predominance of hail-related events, and we will go back through our modelling to understand the allocations of hazard premium to hail and whether the loadings we put across the whole portfolio continue to be relevant,” Mr Johnston said. 

“I [expect] there will be some … adjustments to pricing, particularly in some geographies, off the back of that.”

A drop in net investment returns to $259 million from $374 million also contributed to the weaker first-half earnings, Suncorp says.

Gross written premium grew 2.7% to $7.69 billion for the period, and net incurred claims rose 23.4% to $5.48 billion.

“Elevated natural hazard experience and ongoing working claims inflation in some portfolios drove [the] increase in net incurred claims,” Suncorp said.

“Working claims were impacted by ongoing industry-wide construction and labour inflationary pressures in the consumer home portfolio, and more persistent parts and labour inflation in motor.”

Citi analysts say GWP growth “should accelerate in 2H with help from Vero”.

Suncorp’s consumer insurance division, the biggest by GWP contribution, made an insurance trading loss of $137 million after a year-earlier profit of $509 million.

Commercial and personal injury insurance, which includes the intermediated business, recorded a drop in insurance trading profit to $204 million from $224 million.

Suncorp New Zealand’s result was flat in Australian currency terms at $258 million.

S&P Global Ratings says Suncorp’s earnings are on track to improve in the second half “as reinsurers bear a greater share of any further storm or other natural hazard events”. It expects the insurer to have “solid premium growth of close to 4% ... up from 2.7% during the first half”.