SUNCORP GROUP LIMITED — Interim / Quarterly Report 2014

Feb 18, 2014

Suncorp Group Limited

Financial results for the half year ended 31 December 2013

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~~Suncorp Group Limited~~

19 February 2014

Suncorp results presentation Agenda

Patrick Snowball

Steve Johnston Patrick Snowball

Suncorp Leadership Team

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~~Suncorp Group Limited~~ 19 February 2014

Introduction Patrick Snowball Chief Executive Officer, Suncorp Group Limited

~~Suncorp Group Limited~~

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19 February 2014

Suncorp’s strategic priorities Relentless execution

Strategy

• Building Blocks

• Simplification

• Non-core Bank resolution

• NOHC

• Increased reinsurance (Queensland Quota-share and Life Risk)

• Exit from unfavourable markets

(Life Group, Farm Insurance, Aviation etc)

Delivering

• Underlying ITR >12%

• • Flat expense base

• • De-risked balance sheet

• Increased ordinary dividends

• • Capital returns

• • Reduced volatility

Commitments

• 10%+ ROE

• Underlying ITR >12%

• • Growth 7% to 9%

• • $225 million Simplification benefits

• • 60% to 80% dividend payout ratio

• • Continue to return surplus capital

• Strategic value of 4C’s

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~~Suncorp Group Limited~~ 19 February 2014

($m) Suncorp Group NPAT Building Blocks delivering and Non-core resolved

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780
724
548
491
453
FY10 FY11 FY12 FY13 HY14
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~~Suncorp Group Limited~~ 19 February 2014

Dividend Interim dividend up 40%

Special dividend Final dividend Interim dividend 20 20 15 15

15

20

20

FY10 FY11 FY12

20 30 40% 35 25

FY13 HY14

~~Suncorp Group Limited~~ 19 February 2014

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Top line growth Growth across all three business lines ($m)

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Short tail GWP
6.5% 3,364
2,890
HY12 HY13 HY14
Retail and Business Bank lending
6.8%
48,886
40,774
HY12 HY13 HY14
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Long tail GWP*

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938
6.7%
815
HY12 HY13 HY14
Suncorp Life individual in-force business
10.1%
821
693
HY12 HY13 HY14
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~~Suncorp Group Limited~~ 19 February 2014

*Excluding Fire Service Levies

Underlying and Reported ITR Building Blocks and Simplification delivering

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18.6%
Underlying ITR
Reported ITR
14.0%
13.4% 13.6%
13.1%
12.8% 13.9%
10.5%
12.0% 10.0% 11.1%
11.2% 11.1%
8.0%
10.9%
7.8%
6.4%
1.9%
3.8%
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1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14

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~~Suncorp Group Limited~~ 19 February 2014

HY14 result overview ($m)

General Insurance Bank Suncorp Life Business line NPAT Other profit and acquisition amortisation NPAT

%∆

HY14 HY13

470 564 (17) 105 4 large 22 51 (57) 597 619 (4) (49) (45) 9

548 574 (5)

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~~Suncorp Group Limited~~

19 February 2014

Financial results Steve Johnston Chief Financial Officer, Suncorp Group Limited

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Suncorp’s shareholder focus Simplified, de-risked financial services group

Yield

Growth

• Dividend payout ratio of 60% to 80% and return of surplus capital

• Target 7% to 9% per annum growth across the business lines

• Organic strategy, focused exclusively in Australia and New Zealand

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• Multi-brand, multi-channel approach leveraging the Group’s 9 million customers

• De-risked and simplified business model

• Ability to recycle efficiencies into growth in low risk market segments

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~~Suncorp Group Limited~~ 19 February 2014

Suncorp priorities

HY14 focus

• Deliver the benefits of Simplification

• Manage General Insurance franchise and prioritise margins

• Transition the Bank post Non-core

• De-risk and reduce capital consumption of Suncorp Life

• Balance sheet discipline

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~~Suncorp Group Limited~~ 19 February 2014

General Insurance NPAT of $470 million

$m	HY14	Consensus	%Δ
Gross writtenpremium	4,380	4,486	(2)
Gross writtenpremium(ex FSL)	4,302
Net earnedpremium	3,865	3,843	1
Net incurred claims	(2,608)	(2,578)	1
Operatingexpenses	(899)	(915)	(2)
Investment income - insurance funds	179	184	(3)
Insurance trading result	537	534	1
Investment income - shareholder funds	141	142	(1)
NPAT	470	470	-
Reported ITR	13.9%	13.9%	-

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~~Suncorp Group Limited~~

19 February 2014

Gross Written Premium Up 6.6% excluding Fire Service Levies

Product	HY14 ($m)	%∆	Factors
Motor	1,412	4.8	Unit and premium growth in a competitive market
Home	1,230	8.9	Premium increases with some unit reduction in QLD
Commercial	1,008	6.2	Growth with continued underwriting discipline
CTP	505	8.1	Strong growth in NSW and ACT
Workers’ comp& other	147	1.4	Price increases, new business and improved retention
Total	4,302	6.6
Australia	3,734	4.5
New Zealand	568	22.4	9.0% in NZD terms

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~~Suncorp Group Limited~~ 19 February 2014

Claims experience Short tail and long tail

Date	Event	Net costs $m
Sep2013	NZ Canterburystorms	15
Oct 2013	Victorian wind	10
Oct 2013	NSW bushfires	63
Oct 2013	NSW Central Coast hail	23
Nov 2013	NSW/QLD storms	66
Nov 2013	Gold Coast hail	34
	Other natural hazards attritional claims	120
Total		331
Less: allowance for natural hazards		(282)
Natural hazards costs above allowance		49

Reserve releases:

• Net $56 million • Broadly in-line with long-term expectation of 1.5% of NEP • NZ earthquake strengthening of AUD$27 million

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~~Suncorp Group Limited~~

19 February 2014

Investment assets Low yields with credit spread gains

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Insurance funds
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Shareholder funds
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• $9.1 billion

• Investment income $179 million

• Underlying yield 3.6%

• MTM gains of $49 million from narrowing credit spreads

• Returns of $33 million on index linked bonds

• $3.3 billion

• Investment income $141 million

• Underlying yield 4.1% on fixed income

• MTM gains of $21 million from narrowing credit spreads

• Income from equities $79 million

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78% of fixed interest investments rated ‘AA’ or above
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~~Suncorp Group Limited~~ 19 February 2014

General Insurance Overview

• General Insurance NPAT $470 million

• GWP up 6.6%

• Underlying ITR of 14.0%, Reported ITR of 13.9%

• Delivered on the ‘meet or beat’ 12% Underlying ITR target

• Natural hazard claims $49 million above allowance

• Reserve releases of $56 million

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~~Suncorp Group Limited~~

19 February 2014

Suncorp Bank Absorbing Non-core impacts

$m	HY14	Consensus	%Δ
Net interest income	492	486	1
Non-interest income	20	41	(51)
Operatingexpenses	(305)	(300)	2
Profit before impairment losses	207	227	(9)
Loss on sale of loans and advances	(13)	-	n/a
Impairment losses on loans and advances	(45)	(37)	22
Profit before tax	149	190	(22)
Income tax	(44)	(59)	(25)
NPAT	105	131	(20)

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~~Suncorp Group Limited~~ 19 February 2014

Lending assets of $49.2 billion Improved geographical diversification

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Product split Geographic split
Corporate
Agribusiness SA & other 3%
& Property <1%
9% (up 11%) WA 6%
Commercial VIC 9%
(SME) 11%
(up 7%)
Consumer QLD
1% Housing 58%
NSW 24%
78%
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~~Suncorp Group Limited~~ 19 February 2014

Suncorp market share Opportunities to refocus on QLD market

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National market share
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81%
3%
Suncorp Majors
Source: APRA system data for total deposits and retail housing,
DBM BFSM, SME Business Survey, MFI Satisfaction, Dec 2013
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Retail market share in QLD
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64% 9% Suncorp Majors Source: Roy Morgan, Retail Banking, Overall Customer Satisfaction, Dec 2013

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~~Suncorp Group Limited~~ 19 February 2014

Funding and Liquidity Conservative balance sheet

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Deposit to loan ratio
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84%
68%
66%
63%
59%
57% 56%
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4
Source: Company reports for financial year 2013
Regional bank data is reported group ratios and majors data retail and business division only
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Balance sheet components
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Assets Liab + Equity
21% 24%
Short-term wholesale
25% Long-term wholesale
Equity & other
6%
Retail deposits
100% Liquid assets
Lending
66%
Dec-13
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~~Suncorp Group Limited~~

19 February 2014

Credit quality Reduced impaired assets and non-performing loans Gross impaired assets Non-performing loans

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(8%) or $79 million
(18%) or $90 million
1,860 2,184
940 861
506 416
Dec-12 Jun-13 Dec-13 Dec-12 Jun-13 Dec-13
Impaired assets by segment Impairment losses to gross loans
506
Corporate 0.31% 0.32%
416 0.25%
and property 283 149 0.18% 0.16% 0.17% 0.15%
Commercial/SME
Agribusiness 139 182
SUN Reg 1 Reg 2 Major 1 Major 2 Major 3 Major 4
Retail Jun-13 Dec-13
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Source: Company reports for financial year 2013

~~Suncorp Group Limited~~ 19 February 2014

Suncorp Bank De-risked with growth levers

Product split

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Jun-08: $55.2 billion Dec-13: $49.2 billion
Agribusiness Corporate
& property
Commercial/
SME
Corporate
& Property Housing
Housing
Agribusiness Commercial/SME
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Building key differentiators
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Basel II advanced accreditation Banking platform Maintain A+/A1 credit rating

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~~Suncorp Group Limited~~ 19 February 2014

Suncorp Life overview Improved capital efficiency

	$m	HY14	Consensus	%Δ
	Underlying profit after tax	41	59	(31)
	Market adjustment after tax	(19)	(16)	19
	Lifeprofit after tax	22	43	(49)

• Shift in capital efficiency resulting in $535 million capital return to Group

• Life Risk inforce annual premiums up 10.8% to $886 million

• Direct new business sales up 6.3% to $17 million with distribution now managed in-house

• Super business up 41% driven by Everyday Super

• Reduction in planned margins reflects strengthened assumptions and additional reinsurance

• Disability claims experience negative $10 million, lapse experience negative $17 million

• • New Zealand business performed strongly

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~~Suncorp Group Limited~~ 19 February 2014

Suncorp Life Growth in Life Risk and Superannuation

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Life Risk in-force annual Life Risk new business by Superannuation new business
premium ($m) channel ($m) ($m)
886 IFA Direct NZ 185
9 11 13 149
845 131
16
17 17
800
35 33 32
1H13 2H13 1H14 1H13 2H13 1H14 1H13 2H13 1H14
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~~Suncorp Group Limited~~ 19 February 2014

Suncorp Life capital Contributing to the Group’s surplus

Capital movements ($m)

2,106 158 1,641 70 207 100 70 30-Jun-13 LAGIC Reinsurance Sub debt Capital efficiency BAU 31-Dec-13

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~~Suncorp Group Limited~~ 19 February 2014

($m) HY14 capital movements Group excess to CET1 over $1.1 billion

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207 548

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450
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1,585 1,135

801

Excess CET1 30-JunHY14 NPAT Life reinsurance Other Excess CET1 31Interim dividend Excess CET1 3113 (post-div) Dec-13 (pre-div) Dec-13 (post-div)

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~~Suncorp Group Limited~~ 19 February 2014

Conclusion Patrick Snowball Chief Executive Officer, Suncorp Group Limited

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Outlook Focus for the remainder of 2014

General Insurance	• ‘Meet or beat’ 12% underlying ITR • Balance margin and growth • Capitalise on any market disruption from market consolidation
Bank	• Growth 1 to 1.3 times system • NIM heading back to target range of 1.75% to 1.85% • Cost to income heading back to target range for FY15
Life	• Focus on direct distribution and Everyday Super • Manage lapse and claims challenges • Driving industry structural reforms
Capital	• Dividend payout ratio range 60% to 80% of cash earnings • Commitment to return surplus capital

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~~Suncorp Group Limited~~ 19 February 2014

3

Suncorp Group Key commitments

1 Group growth of 7% to 9% per annum over the next two years 2 Simplification benefits of $225 million in the 2015 financial year 3 ‘Meet or beat’ an underlying ITR of 12% through the cycle 4 60% to 80% dividend payout ratio 5 Continue to return surplus capital 6 Group ROE of at least 10% in the 2015 financial year

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~~Suncorp Group Limited~~ 19 February 2014

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Q&A session

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Supplementary slides

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~~Suncorp Group Limited~~ 19 February 2014

The Suncorp journey ‘4Cs’ drive the Group’s competitive advantage

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FY13 - FY16
Optimise &
FY12 - FY16 differentiate
Simplification program
FY10 - FY12
Building Blocks
FY10 • One pricing engine
•
One claims system Simplification benefits $265m
Stabilise business & • One general ledger
strengthen balance sheet • One employment agreement
• One view of customer
• NOHC
Building Block benefits $235m
FY10 FY11 FY12 FY13 FY14 FY15 FY16
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~~Suncorp Group Limited~~ 19 February 2014

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General Insurance A diversified portfolio

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Geographic split
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Product split
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QLD 3%
6% Motor
12%
13% 26% NSW
33% Home
6% VIC
Commerical
23%
WA
CTP
21% NZ
28%
Workers comp
Other 29%
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~~Suncorp Group Limited~~ 19 February 2014

FY14 Reinsurance program

5.8bn
2.5bn
500m
250m	Original cover	Original cover reinstatement	Third cover	Third cover reinstatement
200m	NZ dropdown	NZ dropdown	Dropdown aggregate program
150m
50m
NZD 50m
NZD 25m		NZ dropdown	NZ dropdown
		**Retention **
				~~35~~

~~Suncorp Group Limited~~ 19 February 2014

FY14 Reinsurance program Drop-down aggregate program

250m 50m xs 200m xs 50m 100m xs 100m xs 150m xs 200m 150m xs 300m 200m 150m Erosion contributes to 100m xs 100m xs aggregate dropdown 50m xs 200m 50m xs 300m 50m Retention ~~36~~

~~Suncorp Group Limited~~ 19 February 2014

Natural hazards since 1967 Suncorp long-term catastrophic loss experience Events greater than $100m, gross of all reinsurance

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Christchurch
5,000 NZ AUS Long Run Average earthquakes, Brisbane
floods, Cyclone Yasi,
4,500 Melbourne hailstorm
Brisbane flood,
Cyclone Tracy
4,000
Melbourne &
Newcastle Hunter Valley Perth hailstorms,
3,500
earthquake storm Christchurch
3,000 earthquakes
Brisbane
2,500 hailstorm
Sydney
2,000 hailstorm
1,500
1,000
500
-
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~~Suncorp Group Limited~~ 19 February 2014

Suncorp Bank business lending Diverse portfolios

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Commercial/SME portfolio
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Agribusiness portfolio
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Health & Other Vegetables
Transport &
Education 4% 3% Other
Storage
4% 2% Fruit Dairy 4%
3% 3%
Services (Inc.
Poultry Beef
professional
services) 4% 34%
9%
Property Sugar
Manufact. Investment 5%
& Mining 39%
7% Cotton
8%
Construction
& Dev. Grain &
Sheep &
8% Mixed
Mixed
Retail Hospitality & Livestock Farming
Accomm. 26%
8% 10%
19%
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~~Suncorp Group Limited~~

19 February 2014

Life Capital Contributing to the Group’s surplus

19 207 19 643 535 22 100 207 300 113 Excess Capital 30H1FY14 NPAT Capital instrument Reinsurance Other Life capital returns Excess Capital 31June-2013 transactions benefit to Group (1) 12-13

(1) Life capital return breakdown:

• $158m LAGIC benefits

• $207m excess capital reinsurance benefit

• $100m CET1 reduction as a result of capital rebalancing (subdebt)

• $70m excess capital return

~~Suncorp Group Limited~~ 19 February 2014

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Suncorp Group Capital $1,135 million excess to CET1 targets post dividend

A$m	General Insurance	Bank	Life	NOHC and other entities	Suncorp Group total
CET1	3,532	2,535	517	402	6,986
CET1 target	2,348	2,458	404	191	5,401
Excess (pre-div)	1,184	77	113	211	1,585
Dividend					(450)
Excess (post-div)					1,135
CET1 ratios	1.65x	8.25%	1.65x
CET1 targets	1.10x	8%	Amount equal to sum of PCA plus a target excess		40

~~Suncorp Group Limited~~ 19 February 2014

Important disclaimer

This report contains general information which is current as at 19 February 2014. It is information given in summary form and does not purport to be complete.

It is not a recommendation or advice in relation to the Group or any product or service offered by Suncorp or any of its subsidiaries. It is not intended to be relied upon as advice to investors or potential investors, and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.

This report should be read in conjunction with all other information concerning Suncorp filed with the Australian Securities Exchange (ASX).

The information in this report is for general information only. To the extent that the information may constitute forwardlooking statements, the information reflects Suncorp’s intent, belief or current expectations with respect to our business and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices at the date of this report. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties, many of which are beyond Suncorp’s control, which may cause actual results to differ materially from those expressed or implied.

Suncorp undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this report (subject to ASX disclosure requirements).

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~~Suncorp Group Limited~~ 19 February 2014

Contact Details

Mark Ley mark.ley@suncorp.com.au +61 2 8121 1221 Andrew Dempster andrew.dempster@suncorp.com.au +61 7 3135 2425 Susan Duncalfe susan.duncalfe@suncorp.com.au +61 7 3135 3729 Sam Miller samantha.miller@suncorp.com.au +61 7 3135 2415 Nick Perchey nick.perchey@suncorp.com.au +61 2 8121 9206

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