It has been a difficult start to 2026 for Suncorp Group Ltd (ASX: SUN) shareholders.
After releasing its half-year results on Wednesday, the insurer's share price fell 4.38% to close at $15.28.
Today, the stock has edged higher and is trading around $15.42, up 0.92%.
Even with that rebound, Suncorp shares remain down about 12% this year amid concerns about the company's earnings and outlook.
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Profit slumps after heavy weather losses
For the half, Suncorp reported net profit after tax (NPAT) of $263 million. That is a significant drop from $1.1 billion in the same period last year. Cash earnings came in at $270 million, down from $828 million a year ago.
The main reason for the decline was higher natural hazard costs. Suncorp said it dealt with 9 major weather events during the half, including severe storms and hail. Natural hazard costs totalled $1.31 billion, which was well above its allowance.
Net incurred claims rose 23.4% to $5.48 billion. At the same time, investment income fell to $259 million from $374 million last year, partly due to market impacts from higher yields.
Despite the earnings pressure, some underlying metrics remained solid.
Gross written premium increased 2.7% to $7.69 billion. The underlying insurance trading ratio was 11.7%, which sits within the company's target range of 10% to 12%.
Chief Executive Steve Johnston said higher natural hazard costs and weaker investment returns hurt profits, though the underlying business performance remained resilient.
Dividend reduced as earnings fall
Suncorp declared a fully-franked interim dividend of 17 cents per share, equal to 68% of cash earnings for the half. That is down from 41 cents in the prior corresponding period.
The company also completed $168 million of its on-market share buyback and continues to target around $400 million in buybacks across FY26.
Suncorp ended the half with capital above the midpoint of its Common Equity Tier 1 target range, supporting balance sheet flexibility despite elevated claims costs.
Management expects gross written premium growth to be at the lower end of the mid-single digit range for the full year.
What the brokers are saying
Broker reaction has been mixed following the result.
Macquarie upgraded Suncorp shares to outperform, pointing to solid underlying margins despite elevated catastrophe costs.
However, several brokers reduced their price targets.
Morgan Stanley cut its target to $17.01. Barrenjoey lowered its target to $18, and Jefferies trimmed its target to $17. Citi lifted its target slightly to $18.90 and upgraded the stock to outperform.
With shares trading around $15.40, most broker targets still imply upside.
Are Suncorp shares undervalued?
At current levels, Suncorp is trading on a reduced earnings base after a difficult half.
If natural hazard costs ease and investment returns improve, earnings could recover in the second half. However, recent years suggest extreme weather events are becoming more frequent, adding uncertainty to forecasts.
After falling 12% in 2026, the shares may appear cheaper on forward metrics. But the outlook remains closely tied to weather patterns and market conditions.
