SUNCORP GROUP LIMITED — Earnings Release 2012

Aug 21, 2012

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ASX announcement

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22 August 2012

SUNCORP REPORTS INCREASED PROFIT, DECLARES SPECIAL DIVIDEND

Key Points

• Group n e t profit aft e r tax of $7 2 4 million ( 2 011: $453 million). Cash earnings of $ 8 19 million (2011: $63 6 million).

• Final or d inary divid e nd of 20 c e nts per sh a re fully franked.

• Special d ividend of 15 cents p e r share fully franked, t aking total dividend paymen t s for the y e ar to 55 c e nts per sh a re fully fra n ked (2011: 35 cents).

• Target dividend pa y out ratio in c reased to between 6 0 % and 80 % of cash earning s .

• Top line growth of b etween 8 % and 10% a cross all business lin e s, margin s maintai n ed or impr o ved.

• Building Blocks delivering planned benefi t s and resulting in targ e ted 3% improve m ent in un d erlying Ins u rance Tra d ing Ratio.

• General insurance a fter tax pr o fit of $493 million (20 1 1: $392 m i llion), underlyi n g ITR up f r om 10.8% to 12.1%.

• Combin e d Bank ne t profit afte r tax of $26 million (20 1 1: $84 million).  Core Bank after tax profit of $ 2 89 million ( 2011: $25 9 million) wi t h stable n e t interest m argin of 1.91% (201 1 : 1.90%).

• Non-cor e bank loss after tax o f $263 milli o n. Run-of f of the por tf olio ahead of schedul e at $4.5 billion (from $ 7.3 billion a t 30 June 2 011). Gro s s nonperforming loans reduced $0. 5 billion to $1.9 billion.

• Suncorp Life after t a x profit of $ 251 millio n (2011: $1 4 9 million).

Su n corp Group Limited ( S uncorp) today report e d a net profit after tax of $724 million for the full year to 30 June 2 0 12. Cash earnings were $819 m illion.

Th e Group pe r formed well on an un d erlying ba s is despite a challengi n g external en v ironment. Each busi n ess achiev e d top line growth of between 8 % and 10% a nd maintained or improved m argins.

Dr Z iggy Swit k owski, Su n corp Chair m an, said t h e improve d balance s heet and c o nfidence in the Group’s future pro s pects had a llowed the Board to declare a final dividend of 20 ce n ts per sha r e and a sp e cial divide n d of 15 cents per share. Both di v idends will be fully fra n ked and p a id on 1 O c tober 2012.

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Sun c orp Group Ltd - ABN 66 145 2 9 0 124 - GPO B ox 1453, Brisbane QLD 4001 ww w .suncorpgroup.com.au

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He said the d e cision to d e clare a sp e cial divide n d was consistent wit h the Board’s co m mitment t o return to s hareholde r s any capital deemed surplus to t he needs o f the bu s iness.

“T h ese financial results d e monstrat e Suncorp’s ability to s u ccessfully balance a m ajor tra n sformatio n program and numero u s external challenge s while also rebuilding sh a reholder v a lue,” Dr S w itkowski s a id.

“I a m both ple a sed with t h e progres s the Group is making a nd confid e nt we hav e the str a tegy, man a gement te a m, organi s ational an d balance s h eet strength to further grow ou r businesse s and resp o nd to any f uture external challen g es that m a y arise.”

Ch i ef executive Patrick Snowball said the progress of the G roup’s str a tegic transformation pr o gram had p laced it in a strong po s ition.

“O v er the last three year s , Suncorp h as been tr a nsformed with the es t ablishmen t of a ‘O n e Compan y . Many Br a nds’ busin e ss model a nd refocu s sed core o perating bu s inesses,” M r Snowball said.

“T h e non-ope r ating holdi n g compan y structure h as improv e d capital t r ansparenc y , we ha v e dispose d of non-es s ential ope r ations and the non-co r e banking p ortfolio has been reduced by m o re than 75 percent.”

“T h e Group’s ‘ Building Bl o cks’ are i n place and delivering their target e d financial benefits an d we have a nnounced a new sim p lification p r ogram that will delive r its full $20 0 million in a nnualised b enefits by the 2016 fi n ancial ye a r.”

“A s a result, w e enter the current fin a ncial year in a positio n that man y companies would en v y – with improved pro f its, stable o r growing m argins and reduced c osts.”

Mr Snowball said Suncor p ’s transformation should be see n in the con t ext of the ch a llenges th e Australian financial s e rvices sec t or has fac e d over the past three y ears wit h global an d domestic uncertaint y , volatile in v estment m arkets and weak ass e t growth.

In a ddition, th e insurance sector has withstood a n unprecedented se q uence of n a tural ha z ard events and increased reinsu r ance costs.

General Insurance

Ge n eral Insur a nce poste d an after t a x profit of $ 493 millio n (2011: $3 9 2 million) f or the ye a r to 30 June 2012. While advers e natural h a zard expe r ience and i ncreased rei n surance c o sts impact e d the hea d line result, underlying performan c e was po s itive ac r oss the bu s iness.

Gr o ss written p remium ( G WP) for th e year incr e ased 9.3% to $7,955 m illion (2011: $7,280 mil l ion) with strong contri b utions fro m all produ c t lines. Th e underlyin g insuranc e trading ratio for the y e ar increas e d to 12.1 % (2011: 10 . 8%), re a lising the 3% underlyi n g margin i m proveme n t that was t argeted w h en Buildin g Blocks launched in 2 0 10.

In p ersonal in s urance, th e home an d motor por t folios increased 17.6 % and 3.2% respectively, w ith net writ t en units a n d average premiums increasing a cross bot h lines.

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Sun c orp–Metway L i mited - ABN 6 6 010 831 722 - GPO Box 145 3 , Brisbane QL D 4001 ww w .suncorpgroup.com.au

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In c ommercial insurance, GWP gro w th of 11.7 % for the ful l year was d riven by a co m bination o f strong ret e ntion, rate increases a nd new b u siness vol u mes. In statutory cla s ses, prem i um increa s es did not f ully cover d eterioratin g bond rat e s.

Th e Christma s Day hailstorm in Mel b ourne, a s e ries of sto r ms and flo o ding acro s s Qu e ensland and norther n New Sout h Wales and higher at t ritional ev e nts resulte d in natural hazar d claims being $278 million above allowance.

Su n corp’s Ne w Zealand o perations c ontributed an insuran c e trading r esult of $1 8 million (2 0 11: $203 m illion loss). The business’ solid u nderlying performanc e featured a return to pr o fitability an d strong G W P growth o f 21.7% o n the prior y ear.

Th e allowanc e for natural hazard ev e nts has b e en increas e d to $520 million for the fin a ncial year e nding 30 J une 2013. This repre s ents a 12 % increase w hen the benefits of the Group’s innovative reinsurance p rogram, w h ich includ e s a Queen s land quot a share ag r eement, ar e taken int o account.

Suncorp Bank

Su n corp Bank reported n e t profit aft e r tax of $2 6 million fo r the year t o 30 June 2012 (2 0 11: $84 million) in challenging m a rket conditions.

In the core ba n k, profit af t er tax was $289 million (2011: $ 2 59 million) . Lending momentum b u ilt over the year with t o tal lending increasing by 9.5%. R esidential and bu s iness lending were u p 9.6% and 10.7% res p ectively. N et interest i ncome inc r eased 7%, in line wit h growth in average le n ding asse t s. Net interest margi n was stabl e at 1.91% due to a sset repri c ing offsetti n g retail fu n ding margin pressure .

Su n corp Bank’s deposit t o loan ratio remains a t the top en d of its 60 % to 70% ta r get range and the Group’s ‘A+’ credit ra t ing ensure s a diversit y of alterna t ive funding sources. This includes a ccess to t h e newly fo r med cove r ed bond m a rket, whic h the Bank recently iss u ed into for $1.6 billio n of funding .

Th e non-core bank conti n ued to exc e ed run-off targets du r ing the ye a r, down $2 . 8 billion to $ 4.5 billion. Gross no n -performin g loans red u ced by $0.5 billion to $1.9 billion.

Th e non-core bank loss a fter tax for the year w a s $263 million (2011: $175 million loss). This reflected higher imp a irment ch a rges due t o impaired a sset write- d owns and write-offs in u nderperforming mark e t segment s .

As at 30 June 2012, the n on-core b a nk had pro v isions for impairment s totalling $ 408 mil l ion as well as $671 million of ca p ital suppor t ing the por t folio.

Th e Bank will c ontinue to manage t h e non-core portfolio run-off and m aximise th e amount of c apital available to the Group. B y June 201 3 , total non- c ore bank l o ans are e x pected to b e under $ 3 billion wit h less than $ 1.5 billion in impaired exposure s .

Suncorp Life

Su n corp Life’ s after tax p r ofit for the full year w a s $251 mil l ion (2011: $ 149 millio n ), while un d erlying pr o fit after tax was $146 m illion (2011: $147 million).

Th e embedde d value of S uncorp Lif e increase d 9.5% to $ 2 ,604 millio n

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Sun c orp–Metway L i mited - ABN 6 6 010 831 722 - GPO Box 145 3 , Brisbane QL D 4001 ww w .suncorpgroup.com.au

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Su n corp Life m ade good progress a g ainst its strategy to g r ow the IF A and Direct ch a nnels. Individual Life Risk new b usiness w a s $105 million, an inc r ease of 15 . 4% on the prior year.

Dir e ct Life sal e s increased by 30.4 % as Sunco r p Life succ e ssfully lev e raged the Group’s as s ets to driv e business v olumes wi t h 80% of all sales ma d e to existi n g Suncorp Group cu s tomers.

Capital

Ca p ital levels a cross the Group rem a ined stabl e with the G I Group M C R covera g e at 1.61 tim e s and Ba n k Net Tier 1 ratio at 9. 6 4%.

Aft e r ordinary and special dividend p ayments a r e made, the Group's c apital posi t ion will re m ain robust , with $468 million of c o re capital h eld at the non-operat i ng holding company lev e l and $79 2 million of c apital held in excess o f operatin g targets.

Dividend policy

Ba s ic cash earnings per s hare, form i ng the basis of the Group’s ordin a ry dividen d payout cal c ulation, w e re 64.1 ce n ts. The fin a l dividend represented a payout ratio of 62. 4 % of full ye a r cash ear n ings, withi n the Grou p 's target r a tio of 50% t o 70%.

In r ecognition of the signi f icant impr o vement in t he Group’ s strength o f earnings a nd bal a nce sheet over the p a st three y e ars, the di v idend policy has been amended w ith the tar g et payout r atio increa s ing to bet w een 60% a nd 80% of cash earni n gs.

F urther info_ _r mation re_ _g arding Su_ _n corp’s results, inclu_ _d ing an ex_ _p lanation o_ _f statutory an_ _d non-stat_ _u tory finan_ _c ial infor_ _m ation, is_ _s et out in the Grou_ _p ’s financi_ _a l results an_ _n ounceme_ _n t for the full year ended_ _3 0 June_ _2 012, whi_ _c h is available on w_ _w w.suncorp_ _g roup.com. a u or www. a sx.com.a_ _u* .

Ends

Fo r more info r mation contact:

Media: Jamin S m ith on 040 9 170 035 Analysts/Investors: Mark Le y on 0411 1 3 9 134

Teleconference details

Analyst briefing – 10:30am Au s tralia dial-in: 1800 801 8 25 Int e rnational di a l-in: +61 (0) 2 8524 504 2 Co n ference ID: 6712605 Webcast: www.suncorpgro u p.com.au

Media conference – 2:00pm Au s tralia dial-in: 1800 801 8 25 Int e rnational di a l-in: +61 (0) 2 8524 504 2 Co n ference ID: 5236218

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Sun c orp–Metway L i mited - ABN 6 6 010 831 722 - GPO Box 145 3 , Brisbane QL D 4001 ww w .suncorpgroup.com.au