SUNCORP GROUP LIMITED — Interim / Quarterly Report 2015

Feb 10, 2015

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Sun Gr Limited AB N 66 145 2 90 124 corp oup

Directors’ r ort & ep consolidated interim financial report for the half ar ended -year ye 31 December 2014

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Sun Gro mited corp up Li and subsidiaries ABN 6 6 145 29 0 124

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Consolidated interim financial r t epor

for the half-year ended 31 December 2014

Content s	Page
Directors ’ report ....... ................... .................... ................... ................... ....................	................... .................. 1
Lead aud itor’s indep endence dec laration ....... ................... ................... ....................	................... ..................4
Consolid ated interim statemento f comprehen sive income .................. ....................	................... ..................5
Consolid ated interim statemento f financial po sition ......... ................... ....................	................... ..................6
Consolid ated interim statemento f changes in equity ........ ................... ....................	................... ..................7
Consolid ated interim statemento f cash flows ................... ................... ....................	................... ..................8
Notes to the consolid ated interim financial sta tements ..... ................... ....................	................... ..................9
1. Re porting enti ty ................ .................... ................... ................... ....................	................... ..................9
2. Ba sis of prepa ration ......... .................... ................... ................... ....................	................... ..................9
3. Si gnificant acc ounting poli cies ............. ................... ................... ....................	................... ..................9
4. Us e of estimat es and judg ements ........ ................... ................... ....................	................... ..................9
5. Di vidends ....... ................... .................... ................... ................... ....................	................... ................10
6. Se gment repo rting ............ .................... ................... ................... ....................	................... ................10
7. Ba nking – Spe cific disclos ures ............. ................... ................... ....................	................... ................12
Suncorp Group and Corporate di sclosures .... ................... ................... ....................	................... ................13
8. In come tax ex pense ......... .................... ................... ................... ....................	................... ................13
9. Su bordinated notes .......... .................... ................... ................... ....................	................... ................14
10. Pr eference sh ares ............ .................... ................... ................... ....................	................... ................14
11. Sh are capital. ................... .................... ................... ................... ....................	................... ................15
12. Re serves ....... ................... .................... ................... ................... ....................	................... ................15
13. Fa ir value of fi nancial instr uments ........ ................... ................... ....................	................... ................16
14. Ch anges in th e compositio n of the Sun corp Group ................... ....................	................... ................18
15. Re lated partie s ................. .................... ................... ................... ....................	................... ................18
16. Co ntingent as sets and liab ilities ........... ................... ................... ....................	................... ................18
17. Su bsequent ev ents........... .................... ................... ................... ....................	................... ................18
Directors ’ declaration .................. .................... ................... ................... ....................	................... ................ 19
Independ ent auditor’ s review rep ort to the me mbers of Su ncorp Grou p Limited .....	................... ................ 20

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Directors’ report

The directors present their report together with the consolidated interim financial report of Suncorp Group Limited (the Company ) and its subsidiaries for the half-year ended 31 December 2014 and the review report thereon.

Directors

The directors of the Company at any time during or since the end of the half-year are:

Non-executive

Dr Zygmunt E Switkowski AO (Chairman) Director since 2010 Ilana R Atlas Resigned 20 August 2014 William J Bartlett Director since 2010 Michael A Cameron Director since 2012 Audette E Exel AO Director since 2012 Ewoud J Kulk Director since 2010 Dr Douglas F McTaggart Director since 2012 Geoffrey T Ricketts CNZM Director since 2010 Executive Patrick J R Snowball Director since 2010 (Managing Director and Group CEO)

Dividends

A fully franked 2014 final dividend of $515 million (40 cents per share) and a fully franked 2014 special dividend of $386 million (30 cents per share) were paid on 1 October 2014. A fully franked 2015 interim dividend of $489 million (38 cents per share) has been declared by directors.

Further details of dividends provided for or paid are set out in note 5 to the consolidated interim financial statements.

Review of operations

Overview of the Suncorp Group

Suncorp Group Limited and its subsidiaries (the Suncorp Group ) recorded a consolidated net profit after tax attributable to owners of the Company of $631 million for the half-year ended 31 December 2014. This strong result was achieved despite the $250 million impact of the worst Brisbane storm in the past 30 years.

In addition to improving shareholder returns, the Suncorp Group has continued to deliver exceptional service for its customers during the half-year. The benefits of operational efficiencies are being passed on to customers through improved service and, where possible, reduced prices. These initiatives are being reflected in improved retention rates and high levels of customer satisfaction.

Financial position and capital structure

Net assets of the Suncorp Group decreased to $13,575 million at 31 December 2014 from $13,799 million at 30 June 2014. The decrease in net assets of $224 million arises from the payment of the final and special dividends in respect of 30 June 2014, partially offset by the profit for the half-year.

The Suncorp Group continues to focus on maintaining a strong, de-risked balance sheet while remaining committed to returning surplus capital to shareholders. During the half-year, the Suncorp Group increased the Bank’s Common Equity Tier 1 ( CET1 ) target ratio by 50 basis points ( bps ) to 8.5% - 9.0% of Risk Weighted Assets in advance of potential regulatory changes. At 31 December 2014, the General Insurance group’s CET1 capital position was 1.44 times the Prescribed Capital Amount (June 2014: 1.66 times), the Bank’s CET1 ratio was 8.82% (June 2014: 8.54%) and Suncorp Life’s excess CET1 capital to target was $78 million (June 2014: $97 million).

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 1

Directors’ report (continued)

Review of operations (continued)

Financial position and capital structure (continued)

The Suncorp Group continues to hold capital well above regulatory and operating targets and has been operationalising its Risk Based Capital modelling which has confirmed the inherent diversification benefit that exists within the Suncorp Group. Risk Based Capital models are now embedded in the business areas and provide a robust framework for aligning capital targets, risk appetite and strategic decisions.

Additionally, $183 million of Tier 2 subordinated notes in the General Insurance business area were redeemed during the half-year. These notes were subject to transitional treatment under the APRA Prudential Standards.

The Suncorp Group’s excess to CET1 targets is $627 million after adjustment for the declared dividend. The Suncorp Group maintains a very strong capital position with all businesses holding CET1 capital in excess of targets.

Suncorp-Metway Limited’s Basel III APS 330 capital disclosures are made available at the regulatory disclosures section of suncorpgroup.com.au/investors .

Review of principal businesses

General Insurance profit after tax was $419 million (December 2013: $470 million).

The Insurance Trading Result ( ITR ) was $506 million (December 2013: $537 million), representing an ITR ratio of 12.8% (December 2013: 13.9%). The result was driven by underwriting discipline in a highly competitive market together with a continued focus on claims and expense management.

Personal Insurance gross written premium ( GWP ) inclusive of Fire Service Levies ( FSL ) reduced by 2.8% as the business passed on the benefits of operational efficiencies and lower reinsurance rates. As a result of a number of customer initiatives, such as AAMI roadside assist, there was improved customer retention and positive unit growth in the December quarter. Commercial Insurance GWP inclusive of FSL grew by 0.6% with a strong focus on quality risk selection.

Net incurred claims were $2,805 million (December 2013: $2,608 million), with a loss ratio of 71.1% (December 2013: 67.5%). Natural hazard claims were $470 million, with experience $172 million above long run allowances primarily driven by the Brisbane hail event. Reserve releases of $214 million were well above the expectation of 1.5% of net earned premium of $59 million. This was attributable to proactive management of long-tail claims and a benign wage and super-imposed inflation environment.

Investment income was $357 million (December 2013: $331 million), with gains from reductions in riskfree rates partially offset by the relative underperformance of inflation-linked bonds.

Banking profit after tax was $176 million (December 2013: $105 million).

This result was achieved through an improved net interest margin ( NIM ), a reduced cost to income ratio of 52.2% (December 2013: 59.6%) including a favourable one-off $19 million legal settlement, and lower impairment charges. Home lending growth of 2.0% reflects the Bank’s conservative approach and a focus on the ‘below 80%’ loan to valuation ratio market.

Net interest income was $553 million (December 2013: $492 million). The Bank’s NIM improved 20 bps compared to the half-year ended 31 December 2013 to 1.86% to sit above the target operating range of 1.75% to 1.85%. The NIM benefited from moderation of term deposit pricing and improvements in funding composition as growth in lower cost retail transaction accounts reached 14.0%. Retail deposits remain a core source of funding, with a deposit to loan ratio of 66.1%. An ‘A+/A1’ credit rating and access to a broad range of wholesale funding markets enables the Bank’s diversified funding capability.

The Bank has established a stronger balance sheet over the past twelve months. Banking loans, advances and other receivables increased to $50,111 million, representing a $330 million increase from 30 June 2014. This period of lower growth provided the opportunity to focus on balance sheet quality, strengthen the capital position and improve the NIM. The Bank has taken a considered approach to lending growth in a low interest rate environment.

Gross non-performing loans reduced 15.0% to $656 million (June 2014: $772 million). Gross impaired assets decreased 21.3% to $262 million from June 2014, representing 0.52% of gross loans and advances. Impairment losses on loans and advances were $43 million (December 2013: $45 million). Provision coverage has increased and the Bank continues to hold appropriate provisioning for stress across the agribusiness segment and will retain the drought provision recognised at 30 June 2014.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 2

Directors’ report (continued)

Review of operations (continued)

Review of principal businesses (continued)

Life profit after tax was $86 million (December 2013: $22 million). It comprises a $34 million (December 2013: $23 million) profit after tax from Life Risk, $18 million (December 2013: $18 million) profit after tax from Superannuation and a $34 million profit after tax (December 2013: $19 million loss after tax) arising from market adjustments.

The increase in Life Risk profit is mainly attributable to favourable claims and lapse experience contributing to a $7 million profit after tax (December 2013: unfavourable contributing to a $27 million loss after tax).

Annual in-force premiums increased by 8.6% to $957 million as Life continued to focus on retention and value over volume, ensuring new business is written on a more sustainable footing.

Direct in-force was up 8.0% to $149 million compared to the half-year ended 31 December 2013. Direct in-force via General Insurance brands continue to provide growth as Life unlocks the ‘One Company. Many Brands’ opportunity to better fulfil the holistic protection needs of Suncorp Group customers.

Superannuation delivered strong growth with net new business of $281 million driven by good growth in both Everyday Super and WealthSmart. However this was offset by outflows from historical product offerings.

Events subsequent to reporting date

On 9 February 2015, the Suncorp Group was advised of a potential issue relating to the 2011 catastrophe reinsurance program which could impact on expected recoveries. This potential issue is contrary to the Suncorp Group’s understanding of its additional reinsurance purchases made in 2011. This issue is of a technical nature and relates to the placement of reinsurance cover after the combination of the September 2010 Christchurch earthquake, the Brisbane floods and Cyclone Yasi.

It is uncertain whether this will have any financial impact; however, the Suncorp Group’s maximum exposure will not exceed $118 million after tax. The Suncorp Group has not recognised any financial impact in the preparation of its results for the six months to 31 December 2014.

The Suncorp Group will have detailed consultation with its reinsurance brokers and advisors.

Other than the matter noted above, there has not arisen in the interval between 31 December 2014 and the date of this report any other item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Suncorp Group, the results of those operations, or the state of affairs of the Suncorp Group.

Lead auditor’s independence declaration

The lead auditor’s independence declaration is set out on page 4 and forms part of the directors’ report for the half-year ended 31 December 2014.

Rounding of amounts

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and the directors’ report have been rounded off to the nearest million dollars unless otherwise stated.

Signed in accordance with a resolution of the directors.

Dr Zygmunt E Switkowski AO Chairman

Patrick J R Snowball

Managing Director and Group CEO

11 February 2015

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 3

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Suncorp Group Limited

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2014 there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

• (ii) no contraventions of any applicable code of professional conduct in relation to the review.

KPMG

Chris Hall Partner

Brisbane 11 February 2015

Liability limited by a scheme approved under Professional Standards Legislation.

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 4

Consolidated interim statement of comprehensive income for the half-year ended 31 December 2014

CONSOLIDATED	Note	Dec 2014	Dec 2013
Revenue Insurance premium income Reinsurance and other recoveries income Banking interest income Investment revenue Other income		$m $m
		4,917 4,858 1,052 787 1,461 1,513 733 827 301 269
Total revenue Expenses General insurance claims expense Outwards reinsurance premium expense Interest expense Fees and commissions expense Operating expenses 7.1.2,7.1.3 Life insurance claims expense and movement in policyowner liabilities Losses on Bankingloans,advances and other receivables		8,464 8,254 (3,739) (3,283) (430) (869) (633) (448) (946) (1,056) (415) (373) (1,320) (1,348) (43) (58)
Total expenses Profit before income tax Income tax expense 8		(7,526) (7,435) 938 819 (302) (268)
Profit for the period Net change in fair value of cash flow hedges Exchange differences on translation of foreign operations Income tax expense Other comprehensive income Items that may be reclassified subsequently to profit or loss Net change in fair value of available-for-sale financial assets		636 551 25 32 3 12 31 88 (7) (15)
Total other comprehensive income		52 117
Total comprehensive income for theperiod		688 668
Profit for the period attributable to: Owners of the Company Non-controllinginterests		631 548 5 3
Profit for theperiod		636 551
Owners of the Company Non-controllinginterests Total comprehensive income for the period attributable to:		683 665 5 3
Total comprehensive income for theperiod		688 668
Earnings per share: Basic earnings per share Diluted earnings per share		Cents Cents
		49.35 42.88 48.44 42.49

The consolidated interim statement of comprehensive income is to be read in conjunction with the accompanying notes.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 5

Consolidated interim statement of financial position as at 31 December 2014

CONSOLIDATED	Note	Dec 2014	Jun 2014	Dec 2013
Assets Cash and cash equivalents Receivables due from other banks Trading securities Derivatives Investment securities Banking loans, advances and other receivables General insurance assets Life assets Property, plant and equipment Deferred tax assets Other assets Goodwill and intangible assets		$m $m		$m
		880 895 566 927 2,298 1,593 701 301 26,521 26,915 50,111 49,781 6,287 6,603 722 862 199 205 80 183 480 444 5,751 5,720
				1,064
				790
				2,129 425 26,588
				49,074
				6,562 584 228 20 476
				6,138
Total assets Liabilities Payables due to other banks Deposits and short-term borrowings Derivatives Payables and other liabilities Current tax liabilities General insurance liabilities Life liabilities Deferred tax liabilities Managed funds units on issue Securitisation liabilities 7.3 Debt issues 7.4 Subordinated notes 9 Preference shares 10		94,596 94,429 314 81 44,630 43,579 591 625 1,547 2,331 115 379 14,412 14,173 6,267 6,374 60 58 180 118 2,858 3,581 7,720 6,831 1,382 1,557 945 943		94,078
				186 44,192 554 1,605 111 14,330 6,161 39 30 4,245
				6,412 1,671
				550
Total liabilities		81,021 80,630		80,086
Net assets		13,575 13,799		13,992
Equity Share capital 11 Reserves 12 Retainedprofits		12,678 12,682 251 206 624 885
				12,675 151 1,154
Non-controllinginterests Total equity attributable to owners of the Company		13,553 13,773 22 26		13,980 12
Total equity		13,575 13,799		13,992

The consolidated interim statement of financial position is to be read in conjunction with the accompanying notes.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 6

Consolidated interim statement of changes in equity for the half-year ended 31 December 2014

CONSOLIDATED	Note
Balance as at 1 July 2014 Profit after tax for the period Total other comprehensive income		Share capital Reserves Retained profits Total $m $m $m $m $m $m Equity attributable to owners of the Company Non- controlling interests Total equity
		12,682 206 885 13,773 26 13,799
		- - 631 631 5 636
		- 52 - 52 - 52
Total comprehensive income Transactions with owners, recorded directly in equity Dividends paid 5 Share-based payments Treasury shares movements Transfers		- 52 631 683 5 688
		- - (897) (897) (9) (906)
		6 - (2) 4 - 4
		(10) - - (10) - (10)
		- (7) 7 - - -
Balance as at 31 December 2014		12,678 251 624 13,553 22 13,575
Balance as at 1 July 2013 Profit after tax for the period Total other comprehensive income		12,682 40 1,245 13,967 16 13,983 - - 548 548 3 551 - 117 - 117 - 117
Total comprehensive income Transactions with owners, recorded directly in equity Dividends paid 5 Share-based payments Treasury shares movements Transfers		- 117 548 665 3 668 - - (640) (640) (7) (647) (22) - (5) (27) - (27) 15 - - 15 - 15 - (6) 6 - - -
Balance as at 31 December 2013		12,675 151 1,154 13,980 12 13,992

The consolidated interim statement of changes in equity is to be read in conjunction with the accompanying notes.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 7

Consolidated interim statement of cash flows for the half-year ended 31 December 2014

CONSOLIDATED	Dec 2014	Dec 2013
Cash flows from operating activities Premiums received Claims paid Interest received Interest paid Reinsurance and other recoveries received Outwards reinsurance premiums paid Other operating income received Dividends received Operating expenses paid Income tax paid Net decrease (increase) in operating assets Trading securities Banking loans, advances and other receivables Net increase in operating liabilities Deposits and short-term borrowings	$m $m
	5,646 5,495 (4,595) (4,411) 1,903 1,976 (997) (1,166) 1,158 1,118 (817) (600) 401 314 21 33 (2,044) (1,948) (470) (62) (702) 1,325 (373) (1,133) 1,051 645
Net cash from operating activities Cash flows from (used in) investing activities Proceeds from sale of investment securities Payments for purchase of investment securities Proceeds from other investing activities Payments for other investingactivities	182 1,586 11,583 7,945 (10,927) (8,054) 65 3 (116) (85)
Net cash from (used in) investing activities Cash flows (used in) from financing activities Net (decrease) in borrowings Dividends paid on ordinary shares Payment on call of subordinated notes Payments for other financing activities Payments forpreference share redemption	605 (191) (286) (1,663) (897) (640) (183) - (31) (35) - (30)
Net cash (used in) financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of exchange rate fluctuations on cash held	(1,397) (2,368) (610) (973) 1,741 2,641 1 -
Cash and cash equivalents at the end of theperiod	1,132 1,668
Cash and cash equivalents at the end of the period comprises: Cash and cash equivalents Receivables due from other banks Payables due to other banks	880 1,064 566 790 (314) (186)
	1,132 1,668

The consolidated interim statement of cash flows is to be read in conjunction with the accompanying notes.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 8

Notes to the consolidated interim financial statements

1. Reporting entity

Suncorp Group Limited (the Company ) is a company domiciled in Australia. The consolidated interim financial report of the Company as at and for the half-year ended 31 December 2014 comprises the Company and its subsidiaries (the Suncorp Group ). The Suncorp Group conducts general insurance, banking and life insurance businesses in Australia and New Zealand. Operating segment information is presented in note 6.

The Suncorp Group is a for-profit entity and its consolidated financial report for the financial year ended 30 June 2014 is available upon request from the Company’s registered office at Level 28, 266 George Street, Brisbane, Qld 4000 or at suncorpgroup.com.au .

2. Basis of preparation

The consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001 .

The consolidated interim financial report does not include all of the information required for a full consolidated annual financial report, and should be read in conjunction with the consolidated financial report of the Suncorp Group for the financial year ended 30 June 2014 and any public announcements made by the Suncorp Group in accordance with the continuous disclosure requirements of the Corporations Act 2001 and the Australian Securities Exchange ( ASX ) Listing Rules.

The consolidated interim financial report was approved by the Board of Directors on 11 February 2015.

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in the financial report have been rounded off to the nearest million dollars, unless otherwise stated.

3. Significant accounting policies

The accounting policies applied by the Suncorp Group in this consolidated interim financial report are the same as those applied by the Suncorp Group in its consolidated financial report for the financial year ended 30 June 2014.

Where necessary, comparatives have been restated to conform to changes in presentation in the current period.

4. Use of estimates and judgements

The preparation of the consolidated interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the amounts reported in the financial statements. The estimates and associated accounting assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Estimates and underlying assumptions are reviewed on an ongoing basis. Where revisions are made to accounting estimates, any financial impact is recognised in the period in which the estimate is revised.

The significant judgements made by management in applying the Suncorp Group’s accounting policies and the key sources of estimation uncertainty are the same as those that applied to the consolidated financial report as at and for the financial year ended 30 June 2014.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 9

Notes to the consolidated interim financial statements (continued)

5. Dividends

CONSOLIDATED	Dec 2014	Dec 2013
Dividends on ordinary shares 2014 final dividend (Dec 2013: 2013 final dividend) 2014 special dividend(Dec 2013: 2013 special dividend)	¢ per share $m ¢ per share $m
	40 513 30 384
	30 384 20 256
Total dividends recognised in equity	70 897 50 640
Dividends declared since balance date and not recognised in the consolidated interim statement of financial position 2015 interim dividend1(Dec 2013: 2014 interim dividend)	38 486 35 447

Note

• 1 The total 2015 interim dividend on ordinary shares declared but not recognised in the consolidated interim statement of financial position is estimated based on the total number of ordinary shares on issue, net of treasury shares, as at 31 December 2014. The actual dividend amount to be recognised in the consolidated financial statements for the financial year ending 30 June 2015 will be based on the actual number of ordinary shares on issue net of treasury shares on the record date.

6. Segment reporting

The basis of segmentation and basis of measurement of segment results are the same as those applied by the Suncorp Group in its consolidated financial report for the financial year ended 30 June 2014.

6.1 Segment results

BUSINESS AREAS	GENERAL INSURANCE	BANKING	LIFE	CORPORATE
Operating segments Half-year ended 31 December 2014 Revenue from external customers Inter-segment revenue	Personal Commercial GI NZ Total Banking Life Corporate Total $m $m $m $m $m $m $m $m
	2,946 1,960 931 5,837 1,590 1,073 13 8,513
	- - - - - - 22 22
Total segment revenue	2,946 1,960 931 5,837 1,590 1,073 35 8,535
Segment profit (loss) before income tax Segment income tax(expense)benefit
	252 238 104 594 252 140 (48) 938
	(76) (71) (28) (175) (76) (54) 3 (302)
Segmentprofit(loss) after income tax	176 167 76 419 176 86 (45) 636
Half-year ended 31 December 2013 Revenue from external customers Inter-segment revenue
	2,946 1,826 727 5,499 1,595 1,257 11 8,362
	- - - - 1 5 21 27
Total segment revenue	2,946 1,826 727 5,499 1,596 1,262 32 8,389
Segment profit (loss) before income tax Segment income tax(expense)benefit
	351 288 29 668 149 59 (58) 818
	(105) (85) (8) (198) (44) (37) 12 (267)
Segmentprofit(loss) after income tax	246 203 21 470 105 22 (46) 551

6.2 Reconciliation of segment profit before tax

CONSOLIDATED	Dec 2014	Dec 2013
Segment profit before income tax Elimination of intra-group investments Other consolidation eliminations	$m $m
	938 818
	(3) (3)
	3 4
Consolidatedprofit before income tax	938 819

6.3 Results by business area

A summary of revenue and expenses by business area and a summary of assets and liabilities by business area are presented in notes 6.3.1 and 6.3.2. These disclosures are an extension to the operating segment results presented above and are prepared on the same basis as described in note 6. Inclusion of results by business area in addition to the operating segment information presented above is beneficial in understanding the nature and financial effects of the business activities of the Suncorp Group, which consists of a General Insurance group, a Banking group, a Life group and a Corporate group.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 10

Notes to the consolidated interim financial statements (continued)

6.3.1 Summary of revenue and expenses by business area

CONSOLIDATED	Note	Half-year ended 31 December 2014	Half-year ended 31 December 2013
		General Insurance Banking Life Corporate General Insurance Banking Life Corporate
		$m $m $m $m $m $m $m $m
Revenue
Insurance premium income Reinsurance and other recoveries income Banking interest income Investment revenue		4,440 - 477 - 4,398 - 460 - 934 - 118 - 675 - 112 - - 1,461 - - - 1,515 - - 357 10 401 35 331 (19) 610 32
Other income		106 119 77 - 95 100 80 -
Total revenue		5,837 1,590 1,073 35 5,499 1,596 1,262 32
Expenses
General insurance claims expense Life insurance claims expense and movement in policyowner liabilities Outwards reinsurance premium expense Interest expense		(3,739) - - - (3,283) - - - - - (430) - - - (869) - (493) - (140) - (533) - 85 - (14) (908) (2) (47) (18) (1,023) (2) (39)
Fees and commissions expense Operating expenses		(248) (65) (103) - (216) (61) (102) - (749) (322) (202) (36) (781) (305) (212) (51)
Losses on Banking loans, advances and other receivables1 7.1.2, 7.1.3 - (43) - - - (58) - -
Outside beneficial interests in managed funds - - (56) - - - (103) -
Total expenses (5,243) (1,338) (933) (83) (4,831) (1,447) (1,203) (90)
Profit (loss) before income tax 6.1 594 252 140 (48) 668 149 59 (58) Income tax(expense)benefit 6.1 (175) (76) (54) 3 (198) (44) (37) 12
Profit(loss) for theperiod 6.1 419 176 86 (45) 470 105 22 (46)

Note

• 1 Comprises impairment expense on Banking loans, advances and other receivables of $43 million (December 2013: $45 million) (note 7.1.2) and loss on sale of Banking loans and advances of $nil million (December 2013: $13 million) (note 7.1.3).

6.3.2 Summary of assets and liabilities by business area

CONSOLIDATED	Note	As at 31 December 2014	As at 30 June 2014
		General Insurance Banking Life Corporate General Insurance Banking Life Corporate
		$m $m $m $m $m $m $m $m
Assets
Cash and cash equivalents Receivables due from other banks Trading securities Derivatives Investment securities		233 521 563 37 281 463 707 17 - 566 - - - 927 - - - 2,298 - - - 1,593 - - 23 710 10 - 23 334 5 - 12,225 6,634 8,241 14,421 12,963 6,500 9,040 14,665
Banking loans, advances and other receivables		- 50,111 - - - 49,781 - -
General Insurance assets		6,287 - - - 6,603 - - -
Life assets Due from Group entities Property, plant and equipment Deferred tax assets Other assets		- - 722 - - - 862 - 117 169 22 1,274 - 147 7 1,240 32 - 4 163 33 - 4 168 - 95 1 114 - 98 22 128 180 223 54 43 172 192 49 54
Goodwill and intangible assets		5,097 262 228 164 5,091 262 229 138
Total assets Liabilities Payables due to other banks Deposits and short-term borrowings Derivatives		24,194 61,589 9,845 16,216 25,166 60,297 10,925 16,410 - 314 - - - 81 - - - 45,104 - - - 44,154 - - 193 424 15 1 149 525 12 -
Payables and other liabilities		637 386 147 386 1,253 457 177 448
Current tax liabilities 37 - - 92 23 - 1 370 Due to Group entities 213 152 26 410 392 160 56 13 General Insurance liabilities 14,412 - - - 14,173 - - - Life liabilities - - 6,267 - - - 6,374 - Deferred tax liabilities 145 - 45 - 81 - 42 - Managed funds units on issue - - 1,369 - - - 2,357 - Securitisation liabilities 7.3 - 2,872 - - - 3,598 - - Debt issues 7.4 - 7,727 - - - 6,839 - - Subordinated notes 550 742 100 760 727 742 100 758 Preference shares 10 - - - 945 - - - 943
Total liabilities 16,187 57,721 7,969 2,594 16,798 56,556 9,119 2,532
Net assets 8,007 3,868 1,876 13,622 8,368 3,741 1,806 13,878

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 11

Notes to the consolidated interim financial statements (continued)

7. Banking – Specific disclosures

7.1 Banking – Provision for impairment on Banking loans, advances and other receivables

7.1.1 Reconciliation of provision for impairment on Banking loans, advances and other receivables

CONSOLIDATED	Dec 2014	Dec 2013
Collective provision Balance at the beginning of the period Charge(credit)against impairment losses	$m $m
	120 102 9 (5)
Balance at the end of the period Specific provision Balance at the beginning of the period Charge against impairment losses Impaired assets written off Unwind of discount	129 97 106 198 32 48 (29) (124) (5) (9)
Balance at the end of theperiod	104 113
Totalprovisions	233 210

7.1.2 Impairment expense on Banking loans, advances and other receivables

CONSOLIDATED	Dec 2014	Dec 2013
	$m $m
Increase (decrease) in collective provision for impairment	9 (5)
Increase in specific provision for impairment Bad debts written off Bad debts recovered	32 48 2 7 - (5)
Total impairment expense	43 45

7.1.3 Loss on sale of Banking loans and advances

CONSOLIDATED	Dec 2014	Dec 2013
	$m $m
Loss on sale of Banking loans and advances	- 13
7.2 Banking – Short-term offshore debt securities
BANKING	Dec 2014	Dec 2013
Balance at the beginning of the period Proceeds from issues Repayments Foreign exchange translation and fair value movements	$m $m
	2,711 3,999
	3,850 3,575
	(3,330) (4,057)
	234 169
Balance at the end of theperiod	3,465 3,686

Short-term offshore debt securities are disclosed within the consolidated interim statement of financial position category of ‘Deposits and short-term borrowings’.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 12

Notes to the consolidated interim financial statements (continued)

7.3 Banking – Securitisation liabilities

CONSOLIDATED	Dec 2014	Dec 2013
Banking Balance at the beginning of the period Transaction costs amortised Repayments Foreign exchange translation movements	$m $m
	3,598 4,802
	2 2
	(749) (573)
	21 36
Balance at the end of theperiod	2,872 4,267
Consolidated Adjustments for intra-group investments in Banking's securitisation liabilities Balance at the beginning of the period Repayments
	(17) (25)
	3 3
Balance at the end of theperiod	(14) (22)
Total securitisation liabilities	2,858 4,245

7.4 Banking – Debt issues

CONSOLIDATED		Dec 2014	Dec 2013
Banking Balance at the beginning of the period Proceeds from issues		$m $m
		6,839 7,313
		2,063 401
Transaction costs(incurred)amortised		(1) 1
Net proceeds Repayments Foreign exchange translation and fair value movements		2,062 402
		(1,378) (1,368)
		204 86
Balance at the end of theperiod		7,727 6,433
Consolidated Adjustments for intra-group investments in Banking's debt issues Balance at the beginning of the period Repayments
		(8) (22)
		1 1
Balance at the end of theperiod		(7) (21)
Total debt issues		7,720 6,412

Suncorp Group and Corporate disclosures

8. Income tax expense

The Suncorp Group’s consolidated effective tax rate for the half-year ended 31 December 2014 was 32.2% (for the financial year ended 30 June 2014: 37.3%; for the half-year ended 31 December 2013: 32.7%).

Income tax expense adjustments have primarily arisen from:

• The life insurance statutory funds adjustment resulting in a $17 million (December 2013: $20 million) income tax expense. Accounting standards require that the tax expense from an increase in net market values of policyowner assets be recognised as part of the Suncorp Group’s income tax expense, whereas the net profit before tax of the Suncorp Group includes a partially offsetting transfer to policyowner liabilities. Consequently, the tax expense is disproportionate relative to the net profit before tax. The reverse, a tax credit, is required in periods where the market values of policyowner assets decrease.

• Non-deductible interest paid in respect of preference shares increased income tax expense by $7 million (December 2013: $4 million).

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 13

Notes to the consolidated interim financial statements (continued)

9. Subordinated notes

CONSOLIDATED	Dec 2014	Dec 2013
Balance at the beginning of the period Repayment on call of General Insurance subordinated notes Transaction costs amortised Foreign exchange translation and fair value movements	$m $m
	1,557 1,646
	(183) -
	6 23
	2 2
Balance at the end of theperiod	1,382 1,671

10. Preference shares

CONSOLIDATED	Dec 2014	Dec 2013	Dec 2013
	Banking Corporate Total Banking Corporate Total
Balance at the beginning of the period Repayments on redemption Transaction costs amortised	$m $m $m $m $m $m
	- 943 943 30 549 579
	- - - (30) - (30)
	- 2 2 -		1 1
Balance at the end of theperiod	- 945 945 -		550 550

A summary of the terms of the preference shares can be found in notes 7.10 and 21 to the Suncorp Group consolidated financial report for the financial year ended 30 June 2014.

Corporate

Corporate preference shares consist of Convertible Preference Shares ( SUNPC and SUNPE ) issued by the Company.

Banking

Banking preference shares consisted of Reset Preference Shares ( SBKPA ) issued by Suncorp-Metway Limited. All outstanding SBKPA were redeemed for cash on 16 September 2013.

10.1 Preference share dividends recognised as interest expense

CONSOLIDATED	Dec 2014	Dec 2013
	¢ per share $m ¢ per share $m
Convertible Preference Shares (SUNPC) September quarter Decemberquarter	130 7 131 7 127 7 126 7
	257 14 257 14
Convertible Preference Shares (SUNPE) September quarter Decemberquarter	108 4 - - 105 4 - -
	213 8 - -
Reset Preference Shares (SBKPA) Period from March to September	- - 215 1

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 14

Notes to the consolidated interim financial statements (continued)

11. Share capital

CONSOLIDATED

CONSOLIDATED
Balance as at 1 July 2014 Share-based payments Treasuryshares movements	Issued capital Share- based payments Treasury shares Total
	$m $m $m $m
	12,717 50 (85) 12,682
	- 6 - 6
	- - (10) (10)
Balance as at 31 December 2014	12,717 56 (95) 12,678
Balance as at 1 July 2013 Share-based payments Treasuryshares movements
	12,717 70 (105) 12,682 - (22) - (22) - - 15 15
Balance as at 31 December 2013	12,717 48 (90) 12,675

11.1 Number of ordinary shares on issue

At 31 December 2014, 1,286,600,980 of ordinary shares were on issue. There have been no movements to this balance since 30 June 2014.

On 1 October 2014, 8,173,876 ordinary shares were allotted at the issue price of $14.64 per share under the Dividend Reinvestment Plan in respect of the 2014 final and special dividends. On 1 October 2013, 6,732,163 ordinary shares were allotted at the issue price of $12.71 per share under the Dividend Reinvestment Plan in respect of the 2013 final and special dividends. Shares for both allotments were acquired on market for delivery to shareholders and resulted in no issue of new shares.

12. Reserves

CONSOLIDATED

Balance as at 1 July 2014 Transfer to retained profits Amount recognised in equity Amount transferred from equity to profit or loss Income tax Exchange differences on translation of foreign operations	Equity reserve for credit losses Hedging reserve Assets available- for-sale reserve Foreign currency translation reserve Total
	$m $m $m $m $m
	151 (33) 12 76 206
	(7) - - - (7)
	- 24 15 - 39
	- 1 (12) - (11)
	- (6) (1) - (7)
	- - - 31 31
Balance as at 31 December 2014	144 (14) 14 107 251
Balance as at 1 July 2013 Transfer from retained profits Amount recognised in equity Amount transferred from equity to profit or loss Income tax Exchange differences on translation of foreign operations	131 (65) (4) (22) 40 (6) - - - (6) - 30 5 - 35 - 2 7 - 9 - (11) (4) - (15) - - - 88 88
Balance as at 31 December 2013	125 (44) 4 66 151

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 15

Notes to the consolidated interim financial statements (continued)

13. Fair value of financial instruments

13.1 Comparison of fair value to carrying amounts

The following financial assets and liabilities are recognised and measured at fair value and therefore their carrying value equates to their fair value:

• financial assets at fair value through profit or loss including trading securities

• available-for-sale financial assets

• certain short-term offshore borrowings designated as financial liabilities at fair value through profit or loss

• derivatives.

The basis for determining their fair values has not changed since 30 June 2014 and is described in note 26.2 to the Suncorp Group consolidated financial report for the financial year ended 30 June 2014.

The table below discloses a comparison of carrying value and fair value of financial assets and liabilities that are not recognised and measured at fair value, where their carrying value is not a reasonable approximation of fair value. Significant assumptions and estimates used in determining their fair values have not changed since 30 June 2014 and are described in note 26.1 to the Suncorp Group consolidated financial report for the financial year ended 30 June 2014.

CONSOLIDATED	Note	Dec 2014	Jun 2014	Dec 2013
Financial assets Held-to-maturity investments		Carrying value Fair value Carrying value Fair value Carrying value Fair value
		$m $m $m $m $m $m
Banking loans, advances and other receivables
Financial liabilities Deposits and short-term borrowings1

Note

1 Excludes short-term offshore borrowings designated as financial liabilities at fair value through profit or loss.

13.2 Fair value hierarchy

Financial assets and liabilities that are recognised and measured at fair value are categorised by a hierarchy which identifies the most significant input used in the valuation methodology:

• Level 1 – derived from quoted prices (unadjusted) in active markets for identical financial instruments that the Suncorp Group can access at the measurement date

• Level 2 – derived from other than quoted prices included within Level 1 that are observable for the financial instruments, either directly or indirectly

• Level 3 – fair value measurement is not based on observable market data.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 16

Notes to the consolidated interim financial statements (continued)

13.2 Fair value hierarchy (continued)

CONSOLIDATED	Level 1	Level 2	Level 3	Total
	$m $m $m $m
As at 31 December 2014 Financial assets Trading securities Investment securities1 Derivatives	- 2,298 - 2,298 4,829 17,793 - 22,622 7 682 12 701
	4,836 20,773 12 25,621
Financial liabilities Derivatives Deposits and short-term borrowings2	- 3,465 - 3,465 27 539 25 591
	27 4,004 25 4,056
As at 30 June 2014 Financial assets Trading securities Investment securities1 Derivatives	- 1,593 - 1,593 4,708 18,249 - 22,957 3 264 34 301
	4,711 20,106 34 24,851
Financial liabilities Derivatives Deposits and short-term borrowings2	- 2,711 - 2,711 28 501 96 625
	28 3,212 96 3,336
As at 31 December 2013 Financial assets Trading securities Investment securities1 Derivatives	- 2,129 - 2,129 5,101 17,405 2 22,508 1 398 26 425
	5,102 19,932 28 25,062
Financial liabilities Derivatives Deposits and short-term borrowings2	- 3,686 - 3,686 - 496 58 554
	- 4,182 58 4,240

Notes

• 1 Only includes financial assets at fair value through profit or loss and available-for-sale financial assets.

• 2 Only includes short-term offshore borrowings designated as financial liabilities at fair value through profit or loss.

There have been no significant transfers between Level 1 and Level 2 during the half-year ended 31 December 2014.

Level 3 derivatives relate to long-dated interest rate swaps and cross currency swaps in relation to the Apollo securitisation trusts where a significant input is the amortisation profile of the mortgage portfolio. The valuation methodology for derivative financial instruments classified within Level 3 of the fair value hierarchy is based on market data using observable quoted rates for actively traded tenor points. Where interpolation is used to value an instrument for the correct time periods, observable inputs such as the bank bill swap rate ( BBSW ) yield curves and swap curve rates are used.

The Suncorp Group’s exposure to Level 3 financial instruments is restricted to an insignificant component of the portfolios to which they belong, such that any change in the assumptions used to value the instruments to a reasonably possible alternative do not have a material effect on the portfolio balance or the Suncorp Group’s results.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 17

Notes to the consolidated interim financial statements (continued)

13.2 Fair value hierarchy (continued)

The following table discloses the movements in financial instruments classified as Level 3 in the fair value hierarchy:

CONSOLIDATED	Dec 2014		Dec 2013
	Asset	Liability Asset		Liability
	Investment securities Derivatives Derivatives Investment securities Derivatives Derivatives $m $m $m $m $m $m
Balance at the beginning of the period	- 34 96 3 41 109 - 5 (5) - (6) (41) - - (26) - (11) (16) - - - - 2 6 - (27) (40) (1) - -
Total gains or losses included as investment revenue in profit or loss for the period1
Transfer out to Level 2 Purchases Settlements
Balance at the end of theperiod	- 12 25 2 26 58

Note

1 All gains/losses included in the profit or loss relate to assets and liabilities held at the end of the period (i.e. unrealised).

14. Changes in the composition of the Suncorp Group

The Suncorp Group did not acquire nor dispose of any material subsidiaries, interests in joint arrangements, or associates during the current or prior interim reporting periods.

15. Related parties

Except as disclosed below, arrangements for related parties continue to be in place as disclosed in the consolidated financial report for the financial year ended 30 June 2014.

Share-based payments

During the half-year, the following Long-term Incentives ( LTI ) grants were made to the Group CEO and executives as part of their remuneration package under the Suncorp Group Equity Incentive Plan:

• 276,839 (December 2013: 324,396) performance rights were offered to the Group CEO as approved and resolved by shareholders at the 2014 Annual General Meeting on 23 October 2014 (December 2013: 2013 Annual General Meeting on 24 October 2013). The fair value per share at grant date was $8.23 (December 2013: $7.13).

• 929,386 (December 2013: 1,010,448) performance rights were offered to executives on 1 October 2014 (December 2013: 1 October 2013). The fair value per share at grant date was $8.19 (December 2013: $7.30).

The vesting period is three years. The features and performance criteria for the LTI are described in note 12 to the Suncorp Group consolidated financial report for the financial year ended 30 June 2014.

16. Contingent assets and liabilities

There have been no material changes in contingent assets or contingent liabilities since 30 June 2014.

17. Subsequent events

On 9 February 2015, the Suncorp Group was advised of a potential issue relating to the 2011 catastrophe reinsurance program which could impact on expected recoveries. This potential issue is contrary to the Suncorp Group’s understanding of its additional reinsurance purchases made in 2011. This issue is of a technical nature and relates to the placement of reinsurance cover after the combination of the September 2010 Christchurch earthquake, the Brisbane floods and Cyclone Yasi.

It is uncertain whether this will have any financial impact; however, the Suncorp Group’s maximum exposure will not exceed $118 million after tax. The Suncorp Group has not recognised any financial impact in the preparation of its results for the six months to 31 December 2014.

The Suncorp Group will have detailed consultation with its reinsurance brokers and advisors.

Other than the matter noted above, there has not arisen in the interval between 31 December 2014 and the date of this report any other item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Suncorp Group, the results of those operations, or the state of affairs of the Suncorp Group.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 18

Directors’ declaration

In the opinion of the directors of Suncorp Group Limited (the Company):

1. The consolidated interim financial statements and notes set out on pages 5 to 18, are in accordance with the Corporations Act 2001 , including:

2. a) giving a true and fair view of the Suncorp Group’s financial position as at 31 December 2014 and of its performance for the half-year ended on that date; and

3. b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 ; and

4. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors:

Dr Zygmunt E Switkowski AO Chairman

Patrick J R Snowball Managing Director and Group CEO

11 February 2015

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 19

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Independent auditor’s review report to the members of Suncorp Group Limited

We have reviewed the accompanying interim financial report of Suncorp Group Limited (the Company ), which comprises the consolidated interim statement of financial position as at 31 December 2014, consolidated interim statement of comprehensive income, consolidated interim statement of changes in equity and consolidated interim statement of cash flows for the half-year ended on that date, notes 1 to 17 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Suncorp Group comprising the Company and the entities it controlled at the half-year’s end or from time to time during the half-year.

Directors’ responsibility for the interim financial report

The directors of the Company are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the interim financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with the Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Suncorp Group’s financial position as at 31 December 2014 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As auditor of Suncorp Group Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Suncorp Group Limited is not in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the Suncorp Group’s financial position as at 31 December 2014 and of its performance for the half-year ended on that date; and

• (b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

KPMG

Chris Hall Partner Brisbane

11 February 2015

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

SUNCORP GROUP LIMITED | CONSOLIDATED INTERIM FINANCIAL REPORT 2014/15 20