In a statement released to the ASX yesterday, Suncorp Life said the revised assumptions reflect the culmination of a “detailed review of the business taking account of current industry trends and Suncorp’s more recent experience”.
“In light of the revised assumptions, the group has reassessed the carrying value of intangibles and goodwill associated with the life business,” the statement said.
As a result, $350 million after tax of goodwill and other intangible assets has been written down, and losses of $150 million after tax have been recognised on “some products and other reserving adjustments to policy liabilities”.
Suncorp indicated it would need to keep its assumptions under review in February 2014 given “the highly uncertain nature of operating conditions in the industry and the increasingly pressing need for fundamental industry reform”.
The company acknowledged the write-down would have an impact on reported net profit after tax for 2014/2015, but pointed out that as a non-cash item, it would not affect cash earnings or dividends.
Suncorp group chief executive Patrick Snowball said the changed assumptions recognised “industry headwinds and deteriorating situation”.
“The structural and cyclical life insurance issues have now been recognised by most life insurance companies and reinsurers; however, we are frustrated that industry change is not occurring at a more rapid pace,” said Mr Snowball.
“This is continuing to impact Suncorp Life earnings and the potential for further deterioration needs to be reflected in our assumptions. We believe our revised approach to setting forward-looking assumptions acknowledges the structural challenges appropriately,” he said.
“The Suncorp Life business has a clear strategy in place to address the industry challenges and I’m confident in our ability to execute this plan,” Mr Snowball said.
Suncorp Life expects to report an underlying profit after tax of between $75 million and $85 million for the 2014 financial year.
