SUNCORP GROUP LIMITED — Annual Report 2012

Aug 21, 2012

Letter to shareholders

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Dear Shareholder,

22 August 2012

The 2012 f inancial year saw the Suncorp G r oup continue to deliv e r against it s strategy a strengthe n its compe t itive positi o n.

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S uncorp is n ow three y ears into a strategic tr a nsformati o n u nder Grou p CEO Pat r ick Snowb a ll and his e xecutive t e am. Oper a ting under its ‘One C o mpany. M a ny Brands ’ b usiness m o del, the G r oup is no w beginning to realise i t s s cale adva n tages in cl a ims, pricin g and acce s s to a c ustomer b a se of arou n d nine million. Each o f its core b usinesses has been r e focussed i n their markets and a n on-operati n g holding c ompany s t ructure int r oduced to i m prove ca p ital transp a rency and managem e nt.

T he Buildin g Blocks pr o gram has been s uccessfull y executed; contributin g to a thre e percent i m proveme n t in the un d erlying insurance ma r gin and p roviding a solid found a tion for fu t ure busine s s growth that will be s upported t h rough a r a nge of sim p lification i n itiatives a n nounced i n May 201 2 . These ini t iatives will f urther stre a mline and f ocus our p o licy syste m s, legal e ntity struct u res and technology platforms.

T he transfo r mation of S uncorp sh o uld be se e n in the c ontext of t h e challeng e s that hav e faced the Australian f inancial se r vices sect o r over the p ast three y ears with g lobal and d omestic e c onomic un c ertainty, v o latile i n vestment m arkets and weak as s et growth. I n addition, the insuran c e sector h a s withstoo d an unpre c edented s equence of natural h a zard event s and subs t antially i n creased r e insurance costs.

The Grou p ’s results f o r the finan c ial year to 30 June 2 0 12 demon s trate we a r e moving i n the right direction and should p rovide furt h er confide n ce in our a bility to deliver future g rowth pla n s. Net prof i t after tax was $724 million, a sig n ificant imp r ovement o n the prior y ear. The G eneral Ins u rance profit after tax was $493 million. While adverse n a tural haza r d experien c e and incr e ased rein s urance costs imp a cted this r e sult, underlying busin e ss perfor m ance was p ositive ac ro ss all met r ics. Gross written pr e mium for t h e year incr e ased 9.3 % to $7.96 b illion with s trong cont r ibutions from all prod u ct lines.

Over the course of th e year, Suncorp supp o rted hundr e ds of thou s ands of b u siness, ho m e and motor insurance cust o mers who s e property was dama g ed by poo r weather o r other clai m s events. Unfortuna t ely, many o f our cust o mers are i n curring pr e ventable c o sts year a f ter year be c ause of inadequat e mitigation or poor pl a nning deci s ions. This lack of foresight and i n vestment, particularly in regions identified a s high risk, is being re f lected in p r emiums w h ich have a l ready bee n driven higher by t he abnorm a l incidenc e of severe events in r e cent year s . We will c o ntinue to t a ke a leadership role in lob b ying governments at a ll levels o n this impor t ant issue.

Suncorp B ank report e d net profi t after tax o f $26 millio n . In the Core Bank, p r ofit after ta x was $289 milli o n, up 11.6 % . The Cor e Bank aims to become a genuin e alternativ e to the Ma j ors with a growing di r ect footpri n t and impr o ved broker flows. Th e Non-core Bank incur r ed a loss a fter tax of

Suncorp Grou p Ltd- ABN 66 1 45 290 124 - G PO Box 1453, Brisbane QLD 4 001 www.suncorp g roup.com.au

$263 milli o n, which included incr e ased imp a irment charges flowin g from the impact of e c onomic uncertaint y on the m a rket for as s ets held in this portfol i o. Over th e year, the n on-core p o rtfolio reduced fr o m $7.3 bil l ion to $4.5 billion with the residu a l portfolio n ow one qu a rter the si z e it was when plac e d into run - off in 2009 .

Suncorp Life made s u bstantial p r ogress ag a inst its str a tegy to grow intermediated and d irect distributio n channels. Profit after tax of $25 1 million was up 68.5 % with unde r lying profit after tax of $146 milli o n, up 11.5 % after adj u sting for di v ested bus i nesses.

The under l ying trend s in the co m pany's thr e e main bu s inesses ar e encourag i ng and the Board expects this positive m omentum to continu e . Accordin g ly, it has a p proved th e payment o f a final dividend o f 20 cents p er share, a long with a special di v idend of 1 5 cents per s hare. This brings the total divid e nd payout f or the 201 1 /12 year t o 55 cents p er share, f u lly franke d .

Both the fi n al ordinar y and speci a l dividend payments w ill be paid on 1 Octo b er 2012.

The Board has also decided to i n crease the target ordi n ary divide n d payout ra tio to 60 % to 80% of full year c a sh earnings. This me a ns shareh o lders can e xpect in the future to r eceive a l a rger percentag e of the Gr o up's earni n gs in the f o rm of ordi n ary dividends and be n efit from o u r substanti a l franking c r edits.

If, after th e payment o f ordinary d ividends, there is capital that is i d entified a s surplus to the ongoin g needs of t h e busines s , then the B oard’s pol i cy is that t h is should b e returned to shareholders in the form of sp e cial divide n ds or sha r e buy back s .

The comp a ny very much appre c iates the s u pport of it s shareholders during t hese toug h years an d I would like to thank y o u on behal f of the Bo a rd.

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Dr Ziggy Switkowski Chairm a n

Suncorp Grou p Ltd- ABN 66 1 45 290 124 - G PO Box 1453, Brisbane QLD 4 001 www.suncorp g roup.com.au