Suncorp Group Ltd (ASX: SUN) shares are in the spotlight on Friday.
In morning trade, the insurance giant's shares are down 5% to $18.36.
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Why are Suncorp shares on the slide?
The catalyst for this move has been the release of an update from Suncorp before the market open.
This morning, Suncorp's acting CEO, Jeremy Robson, provided an update on the successful placement of its FY 2027 reinsurance program and its FY 2026 outlook.
With respect to the former, Robson revealed that the renewal reflected continued discipline in the company's reinsurance strategy, maintaining an appropriate balance between cost, earnings volatility, and capital efficiency.
Suncorp advised that it has now successfully placed its main catastrophe program for FY 2027, which maintains the maximum event retention of $350 million for a first and second large event. This is on top of the previously announced five-year aggregate reinsurance arrangement which commenced on 30 June.
That aggregate cover provided $800 million of protection annually, and up to $2.4 billion in total over a 5-year period.
Commenting on the program, Jeremy Robson said:
The FY27 reinsurance program demonstrates our focus on optimising returns while ensuring appropriate protection for our customers and shareholders. While the cost of reinsurance remains an important input to insurance pricing, it is pleasing to see improved market conditions reflected in the pricing of our comprehensive main catastrophe program, now complemented by the addition of aggregate protection to further enhance resilience and reduce volatility.
Suncorp has also reaffirmed its natural hazard allowance (NHA) for FY 2027 is $1,800 million, excluding claims handling expenses and profit commission.
FY 2026 update
Looking ahead to its FY 2026 results next month, Suncorp advised that it is reaffirming its underlying ITR to be towards the upper end of the 10% to 12% range.
However, its gross written premium growth is now expected to be approximately 2.7%. Suncorp notes that expectations have been impacted by an ongoing weak economy and soft commercial market in New Zealand, as well as a marginal reduction in demand in Australia.
In addition, total investment income is expected to be between $750 million and $800 million in FY 2026. This is down from $1,227 million in FY 2025.
The company explained that its lower investment income relative to FY 2025 is predominately driven by rising bond yields. These are resulting in mark-to-market losses in both insurance funds and shareholders' funds.
Following today's move, Suncorp shares are now down around 12% over the past 12 months.
