Suncorp has announced it is on target to achieve annualised synergies of $325 million and incur one-off implementation costs of $375 million as a result of its merger with Promina.
The synergy target represents a $100 million increase on the pre-merger estimate, while the implementation costs represent a $20 million increase.
The new synergy target follows a six-month integration process, which saw more than 400 employees of both companies plan the shape of the amalgamated organisation.
Suncorp chief executive John Mulcahy said employees had developed a robust and disciplined integration plan that would ensure targets are achieved on time.
He said the company would provide details on how it plans to achieve synergy targets at its interim results presentation on February 28, as well as details on how costs and benefits would flow through to the P&L.
Mulcahy said the company would also update the market on its revised full-year insurance trading ratio (ITR), which has been substantially impacted by severe weather events in the second half of 2007, including June floods in New Zealand, October storms in Lismore, NSW, and December storms in Sydney and Melbourne.
According to Mulcahy, the claim cost associated with these weather events are expected to total $280 million — a massive increase on the $100 million the company typically provisions per half year. These costs are expected to rise further as a result of recent flooding across much of Queensland and northern NSW.
“These events have been very distressing for all those involved and a serious community issue. Our priority is to work with out customers to ensure all claims are processed as quickly as possible,” he said.
Mulcahy said that, as a result of these weather events, the company had decided to implement a retention buy-down program that would provide protection through to June 30, 2008, from significant natural hazard losses below the current catastrophe retention of $200 million. The program is expected to cost a total of $15.2 million.
“The program essentially provides protection against significant hail, storm and bushfire events, with the maximum event retention (MER) reducing to $100 million for non-cyclone and non-earthquake losses,” Mulcahy said.
