The Suncorp Group Ltd (ASX: SUN) share price travelled from south to north amid a shaky day for ASX shares.
The financial services company initially fell as low as $13.06 in the first hour of trade after a reinsurance update, prompting reports of Suncorp shares experiencing their largest fall in more than three months.
But the Suncorp share price clawed its way back into the green throughout the rest of today's session. After the closing bell, Suncorp shares finished at $13.51 apiece, up 0.6%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) closed 0.45% higher after a late-session rally.
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Increasing cost of doing business
Investors were quick to sell off Suncorp shares earlier this morning after the company provided an update on its FY24 reinsurance program. At first, the market reacted negatively to the news before shifting to a more optimistic sentiment later in the day.
According to the update, Suncorp has run into increased costs with its reinsurance program. Owing to inflationary pressures and heightened natural disaster events, the insurance provider expects a 12% increase in the cost of FY24 catastrophe reinsurance premiums.
Suncorp has revised its program to strike a balance between costs and returns. As such, the maximum event retention has increased to $350 million from $250 million in FY23 for a first large event. At the same time, the figure for a second large event is set at $250 million.
The company also amended its main catastrophe program, reducing its max protection from $6.8 billion to $6.4 billion. Additionally, purchases were made to lessen the impact of third and fourth events in Australia to $150 million.
Amid the outcomes of its reinsurance program, Suncorp CEO Steve Johnston said:
We believe the cover that has been placed provides the best outcome, balancing optimal returns with an acceptable level of volatility.
Notably, the update indicated a view to maintain an underlying insurance margin of 10% to 12% despite the rising input costs.
Suncorp share price in focus as decision approaches
An important date is fast approaching for Suncorp shareholders as the ACCC verdict draws near.
Pencilled in for 28 July 2023, the competition watchdog is expected to reveal whether it will allow the banking division of Suncorp to merge with ANZ Group Holdings Ltd (ASX: ANZ). The financial conglomerate has already reached an agreement with Queensland to ensure jobs and investment in the state post-merger.
The Suncorp share price is up more than 14% since the proposed deal was announced back in July last year.
