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SUNCORP GROUP LIMITED — Interim / Quarterly Report 2017
Feb 8, 2017
65879_rns_2017-02-08_e4c2610b-6712-46ab-a181-0cd1b54f4fd6.pdf
Interim / Quarterly Report
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Financial results for the half year ended 31 December 2016 Create a better today
SUNCORP GROUP LIMITED ABN 66 145 290 124 DATA PACK RELEASE DATE 9 FEBRUARY 2017
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Results
Group Net Profit After Tax $537 million Group top line growth of 4.3% Expenses remain flat Dividend of 33 cents per share, up 10% Cash ROE of 8.5%
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HY17
2
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Highlights
-
Embedded the Marketplace strategy to deliver greater value to customers
-
Momentum in top line growth of 4.3% reflects discipline in pricing and risk
-
Stabilisation of working claims is driving improved UITR Recalibration of costs providing shareholder benefits and reinvestment capacity
-
More resilient Suncorp for a sustainable future
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Embedded the Marketplace strategy to deliver greater value to customers Parramatta Concept Store Health Insurance Annuities AAMI Smartplates app Marketplace apps Brand refresh Workbench
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Momentum in top line growth of 4.3% 2. reflects discipline in pricing and risk
Premium increases in short-tail
Significant long-tail growth Cautious Lending approach Moderate Life growth
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Short-Tail GWP ($m) Long-Tail GWP ($m)
3.3% 3,585
19% 1,125
3,472
3,442
3,413
938 944 945
Dec-13 Dec-14 Dec-15 Dec-16 Dec-13 Dec-14 Dec-15 Dec-16
Bank Lending ($m) Life In-Force Annual Premium ($m)
2.5% 54,188 2.1%
1,041
52,862 1,020
957
50,300
49,184
881
Dec-13 Dec-14 Dec-15 Dec-16 Dec-13 Dec-14 Dec-15 Dec-16
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Stabilisation of working 3. claims is driving improved UITR
Lower active claims
Improved pathing
Underlying ITR 10.1% to 11%
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Home active claim volumes (‘000) Home average claim life (days)
60
125
50
110
40
95
30
80
20
65
10
0 50
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
Working Natural Hazards
Motor active claims volumes (‘000) Non-aligned motor repairs (%)
250
25%
200
23%
150
21%
100
19%
50
17%
0 15%
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16
Working Natural Hazards
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Chart Title
Recalibration of costs
providing shareholder 1400 $1,360m $$1,347m1,360m
4.
benefits and
reinvestment capacity
1200
Banking and 368 353
Wealth
1000
Flat expenses
186 203
Restructure benefits on New Zealand800
track
Business improvement 600
program
Insurance
400 806 804
200
0
Dec-15 Dec-16
Axis Title
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More resilient Suncorp for a sustainable future
Dividend and capital Reinsurance
Realignment of Investment Portfolio Additional expertise in the Senior Leadership Team
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Anthony Day Chief Executive Officer Insurance
David Carter Chief Executive Officer Banking and Wealth
Gary Dransfield Chief Executive Officer Customer Platforms
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Steve Johnston Chief Financial Officer
Pip Marlow Kate Olgers (Commencing March 2017) Chief Legal Officer Chief Executive Officer Strategic Innovation
Sarah Harland Chief Information Officer
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Paul Smeaton Chief Executive Officer New Zealand
Mark Reinke Chief Customer Experience Officer
Amanda Revis
Fiona Thompson Chief Risk Officer
Chief People Experience Officer
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Result overview
Business line NPAT up 12.7% Cash earnings up 5.0% Dividend up 10.0%
| HY17 ($m) |
HY16 ($m) |
Change (%) |
|
|---|---|---|---|
| Insurance (Australia) | 369 | 259 | 42.5 |
| Banking & Wealth | 208 | 207 | 0.5 |
| New Zealand | 36 | 78 | (53.8) |
| Business Line NPAT | 613 | 544 | 12.7 |
| Other | (29) | 12 | n.a |
| Cash earnings | 584 | 556 | 5.0 |
| Acquisition Amortisation | (47) | (26) | 80.8 |
| Reported NPAT | 537 | 530 | 1.3 |
| Interim dividend | 33 cps | 30 cps | 10.0 |
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| Insurance (Australia) NPAT NPAT up 42.5% to $369 million GWP growth of 6.2% Reported ITR of 13.8% Natural hazards $319 million Reserve releases of $149 million Underlying investment yield of 2.3% |
HY17 ($m) HY16 ($m) Change (%) |
HY17 ($m) HY16 ($m) Change (%) |
HY17 ($m) HY16 ($m) Change (%) |
HY17 ($m) HY16 ($m) Change (%) |
|---|---|---|---|---|
| Gross written premium | 4,031 | 3,796 | 6.2 | |
| Net earned premium Net incurred claims Operating expenses Invest income - Insurance funds |
3,552 (2,374) (722) 35 |
3,480 (2,546) (724) 93 |
2.1 (6.8) (0.3) (62.4) |
|
| Insurance trading result | 491 | 303 | 62.0 | |
| General Insurance profit after tax | 358 | 236 | 51.7 | |
| Life Insurance profit after tax | 11 | 23 | (52.2) | |
| Insurance NPAT | 369 | 259 | 42.5 | |
| HY17 | 10 INSURANCE (AUSTRALIA) |
Gross Written Premiums
Growth in all classes
Home & Motor low single digit price increases
CTP growth from SA entry and NSW price increases
Commercial underwriting discipline
| HY17 ($m) |
HY16 ($m) |
Change (%) |
|
|---|---|---|---|
| Motor | 1,293 | 1,273 | 1.6 |
| Home Commercial Compulsory third party Workers compensation and other |
1,123 787 722 106 |
1,097 784 567 75 |
2.4 0.4 27.3 41.3 |
| Total Gross Written Premium | 4,031 | 3,796 | 6.2 |
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INSURANCE (AUSTRALIA)
HY17
Claims expense
Home & Motor claims costs down $1 million Lower natural hazard claims SA CTP led to increased claims Lower CTP working claims Increased prior year releases and reduced risk margins $232 million of claims >$5 million
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(1)
51 (20)
(40)
38
(9)
(17)
2,518
2,517
1H16 NIC Corporate SA CTP Consumer CTP Natural Prior year Risk 1H17 NIC
Working Growth Working Claims Hazards releases margin
Claims Claims
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INSURANCE (AUSTRALIA)
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Investments
Insurance funds $9.2 billion
Investment income of $35 million (1H16: $93 million)
$163 million MTM loss from an increase in risk-free rates
$22 million MTM gain from widening credit spreads $69 million MTM gain from outperformance of ILBs 2.3% annualised underlying return
Shareholder funds $2.8 billion
Investment income of $35 million (1H16: $24 million)
2.7% annualised return
Returns driven by favourable equity markets and narrowing credit spreads, offset by MTM from rising bond yields
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Corporate
ILBs
Semis
Cash
Govt
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Fixed Interest
Equities
Infrastructure
Cash
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INSURANCE (AUSTRALIA)
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Life Insurance NPAT
Stable underlying profits
Lapse and claims assumptions remain appropriate
Optimisation program to deliver improved returns Exploring strategic alternatives
| HY17 ($m) |
HY16 ($m) |
Change (%) |
|
|---|---|---|---|
| Planned profit margin release | 9 | 7 | 28.6 |
| Experience | (2) | 9 | n/a |
| Other and investments | 18 | 10 | 80.0 |
| Underlying profit after tax | 25 | 26 | (3.8) |
| Market adjustments | (14) | (3) | 366.7 |
| Life Insurance NPAT | 11 | 23 | (52.2) |
| In-force annual premium | 801 | 798 | 0.4 |
| Total new business | 33 | 38 | (13.2) |
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INSURANCE (AUSTRALIA)
HY17
| Banking & Wealth NPAT Strong capital & balance sheet Disciplined cost management Improved credit quality Resilient funding profile Progress on strategic projects |
HY17 ($m) |
HY16 ($m) |
Change (%) |
|
|---|---|---|---|---|
| Net interest income | 558 | 566 | (1.4) | |
| Net non-interest income | 39 | 49 | (20.4) | |
| Operating expenses | (307) | (326) | (5.8) | |
| Profit before impairment losses Impairment losses |
290 (1) |
289 (11) |
0.3 (90.9) |
|
| Income tax | (86) | (84) | 2.4 | |
| Bank profit after tax | 203 | 194 | 4.6 | |
| Wealth profit after tax | 5 | 13 | (61.5) | |
| Banking & Wealth NPAT | 208 | 207 | 0.5 |
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BANKING & WEALTH
HY17
Credit quality
Continued focus on credit quality and risk management
Impairment losses <0.01% of GLA Limited exposure to resources and inner-city apartments Improving agribusiness conditions
| ~~28~~ 182 206 416 |
33 162 67 262 |
~~25~~ 109 42 176 |
30 96 59 185 |
|---|---|---|---|
| 1H14 1H15 1H16 1H17 ■Retail ■Agribusiness ■Commercial (SME) |
Gross impaired loans by segment ($m)
0.98% Home lending 0.74% credit quality 0.69% 0.67% (% gross home loans) 0.07% 0.02% 1H14 1H15 1H16 1H17 Past due loans Impaired assets Loss rate
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BANKING & WEALTH
HY17
New Zealand NPAT
UITR above group target of 12%
Kaikoura earthquake and aftershock impact NZ$23 million
2010/11 ‘over-cap’ EQC claims Personal lines grew 7.7% Life Insurance underlying profit growth of 41%
| HY17 (NZ$m) |
HY16 (NZ$m) |
Change (%) |
|
|---|---|---|---|
| Gross written premium | 714 | 681 | 4.8 |
| Net earned premium Net incurred claims Operating expenses Investment income – insurance |
586 (372) (196) 4 |
562 (303) (183) 7 |
4.3 22.8 7.1 (42.9) |
| Insurance trading result | 22 | 83 | (73.5) |
| General Insurance profit after tax | 19 | 68 | (72.1) |
| Life Insurance profit after tax | 18 | 19 | (5.3) |
| New Zealand NPAT | 37 | 87 | (57.5) |
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NEW ZEALAND
HY17
Capital position 26 (80) 56 537 (19) (35) (383) CET1 excess increased to $448 million NZ Autosure disposal $56 million 448 Positive Life adjustment 346 Seasonal GI excess tech provision capital impact Subdued Bank growth Excess HY17 Autosure Life policy GI excess Bank Other HY17 Excess CET1 NPAT goodwill liability technical growth Dividend CET1 (Jun-16) release adjustment provision (net of (Dec-16) (DAC) DRP)
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CAPITAL
HY17
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Medium term targets
Broadening of customer relationships Cost base flat in FY17 and FY18 Improving underlying NPAT Sustainable ROE of at least 10%, which implies an underlying ITR of at least 12% Maintaining a dividend payout ratio of 60% to 80% of cash earnings and returning surplus capital to shareholders
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HY17
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Priorities for next six months
-
Stability and momentum Further UITR improvement Continued top line growth
- Elevate the Customer More Marketplace capabilities Customer value focus
- Recalibrate Costs Flat costs Focus on reinvestment
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Suncorp is on track to become the first Marketplace that fully meets customers’ financial needs, providing access to all of our brands, products and services, through any channel or medium.
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Highlights
-
Embedded the Marketplace strategy to deliver greater value to customers
-
Momentum in top line growth of 4.3% reflects discipline in pricing and risk
-
Stabilisation of working claims is driving improved UITR 4. Recalibration of costs providing shareholder benefits and reinvestment capacity
-
More resilient Suncorp for a sustainable future
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HY17 Data Pack
Create a better today
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Suncorp Group
Leading financial services brands in Australia and New Zealand
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Top 20 ASX listed company
$17 billion market capitalisation at 31 December 2016
$97 billion in group assets
13,500 employees in Australia and New Zealand
Approximately 9 million customers End-to-end ownership of brands
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Suncorp’s shareholder promise
Simplified, de-risked financial services group
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Yield
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Dividend payout ratio of 60% to 80% Strategy focused exclusively in Australia and New Zealand
De-risked and simplified business model Return surplus capital to shareholders
Growth
‘Above system’ growth in key markets Multi-brand, multichannel approach providing greater value to the Group’s 9 million customers
Efficiency-led profit growth
Incremental market opportunities such as South Australia CTP
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Strategy
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Operating model
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DATA PACK
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27 27
HY17
Our strategy to grow Connected Customers
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Customer
Marketplace
Experience
Brands
Deep insights Priority segments New propositions
Curate solutions Omni-channel Customer navigation
Seamless experience Simplified journeys Personalised services
Reposition master brand Distinct and complementary Networked
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Elevate the Customer
Creating a better today by growing customer connections
Customers Our strengths: want: 9 million customers To make informed Trusted brands decisions Simplified systems Simple and easy Trust and control
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Sustainable organic growth
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Connected Customers
increasing frequency of interactions
Mobility
Home
Connected 2 or more needs met
Meeting
Customers =
96% retention
more needs
Money
Self
HY17 DATA PACK 30
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Connecting customers creates value
Significant growth opportunity
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Meeting more needs
>60% 4x 4x +
NPAT/ NPAT/
Customer Customer
% of
customers >30%
<5%
<1%
1 2 3 4
Needs met
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Progress on Marketplace initiatives
| Initiative | 1H17 | 2H17 |
|---|---|---|
| Connected customers | SME: Start a Business | Suncorp Start Company website launched SME: Grow a Business |
| Customer Workbench | Tactical solution providing a single view of each customer’s holdings across brands and product types in pilot testing |
Call Centre rollout Stores rollout |
| Digital Marketplace | Suncorp insurance products available via mobile banking app | AAMI personal and home loans via online channels Single portal for customers to access their Suncorp or AAMI products and services |
| Stores rollout | Parramatta Concept Store opened | Carindale Concept Store Sites secured for Brisbane and Sydney flagship stores |
| Health | Suncorp Private Health Insurance launched | AAMI Private Health Insurance launch with online quote and buy capability Online quote and buy for Suncorp Private Health Insurance |
| APIA savings account | Pilot launched in Parramatta store | Full rollout and online origination |
| Broker access | Co-branded Life product launched with Austbrokers | Open up more products and services to brokers |
| Other | Framework for future cross brand products and services complete Financial Inclusion Action Plan published |
Replacement of cheque payments with EFT Mobile POS launch BPAY View for Insurance |
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Profit after tax from
business lines ($m)
Diversification of earnings
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613
36
544
78
208
207
369
259
1H16 1H17
Insurance Banking & Wealth New Zealand
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Operating expenses
($m)
Flat cost base in FY17
and FY18
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1,360 1,360
186 203
368 353
806 804
1H16 1H17
Insurance Banking & Wealth New Zealand
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Dividends (cps)
33 cent interim dividend, up 10% cash earnings payout ratio of 72%
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105
88
30
75 12
68
20
55
38
40
38
15
35 35 30
20
20 20
38
35 33
30
25
20
15 15
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
■ Interim ■ Final ■ Special
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Capital position ($m)
| As at 31 December 2016 | As at 31 December 2016 | As at 31 December 2016 | As at 31 December 2016 | ||||
|---|---|---|---|---|---|---|---|
| GI | Bank | Life | SGL, Corp Services & Consol |
Total | Total as at 30 Jun 2016 |
||
| CET1 CET1 Target |
2,848 2,440 |
2,913 2,772 |
525 358 |
121 6 |
6,407 | 6,338 5,552 |
|
| 5,576 | |||||||
| Excess to CET1 Target (pre div) | 408 | 141 | 167 | 115 | 831 | 786 | |
| Group Dividend | (383) | (440) | |||||
| Group Excess to CET1 Target (ex div) | 448 | 346 | |||||
| Common Equity Tier 1 Ratio | 1.23x | 9.20% | 2.03x | ||||
| Total Capital Total Capital Target |
4,133 3,486 |
4,270 3,880 |
625 424 |
121 (11) |
9,149 | 8,860 7,743 |
|
| 7,779 | |||||||
| Excess to Target (pre div) | 647 | 390 | 201 | 132 | 1,370 | 1,117 | |
| Group Dividend Group Excess to Target (ex div) |
(383) | (440) 677 |
|||||
| 987 | |||||||
| Total Capital Ratio | 1.78x | 13.48% | 2.42x |
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CET1 capital base ($m)
CET1 excess increased to $448 million
NZ Autosure disposal $56 million Positive Life adjustment Seasonal GI excess tech provision capital impact Subdued Bank growth
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26 (80)
56
537 (19)
(35)
(383)
448
346
Excess HY17 Autosure Life policy GI excess Bank Other HY17 Excess
CET1 NPAT goodwill liability technical growth Dividend CET1
(Jun-16) release adjustment provision (net of (Dec-16)
(DAC) DRP)
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Group Risk Based Capital (RBC)
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Group
11%
3%
24%
62%
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HY17
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General Insurance Bank
3% [3%]
27%
21%
8%
65%
73%
Life Insurance Corporate
7%
14%
36%
57%
86%
■ Insurance risk ■ Market risk ■ Operational risk ■ Counterparty credit risk
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DATA PACK
38
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General Insurance capital
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Total capital ($m) Prescribed Capital Amount Capital ratios vs peers
(PCA) ($m)
4,133 1.78x 1.72x
1.69x
1.78x PCA
775
2,324
510
295
CET1 Target
(0.95 – 1.15x 801
PCA)
250
1.23x 1.21x
2,848 568 1.06x
893
(483) SUN Peer 1 Peer 2
■ Common Equity Tier 1 ■ Tier 2 ■ Outstanding claims risk ■ Asset risk ■ Common Equity Tier 1 ■ Tier 2
■ Additional Tier 1 ■ Premium liabilities risk ■ Operational risk ■ Additional Tier 1
■ Insurance concentration risk ■ Aggregation benefit
Source: Latest published company reports
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Bank capital
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Total capital ($m) Risk weighted assets ($m) Capital ratios vs peers
14.14% 14.35%
4,270 31,675 13.48% 13.31% 13.11%
12.29% 12.21%
13.48% RWA
907 3,391
98
450
CET1 Target 9.20% RWA
(8.5% – 9.0%
RWA)
28,186
2,913 9.20% 9.00% 9.77% 9.61% 9.56% 9.48%
8.09%
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4
Standardised Advanced
■ Common Equity Tier 1 ■ Tier 2 ■ Credit risk ■ Operational risk ■ Common Equity Tier 1 ■ Tier 2
■ Additional Tier 1 ■ Market risk
■ Additional Tier 1
Source: Latest published company reports
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Life Insurance capital
Total capital ($m)
Prescribed Capital Amount (PCA) ($m)
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625
2.42x PCA
100
259
525
19
51
37
112
49
1H17 (9)
1H17
■ Insurance risk ■ Combined stress
■ Common Equity Tier 1
■ Asset risk scenario adjustment
■ Tier 2
■ Operational risk ■ Other regulatory
■ Aggregation benefit requirements
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50 year history of major weather events
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Christchurch earthquakes,
6,000 $m Australia New Zealand Long run average Brisbane floods, Cyclone Yasi,
Melbourne hailstorm
5,000 Cyclone
Hunter Valley Marcia and NSW
storm
low storms
4,000
Brisbane flood,
Cyclone Tracy Newcastle Kaikoura
3,000 earthquake Melbourne & earthquake
Perth hailstorms,
Christchurch
Sydney
earthquakes
hailstorm
2,000 Brisbane
hailstorm Brisbane
hailstorm
1,000
-
1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
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Adjusted for inflation, population growth and market share
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Reinsurance program
6.9b
6.1b
2.5b
500m
Original cover Reinstatement Reinstatement Reinstatement
250m
200m Dropdown aggregate
Dropdown aggregate
50m
Retention * Natural hazard protection
Relates to Australian events. Following the Kaikoura earthquake, the Group’s maximum net retention for second and third New Zealand catastrophe events is NZ$25 million.
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Reinsurance program – dropdown aggregate
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250m
50m xs
200m xs 50m
200m 100m xs 100m xs
150m xs 200m 150m xs 300m
150m
100m xs 100m xs
50m xs 200m 50m xs 300m
50m
Natural hazard protection
Retention
300m xs 460m ($232m eroded as at 31 December 2016)
Relates to Australian events. Following the Kaikoura earthquake, the Group’s maximum net retention for second and third New Zealand catastrophe events is NZ$25 million.
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General Insurance 18.6%
ITR
17.0%
Underlying and reported ITR 14.7% 14.8% 14.6%
14.0%
13.4%
13.9% 12.5%
13.6%
12.8%
12%
10.1% [11.0%]
11.0%
10.3%
9.9%
9.4%
7.8%
1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17
Reported ITR Underlying ITR
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Shareholder metrics
EPS (basic)
EPS (diluted)
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$0.43 [$0.49 ] $0.41 $0.42 $0.42 [$0.48 ] $0.41 $0.41
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| 1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
|---|---|---|---|---|
| 1H14 | 1H15 | 1H16 | 1H17 | |
| Numerator ($m) | ||||
| Earnings (EPS basic) | 548 | 631 | 530 | 537 |
| Interest expense on CPS(net of tax) | 14 | 22 | 21 | 20 |
| Earnings(EPS diluted) | 562 | 653 | 551 | 557 |
| Denominator (m) | ||||
| Weighted average ordinary shares (EPS basic) | 1,278 | 1,279 | 1,279 | 1,281 |
| Effect of conversion of CPS | 45 | 69 | 80 | 73 |
| Weighted average ordinaryshares(EPS diluted) | 1,323 | 1,348 | 1,358 | 1,354 |
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Cash EPS (basic) Cash EPS (diluted)
Shareholder metrics
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$0.46 [$0.52 ] $0.43 $0.46 $0.45 [$0.51 ] $0.42 $0.45
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| 1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 |
|---|---|---|---|---|
| 1H14 | 1H15 | 1H16 | 1H17 | |
| Numerator ($m) | ||||
| Earnings (EPS basic) | 587 | 660 | 556 | 584 |
| Interest expense on CPS(net of tax) | 14 | 22 | 21 | 20 |
| Earnings(EPS diluted) | 601 | 682 | 577 | 604 |
| Denominator (m) | ||||
| Weighted average ordinary shares (EPS basic) | 1,278 | 1,279 | 1,279 | 1,281 |
| Effect of conversion of CPS | 45 | 69 | 80 | 73 |
| Weighted average ordinaryshares(EPS diluted) | 1,323 | 1,348 | 1,358 | 1,354 |
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| Shareholder metrics | Cash ROE 8.4% 9.8% 8.3% 8.5% 1H14 1H15 1H16 1H17 |
Cash ROE 8.4% 9.8% 8.3% 8.5% 1H14 1H15 1H16 1H17 |
Cash ROE 8.4% 9.8% 8.3% 8.5% 1H14 1H15 1H16 1H17 |
Cash ROE 8.4% 9.8% 8.3% 8.5% 1H14 1H15 1H16 1H17 |
Cash ROE 8.4% 9.8% 8.3% 8.5% 1H14 1H15 1H16 1H17 |
Cash ROE 8.4% 9.8% 8.3% 8.5% 1H14 1H15 1H16 1H17 |
|
|---|---|---|---|---|---|---|---|
| 1H14 | 1H15 | 1H16 | 1H17 | ||||
| Cash ROE | |||||||
| Earnings ($m) | 587 | 660 | 556 | 584 | |||
| Average shareholders’ equity ($m) | 13,822 | 13,361 | 13,261 | 13,625 | |||
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Shareholder overview
Source: Orient Capital, 16 December 2016
SUN shareholders by type
SUN shareholders by geography
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1%
2% [1%]
4%
6%
25%
40% 11%
75%
35%
■ Domestic Institutions ■ Australia (Institutions & Retail)
■ Retail Investors ■ United States ■ Japan
■ International Institutions ■ United Kingdom ■ Rest of Europe
■ Hong Kong ■ Rest of World
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Insurance
Create a better today
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Insurance NPAT
NPAT up 42.5% to $369 million GWP growth of 6.2%
Reported ITR of 13.8%
Natural hazards $319 million
Reserve releases of $149 million Underlying investment yield of 2.3%
| HY17 ($m) |
HY16 ($m) |
Change (%) |
|
|---|---|---|---|
| General Insurance | |||
| Gross written premium | 4,031 | 3,796 | 6.2 |
| Net earned premium | 3,552 | 3,480 | 2.1 |
| Net incurred claims | (2,374) | (2,546) | (6.8) |
| Operating expenses | (722) | (724) | (0.3) |
| Investment income - insurance funds | 35 | 93 | (62.4) |
| Insurance trading result | 491 | 303 | 62.0 |
| Other income | 17 | 25 | (32.0) |
| Income tax | (150) | (92) | 63.0 |
| General Insurance profit after tax | 358 | 236 | 51.7 |
| Life Insurance profit after tax | 11 | 23 | (52.2) |
| Insurance NPAT | 369 | 259 | 42.5 |
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General Insurance Gross Written Premium
Total GWP of $4.0 billion
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Portfolio by product Portfolio by geography
3% 2% [3%]
6%
18%
7% 26%
32%
21%
19%
35%
28%
■ Motor ■ CTP ■ Queensland ■ Western Australia
■ Home ■ Workers ■ New South Wales ■ South Australia
■ Commercial compensation & other ■ Victoria ■ Tasmania
■ ACT & other
INSURANCE (AUSTRALIA) 52
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Loss ratio Total operating expenses ratio
General Insurance
key ratios
74.8%
73.2%
20.8%
20.1% 20.3%
66.8%
1H16 2H16 1H17 1H16 2H16 1H17
Acquisition expenses ratio Other underwriting expenses ratio
13.0% 13.2% 13.0%
7.8% 6.9% 7.3%
1H16 2H16 1H17 1H16 2H16 1H17
HY17 INSURANCE (AUSTRALIA) 53
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General Insurance reserve releases Conservative assumptions and proactive long-tail claims management
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$208m
6.1%
$149m
$140m
4.2%
4.0%
Long-term
assumption
1.5% of NEP
1H16 2H16 1H17
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Natural hazard events
| Date | Event | Net costs ($m) |
|---|---|---|
| Jul 2016 | Southern winds | 9 |
| Sep 2016 | South Australian and Victorian flooding | 7 |
| Sep 2016 | Southern wind and rain | 13 |
| Oct 2016 | Victorian wind storm | 17 |
| Oct 2016 | Young and Parkes hail | 6 |
| Nov 2016 | South Australian and Victorian storms | 57 |
| Nov 2016 | Maryborough storm | 6 |
| Nov 2016 | Internal reinsurance on Kaikoura earthquake | 28 |
| Nov 2016 | Gympie hail | 10 |
| Dec 2016 | Ipswich hail | 9 |
| Dec 2016 | South Australian and Victorian storms | 50 |
| Total events over $5 million | 212 | |
| Other natural hazards attritional claims | 107 | |
| Total natural hazards | 319 | |
| Less: allowance for natural hazards Natural hazards costs above allowance |
(300) 19 |
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General Insurance investment asset allocation
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Insurance funds Fixed income credit quality Shareholders’ funds
$9.2 billion 2% $2.8 billion 4%
8% 9%
5% [5%]
23%
13%
27% 43%
74%
65%
22%
■ Cash and short-term ■ Semi-Government ■ AAA ■ A ■ Cash and short-term ■ Equities
deposits bonds ■ AA ■ BBB deposits ■ Infrastructure
■ Inflation-linked bonds ■ Commonwealth ■ Interest-bearing securities and property
■ Corporate bonds Government bonds
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- The total effective exposure to inflation-linked securities in the Insurance funds portfolio is $2.9 billion after accounting for both physical bonds and derivatives.
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56
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Personal lines
market share
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Source: Roy Morgan, November 2016
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HY17
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NT
17% 13%
QLD
WA
33% 35%
16% 14%
SA
NSW
14% 14%
29% 25%
VIC
34% 30%
Motor Home
TAS
38% 36%
INSURANCE (AUSTRALIA)
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57
Personal lines market share
Source: Roy Morgan, November 2016
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Total market
$17.6 billion
27% 27%
4%
Home 2% 4% Motor
$8.3 billion 7% 29% $9.3 billion
25% 25%
28%
31%
4%
2%
3%
2%
7%
26%
2% 7%
32%
6%
■ Suncorp ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Peer 4 ■ Peer 5 ■ Others
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Commercial lines
market share
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Total market
$12.9 billion
12%
30%
18%
7%
20%
13%
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■ Suncorp ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Peer 4 ■ Others
Source: Latest Suncorp estimates
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Personal Injury market share
Source: Latest Suncorp estimates * CTP includes QLD, NSW & ACT schemes only
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CTP * Workers compensation
$3.9 billion $1.0 billion
1%
5%
13%
24%
20% 33%
23%
5%
23% 17%
18%
18%
■ Suncorp ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Peer 4 ■ Others
INSURANCE (AUSTRALIA)
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CTP market share
-
Source: State scheme regulators * as at December 2016
-
** as at September 2016
-
*** as at June 2016
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2%
QLD
NSW
$1.2 billion 8%
$2.7 billion
18%
25%
16%
49%
27% 32% 23%
ACT SA
$170 million $458 million
30%
42%
58%
70%
■ Suncorp ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Peer 4 ■ Peer 5 ■ Rest of market
INSURANCE (AUSTRALIA) 61
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HY17
Life Insurance NPAT
Stable underlying profits
Lapse and claims assumptions remain appropriate
Optimisation program to deliver improved returns
Exploring strategic alternatives
| HY17 ($m) |
HY16 ($m) |
Change (%) |
|
|---|---|---|---|
| Planned profit margin release | 9 | 7 | 28.6 |
| Experience Other and investments |
(2) 18 |
9 10 |
n/a 80.0 |
| Underlying profit after tax | 25 | 26 | (3.8) |
| Market adjustments | (14) | (3) | 366.7 |
| Life Insurance NPAT | 11 | 23 | (52.2) |
| In-force annual premium Total new business |
801 33 |
798 38 |
0.4 (13.2) |
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Life Insurance in-force premium
Total in-force premium of $801 million
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Premium by product Premium by geography Premium by channel
7% 9% w 10% 8%
12%
35%
27%
47%
18%
82%
19%
26%
■ Direct via General Insurance brands
■ Term & TPD ■ Income protection ■ Queensland ■ Western Australia
■ Trauma ■ Group ■ New South Wales ■ Other ■ Advised ■ Group & other
■ Victoria & Tasmania
HY17 INSURANCE (AUSTRALIA)
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63
Life Insurance new business
Total new business of $33 million
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New business by product New business by geography New business by channel
8% 7% 5%
w
23%
12%
29%
23%
55%
25%
14% 72%
27%
■ Direct via General Insurance brands
■ Term & TPD ■ Income protection ■ Queensland ■ Western Australia
■ Trauma ■ Other ■ New South Wales ■ Other ■ Advised ■ Group & other
■ Victoria & Tasmania
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Life Insurance key metrics ($m)
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Planned margins Claims and lapse experience
9 9 10
8
7
(2)
1H16 2H16 1H17
1H16 2H16 1H17
In-force premium Operating expenses
813
83
82 82
801
798
1H16 2H16 1H17 1H16 2H16 1H17
INSURANCE (AUSTRALIA) 65
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Life Insurance (Australia)
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Life Insurance meets a core customer need Key Initiatives Outcomes
Optimise efficiencies in claims
Improved customer experience
Health Travel and expense management
Life
Insurance Insurance
Insurance
Commercial Professional
Super Indemnity Streamline processes under
Enhanced competitiveness
new operating model
Improve customer connectivity Improved shareholder returns
Product and claims innovation Reduced earnings volatility
Life Insurance is a core component of the Suncorp financial services
Marketplace, however, currently delivers sub-optimal ROE.
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Life Insurance market share
Individual risk
Source: NMG Consulting, September 2016 In-force portfolio includes IFA, Bank and Direct business
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14%
14% 14%
13%
11% 11%
9%
8%
6%
Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 SUN Peer 7 Others
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In-force
$9.5 billion
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19%
14% 14%
13%
New business
11% 10%
$1.0 billion
7%
7%
5%
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Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 SUN Others
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Life Insurance market share
Share by distribution channel
Source: NMG Consulting, September 2016
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35%
34%
Direct
$1.0 billion
8%
6%
4% 4% 3% 3% 3%
Peer 1 Peer 2 SUN Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Others
33%
Bank
19%
$2.4 billion 18% 18%
4%
2% 2% 3%
1%
Peer 1 Peer 2 Peer 3 Peer 4 SUN Peer 5 Peer 6 Peer 7 Others
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Life Insurance market share
Share by distribution channel
Source: NMG Consulting, September 2016
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IFA 21%
$6.1 billion
14%
13%
11%
10%
10%
8%
7%
6%
Peer 1 Peer 2 Peer 3 Peer 4 SUN Peer 5 Peer 6 Peer 7 Others
Group 26%
24%
$6.5 billion
13%
9%
8% 8%
7%
4%
1%
Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 SUN Others
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Banking & Wealth
Create a better today
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HY17
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70
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Banking & Wealth
NPAT
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Strong capital & balance sheet Disciplined cost management Improved credit quality Resilient funding profile Progress on strategic projects
| HY17 ($m) |
HY16 ($m) |
Change (%) |
|
|---|---|---|---|
| Bank | |||
| Net interest income | 558 | 566 | (1.4) |
| Net non-interest income | 39 | 49 | (20.4) |
| Operating expenses | (307) | (326) | (5.8) |
| Profit before impairment losses on loans and advances |
290 | 289 | 0.3 |
| Impairment losses on loans and advances | (1) | (11) | (90.9) |
| Income tax | (86) | (84) | 2.4 |
| Bank profit after tax | 203 | 194 | 4.6 |
| Wealth profit after tax | 5 | 13 | (61.5) |
| Banking & Wealth NPAT | 208 | 207 | 0.5 |
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Total lending portfolio
Lending assets by portfolio
Portfolio by geography
Total assets of $54.2 billion
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<1%
8%
7% [4%]
10%
10%
53%
26%
81%
■ Housing ■ Agribusiness ■ Queensland ■ Western Australia
■ Commercial (SME) ■ Consumer ■ New South Wales ■ South Australia
■ Victoria and other
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Bank key ratios
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Lending growth (annualised) Net interest margin Cost to income ratio
4.06% (interest-earning assets) 59.6%
3.58%
1.86% 1.85%
1.78%
1.37% 1.66% 53.0%
52.2%
51.4%
(0.34%)
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17
Impairment losses to gross loans Return on Common Equity Tier 1 Deposit to loan ratio
67.2%
and advances (annualised)
13.1% 13.5% 66.6%
0.18% 12.1%
0.17% 66.1%
7.6% 65.7%
0.04%
<0.01%
1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17 1H14 1H15 1H16 1H17
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Home lending portfolio
Total assets of $44.1 billion
Portfolio by borrower type
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30%
70%
■ Owner occupied ■ Investor
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Portfolio by geography
Portfolio by channel
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----- Start of picture text -----
4%
8%
35%
11%
50%
65%
27%
■ Queensland ■ Western Australia ■ Direct ■ Intermediaries
■ New South Wales ■ South Australia
■ Victoria and other
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BANKING & WEALTH
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Commercial (SME) portfolio
Total assets of $5.5 billion
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Portfolio by industry
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4%
10%
7% 35%
19%
16%
9%
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----- Start of picture text -----
■ Property investment ■ Retail
■ Hospitality & accommodation ■ Other
■ Construction & development
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Portfolio by geography Portfolio by exposure size
12% 13%
14%
18%
54%
74%
15%
■ Queensland ■ Other ■ <$5 million ■ $10 - $25 million
■ New South Wales ■ $5 - $10 million ■ $25 - $50 million
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Portfolio by geography
-
Services (including professional services)
-
■ Manufacturing & mining
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BANKING & WEALTH
75
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Agribusiness portfolio
Total assets of $4.4 billion
Portfolio by industry
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15%
3%
3% 29%
8%
11%
31%
■ Beef ■ Sugar
■ Grain & mixed farming ■ Fruit
■ Sheep & mixed livestock ■ Other
■ Cotton
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Portfolio by geography
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Portfolio by exposure size
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6%
10%
25%
49%
29%
61%
20%
■ Queensland ■ Other ■ <$5 million ■ $10 - $25 million
■ New South Wales ■ $5 - $10 million ■ $25 - $50 million
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76
Credit quality
Continued focus on credit quality and risk management
Impairment losses <0.01% of GLA Limited exposure to resources and inner-city apartments Improving agribusiness conditions
Gross impaired loans by segment ($m)
Home lending credit quality (% gross home loans)
| ~~28~~ 182 206 416 |
33 162 67 262 |
~~25~~ 109 42 176 |
30 96 59 185 |
|---|---|---|---|
| 1H14 1H15 1H16 1H17 ■Retail ■Agribusiness ■Commercial (SME) |
0.98% 0.74% 0.69% 0.67% 0.07% 0.02% 1H14 1H15 1H16 1H17 Past due loans Impaired assets Loss rate
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Loan to value ratio (LVR)
Total home lending assets of $44.1 billion
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5%
12% 9%
17%
22%
Home lending 22%
24%
assets by LVR 22%
73%
69%
61% 64%
1H14 1H15 1H16 1H17
■ 0.00 – 80.00% ■ 80.01% - 90.00% ■ 90.01%+
2% 3%
5%
Home lending new 26% 12% 10% 18%
business by LVR
8%
88%
83%
79%
66%
1H14 1H15 1H16 1H17
■ 0.00 – 80.00% ■ 80.01% - 90.00% ■ 90.01%+
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BANKING & WEALTH
78
Credit quality
Relativity to peers
Source: Latest peer financial reports
Impairment losses to gross loans
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----- Start of picture text -----
Impairment losses 0.35%
to gross loans
0.20%
0.16% 0.16%
0.14%
0.11%
<0.01%
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4
0.39%
Net impaired
0.35%
loans to gross 0.32%
loans 0.28%
0.26% [0.27%]
0.16%
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4
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BANKING & WEALTH
79
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Chart Title
Collective provision
($m) 129
119
12
102
97 27
28
117
97
92
74
1H14 1H15 1H16 1H17
■ Modelled collective provision ■ Management overlays
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HY17
BANKING & WEALTH
80
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Portfolio credit quality
Commercial (SME) portfolio
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5,964
6,000 15.00%
5,593
5,462
5,203
13.00%
5,000
11.00%
4,000
9.00%
3,000 7.00%
5.00%
2,000
3.00%
1,000
1.00%
- -1.00%
1H14 1H15 1H16 1H17
3.45%
1.20% 0.81% 1.08%
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Commercial portfolio ($m) Gross impaired assets/Total portfolio (%)
Agribusiness portfolio
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5,000 12.00%
4,484 4,534 4,383
4,258
10.00%
4,000
8.00%
3,000
6.00%
2,000
4.00%
1,000
2.00%
- 0.00%
1H14 1H15 1H16 1H17
4.06%
3.58%
2.56%
2.19%
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Agribusiness portfolio ($m) Gross impaired assets/Total portfolio (%)
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HY17
BANKING & WEALTH
81
Long-term funding profile ($m)
| Covered | Covered | Covered | bond | bond | Domestic | Domestic | Domestic | Domestic | senior unsecured | senior unsecured | senior unsecured | senior unsecured | senior unsecured | Offshore | Offshore | Offshore | senior | senior | unsecured | unsecured | unsecured | unsecured | |||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1,000 | |||||||||||||||||||||||||
| 0 100 200 300 400 500 600 700 800 900 |
|||||||||||||||||||||||||
| Feb 17 | Jul 17 | Dec 17 | May 18 | Oct 18 | Mar 19 | Aug 19 | Jan 20 | Jun 20 | Nov 20 Apr 21 |
Sep 21 | Feb 22 | Jul 22 | Dec 22 | May 23 | Oct 23 | Mar 24 | Aug 24 | Jan 25 | Jun 25 | Nov 25 | Apr 26 | Sep 26 |
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HY17
BANKING & WEALTH
82
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Liquid assets and Liquidity Coverage Ratio
Components of liquid assets ($b)
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13.0
12.3
11.5
4.0
4.3
4.4
5.4 3.4
3.6
4.6
3.6 3.5
1H15 1H16 1H17
■ Cash, Government, Semi-Government
■ Bank, NCD, Bills, RMBS, Supra, Covered Bonds
■ Internal RMBS
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Components of LCR* ($b)
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LCR 130%
LCR 130% 2.03
1.90
4.20
4.20 LCR 100%
LCR 100%
6.76
6.35
4.59
4.05
2H16 1H17
■ HQLA assets ■ Required LCR qualifying assets
■ CLF ■ Buffer
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- based off AUD LCR
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HY17
BANKING & WEALTH
83
Bank market share
Retail banking market share and Suncorp footprint
Source: Roy Morgan, December 2016
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NT 0.0%
14 QLD 8.8%
106 11 516
WA 0.5%
2 1 123
SA 0.3%
1 1 125
NSW & ACT 0.8%
36 2 330
VIC 0.4%
8 1 440
Branch Business centre ATM TAS 0.4%
1 39
BANKING & WEALTH 84
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Bank market share
Source: APRA, December 2016
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26%
25%
Mortgage lending
16% 15%
11%
3% 2%
2%
ANZ CBA NAB WBC SUN BEN BOQ Others
Business lending 22% 22%
20%
17%
15%
1% 2% 1%
ANZ CBA NAB WBC SUN BEN BOQ Others
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BANKING & WEALTH
85
Funds under management and administration ($m)
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135
( 97 )
7,452 7,490
7,355 7,355
Balance Net flows Investment income Balance
Jun-16 and other Dec-16
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BANKING & WEALTH
86
New Zealand
Create a better today
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HY17
87
New Zealand NPAT
UITR above group target of 12% Kaikoura earthquake and aftershock impact NZ$23 million 2010/11 ‘over-cap’ EQC claims Personal lines grew 7.7% Life Insurance underlying profit growth of 41%
| HY17 (NZ$m) |
HY16 (NZ$m) |
Change (%) |
|
|---|---|---|---|
| General Insurance | |||
| Gross written premium | 714 | 681 | 4.8 |
| Net earned premium | 586 | 562 | 4.3 |
| Net incurred claims | (372) | (303) | 22.8 |
| Operating expenses | (196) | (183) | 7.1 |
| Investment income - insurance funds | 4 | 7 | (42.9) |
| Insurance trading result | 22 | 83 | (73.5) |
| Other income | 5 | 10 | (50.0) |
| Income tax | (8) | (25) | (68.0) |
| General Insurance profit after tax | 19 | 68 | (72.1) |
| Life Insurance profit after tax | 18 | 19 | (5.3) |
| New Zealand NPAT | 37 | 87 | (57.5) |
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NEW ZEALAND
88
General Insurance Gross Written Premium
Total GWP of NZ$714 million
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Portfolio by product Portfolio by channel
3%
19%
23%
32%
42%
32%
49%
■ Motor ■ Commercial ■ Direct ■ Strategic partners &
■ Home ■ Other ■ Brokers financial intermediaries
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NEW ZEALAND
8989
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Loss ratio Total operating expenses ratio
General Insurance
key ratios
63.5%
53.9% 53.6% 33.4%
32.6%
32.3%
1H16 2H16 1H17 1H16 2H16 1H17
Acquisition expenses ratio Other underwriting expenses ratio
23.7%
23.3%
22.9%
9.3% 9.4% 9.7%
1H16 2H16 1H17
1H16 2H16 1H17
HY17 NEW ZEALAND 9090
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Natural hazard events
| Date | Event | Net costs (NZ$m) |
|---|---|---|
| Nov 16 | Kaikoura earthquake (net of internal reinsurance) |
20 |
| Nov 16 | North Island rain | 1 |
| Nov 16 | South Island earthquake aftershock | 3 |
| Other natural hazards attritional claims | 9 | |
| Total natural hazards | 33 | |
| Less: allowance for natural hazards Natural hazards costs above allowance |
(11) 22 |
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HY17
NEW ZEALAND
91
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General Insurance investment asset allocation
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Shareholders’ funds
NZ$320 million
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Fixed income credit quality
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Insurance funds Fixed income credit quality
NZ$490 million NZ$320 million
1% 3%
7%
11% 15%
28%
30% 24%
58% 66% 57%
■ Cash and short-term ■ Local government ■ AAA ■ A ■ Cash and short-term deposits
deposits bonds ■ AA ■ BBB ■ Interest-bearing securities
■ Corporate bonds ■ Government bonds ■ Equities
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NEW ZEALAND
92
General Insurance market share
Total NZ$5.2 billion
Source: Insurance Council New Zealand, September 2016
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HY17
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17%
20%
5%
5%
7%
46%
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■ Vero ■ AAI ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Others (Suncorp NZ) (Suncorp NZ)
93
NEW ZEALAND
Life Insurance NPAT
Underlying profit up 41.2% Favourable experience Strong in-force growth with new business up 15.4%
| HY17 (NZ$m) |
HY16 (NZ$m) |
Change (%) |
|
|---|---|---|---|
| Planned profit margin | 15 | 16 | (6.3) |
| Experience Other and investments |
5 4 |
(4) 5 |
n/a (20.0) |
| Underlying profit after tax | 24 | 17 | 41.2 |
| Market adjustments | (6) | 2 | n/a |
| Life Insurance NPAT | 18 | 19 | (5.3) |
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NEW ZEALAND
94
Life Insurance in-force premium
Total in-force premium of NZ$240 million
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Premium by product
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Premium by product Premium by channel
3% 3%
16%
16%
47%
18%
81%
16%
■ Term & TPD ■ Other ■ Direct ■ Group & other
■ Trauma ■ Group ■ Advised
■ Income protection
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HY17
NEW ZEALAND
9595
Life Insurance new business
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New business by product New business by channel
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Total new business of NZ$15 million
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8% 8%
17%
17%
57%
18%
75%
■ Term & TPD ■ Income protection ■ Direct ■ Group & other
■ Trauma ■ Group ■ Advised
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NEW ZEALAND
9696
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Life Insurance
key metrics (NZ$m)
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Planned margins Claims and lapse experience
16 16 15
5
3
(4)
1H16 2H16 1H17
1H16 2H16 1H17
In-force premium Operating expenses
240
229 20
18 18
222
1H16 2H16 1H17 1H16 2H16 1H17
NEW ZEALAND 97
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HY17
Life Insurance market share Individual risk
Source: Melville Jessup Weaver, September 2016
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28%
In-force
20%
NZ$2.1 billion
14%
11% 10%
10%
7%
Peer 1 Peer 2 SUN Peer 3 Peer 4 Peer 5 Others
27%
New business
21%
NZ$60 million
14%
12%
12%
10%
4%
Peer 1 Peer 2 Peer 3 Peer 4 SUN Peer 5 Others
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NEW ZEALAND
98
Economy
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99
Economic Fundamentals
Supportive fundamentals for both Australia and Queensland
Australia continues to see moderate growth despite the fall in mining investment
For Queensland, population growth has lifted and the budget is in surplus
| Australia | Queensland | Data | |
|---|---|---|---|
| Population growth | 1.4% | 1.4% | Jun-16, annual |
| Economic growth | 2.2% | 2.0% | AUS: Sep-16 annual, trend QLD: 2015-16 annual |
| Unemployment rate | 5.6% | 5.9% | Nov-16, trend |
| Inflation | 1.3% | 1.5% | Sep-16, annual |
| Budget position | $37bn deficit (2.1% of GDP) |
$2bn surplus (0.6% of GSP) |
2016-17 estimate |
| Credit rating (S&P / Moody’s) |
(AAA neg outlook / Aaa stable) |
(AA+ stable / Aa1 neg outlook) |
Dec-16 |
“The economy continues to adjust to the end of the resources boom. Our expectation is that GDP growth will be close to potential over the next few quarters” RBA, 22 November 2016
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ECONOMY
100
Growth Outlook
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Australia is forecast to record
continued moderate economic
growth, with domestic income
and demand recovering
Queensland is projected to
lead economic growth among
the states
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“Queensland has a lovely portfolio of sectors – and as some lose steam, others are taking up the slack” Deloitte Access Economics, September 2016
State prospects
GDP outlook
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----- Start of picture text -----
4.0
Annual % Change
3.5
3.0
2.5 3.1%
3.9%
2.0
1.9%
1.5 2.0%
2.6%
1.0
ACT: 2.2%
0.5
2.8%
0.0
2012 2013 2014 2015 2016e 2017f 2018f 2019f
1.6%
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Gross State Product annual average forecast 2017-2019 Source: Deloitte Access Economics, Sep-16
Source: ABS, Suncorp, Deloitte Access Economics
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HY17
ECONOMY
101
Monetary policy remains highly supportive
Cash rate reached a record low in August 2016. No further cuts anticipated from here
Low rates are supporting residential and, recently, non-residential building
Inflation likely to return to the RBA target range during 2017
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8
Inflation and %
Source: ABS, RBA, Bloomberg
interest rates 7
6
5
4
3
Inflation
Target Range 2
1
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Std Var Mortgage Rate RBA Cash Rate Headline Inflation Rate
120
Building $bn, per annum
approvals 100
80
60
40
Source: ABS
20
Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16
Total Non-Residential Residential
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HY17
ECONOMY
102102
Housing market buoyant yet risks contained
Housing being supported by demographics, low rates and a sound economy
-
Some areas of localised oversupply emerging
-
Household debt elevated, yet servicing ratio low and savings still above pre-GFC levels
-
RBA states that household risks have eased (FSR Aug-16)
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900
House prices
Median house price ($ '000)
800
700
600
500
400
Source: Bloomberg, ABS, RP Data
300
Sep-06 Sep-08 Sep-10 Sep-12 Sep-14 Sep-16
Sydney Melbourne Brisbane
190 14
Household % %
debt and debt 185 12
servicing 10
180
Interest payments to disposable income (RHS) 8
175
6
170
4
165
Debt to disposable income (LHS) 2
Source: RBA
160 0
Sep-06 Sep-08 Sep-10 Sep-12 Sep-14 Sep-16
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HY17
ECONOMY
103
Labour market making gradual progress
Despite faltering job growth, unemployment has eased
Encouragingly, future job growth is expected to be concentrated in those sectors that are the largest employers
Labour market
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75 6.4
Monthly change ('000)
50 6.1
25 5.8
0 5.5
-25 5.2
Source: Bloomberg
-50 4.9
Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16
Employment Unemployment Rate (%)
13 Forecast employment growth 2017-2019, % Education Healthcare
Sector 10
Information & Telecommunications
employment 7 Public
Real
Admin Retail &
outlook 4 Utilities Estate Finance &Insurance Recreation Wholesale
Construction Business Services
1 Transport
-2 0 200 400 600 800 1000 1200 1400 1600 1800
Sector employment
-5 Mining Agriculture Nov-16, '000
-8
-11 Manufacturing
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HY17
ECONOMY
104104
Favourable export outlook
Commodity prices have lifted, assisted by improved Chinese industrial activity
Tourism earnings are rising strongly (annual growth of 11% over past 3 years)
Other areas of export growth include financial and IT related services
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170
Commodity prices $US price
150
Iron Ore
130
110
Thermal Coal
90
WTI Oil
70
50
Source: Bloomberg
30
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Service exports 4.1 $bn
and tourism 3.8
3.5
Tourism exports
3.2
2.9
2.6
2.3
Service exports (ex-Tourism)
2.0
1.7
Source: ABS
1.4
Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16
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ECONOMY
105
Glossary
Create a better today
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Glossary
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| Acquisition expense ratio |
Acquisition expenses expressed as a percentage of net earned premium |
|---|---|
| ADI | Authorised Deposit-taking Institution |
| Annuities market adjustments |
The value of annuity obligations are determined by discounting future obligations into today’s dollars using risk-free rates. The value of such obligations fluctuates as market referenced discount rates change. The value of assets backing annuity obligations also fluctuates with investment markets. The net impact of both of these market-driven valuation changes are removed from Suncorp Life’s Underlying Profit and recorded as annuity market adjustments |
| APRA | Australian Prudential Regulation Authority |
| Basis points (bps) | A ‘basis point’ is 1/100th of a percentage point |
| Cash earnings | Net profit after tax adjusted for the amortisation of acquisition intangible assets, the profit or loss on divestments and their tax effect |
| Cash earnings per share |
Basic: cash earnings divided by the weighted average number of ordinary shares (net of treasury shares) outstanding during the period Diluted: cash earnings adjusted for consequential changes in income or expenses associated with the dilutive potential ordinary shares divided by the weighted average number of diluted shares (net of treasury shares) outstanding during the period |
| Cash return on average shareholders' equity |
Cash earnings divided by average equity attributable to owners of the Company. Averages are based on monthly balances over the period. The ratio is annualised for half years |
| Combined operating ratio |
The percentage of net earned premium that is used to meet the costs of all claims incurred plus pay the costs of acquiring (including commission), writing and servicing |
| the General Insurance business |
HY17
107
Glossary
| Common Equity Tier 1 (CET1) |
Common Equity Tier 1 Capital comprises accounting equity plus adjustments for intangible assets and regulatory reserves |
|---|---|
| Common Equity Tier 1 Ratio |
Common Equity Tier 1 divided by the Prescribed Capital Amount for Life and General Insurance, or total risk-weighted assets for the Bank |
| Connected Customer |
Connected customers represent customers with two or more needs met across the following need categories: Home / Property; Self; Mobility and Money |
| Cost to income ratio | Operating expenses of the Banking business divided by total income from Banking activities |
| Credit risk-weighted assets |
Total of the carrying value of each asset class multiplied by their assigned risk weighting, as defined by APRA |
| Deferred acquisition costs (DAC) |
The portion of acquisition costs not yet expensed on the basis that it can be reliably measured and it is probable that it will give rise to premium revenue that will be brought to account in subsequent financial periods |
| Deposit to loan ratio | Total retail deposits divided by total loans and advances, excluding other receivables |
| Diluted shares | Diluted shares is based on the weighted average number of ordinary shares outstanding during the period adjusted for potential ordinary shares that are dilutive in accordance with AASB 133 Earnings per Share |
| Effective tax rate | Income tax expense divided by profit before tax |
| Embedded Value | Embedded Value is equivalent to the sum of the adjusted net worth and the net present value of all future cashflows distributable to the shareholder that are expected to arise from in-force business, together with the value of franking credits |
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HY17
108
Glossary
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| Equity reserve for credit losses |
The equity reserve for credit losses represents the difference between the collective provision for impairment and the estimate of credit losses across the credit cycle based on guidance provided by APRA |
|---|---|
| Fire service levies (FSL) |
The expense levied on premiums for insurance policies with a fire risk component, which is recoverable from insurance companies by the applicable State Government. Fire service levies were established to cover corresponding fire brigade charges |
| Funds under administration (FUA) |
Funds where the Superannuation Australia business receives a fee for the administration of an asset portfolio |
| General Insurance – Commercial |
Commercial products consist of commercial motor insurance, commercial property insurance, marine insurance, industrial special risk insurance, and public liability and professional indemnity insurance |
| General Insurance – Consumer |
Consumer insurance products consist of home and contents insurance, motor insurance, boat insurance, and travel insurance |
| Gross non- performing loans |
Gross impaired assets plus past due loans |
| Impairment losses to gross loans and advances |
Impairment losses on loans and advances divided by gross loans and advances. The ratio is annualised for half years |
| Insurance Trading Result |
Underwriting result plus investment income on assets backing technical reserves |
| Insurance Trading Ratio (ITR) |
The insurance trading result expressed as a percentage of net earned premium |
| Life insurance policyholders' |
Amounts due to an entity or person who owns a life insurance policy. This need not h i Thi i ii f hhl’ i |
| interests | be te nsured. s s dstnct rom sareoders nterests |
HY17
109
Glossary
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| Life risk in-force annual premiums |
Total annualised statistical premium for all business in-force at the date (including new business written during the reporting period) |
|---|---|
| Life risk new business annual premiums |
Total annualised statistical premium for policies issued during the reporting period |
| Life underlying profit after tax |
Net profit after tax less market adjustments. Market adjustments represents the impact of movements in discount rates on the value of policy liabilities, investment income experience on invested shareholder assets and annuities mismatches |
| Loss ratio | Net claims incurred expressed as a percentage of net earned premium. Net claims incurred consist of claims paid during the period increased (or decreased) by the increase (decrease) in outstanding claims liabilities |
| Net interest spread | The difference between the average interest rate on average interest earning assets and the average interest rate on average interest bearing liabilities |
| Net profit after tax | Net profit after tax attributable to owners of the Company derived in accordance with Australian Accounting Standards |
| Net tangible asset backing per share |
Total equity less intangible assets divided by ordinary shares at the end of the period adjusted for treasury shares |
| Other underwriting expenses ratio |
Other underwriting expenses expressed as a percentage of net earned premium |
| Past due loans | Loans outstanding for more than 90 days |
| Payout ratio – cash earnins |
Ordinary shares (net of treasury shares) at the end of the period multiplied by the ordinar dividend er share for the eriod divided b cash earnins |
| g | y p p y g |
HY17
110
Glossary
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| Payout ratio – net profit after tax |
Ordinary shares (net of treasury shares) at the end of the period multiplied by the ordinary dividend per share for the period divided by profit after tax |
|---|---|
| Profit after tax from business lines |
The net profit after tax for the Insurance, Banking & Wealth and New Zealand business lines |
| Return on average shareholders' equity |
Net profit after tax divided by average equity attributable to owners of the Company. Averages are based on monthly balances over the period. The ratio is annualised for half years |
| Return on average total assets |
Net profit after tax divided by average total assets. Averages are based on beginning and end of period balances. The ratio is annualised for half years |
| Return on Common Equity Tier 1 |
Net profit after tax adjusted for dividends paid on capital notes divided by average Common Equity Tier 1 Capital. Average Common Equity Tier 1 Capital is based on the monthly balance of Common Equity Tier 1 Capital over the period. The ratio is annualised for half years |
| Total capital ratio | Total capital divided by the Prescribed Capital Amount for Life and General Insurance, or total risk-weighted assets for the Bank, as defined by APRA |
| Total operating expense ratio |
Total operating expenses (acquisition and other underwriting expenses) expressed as a percentage of net earned premium |
| Total risk-weighted assets |
Bank credit risk-weighted assets, off-balance sheet positions and market risk capital charge and operational risk charge, as defined by APRA |
| Treasury shares | Ordinary shares of Suncorp Group Limited that are acquired by subsidiaries |
| Value of one year’s sales (VOYS) |
An estimate of the present value of all distributable profits expected from the new policies sold in a given year 111 |
HY17
Disclaimer
This report contains general information which is current as at 9 February 2017. 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 forward-looking statements, the information reflects Suncorp’s intent, belief or current expectations with respect to the 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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HY17
112
TO SEE MORE, GO ONLINE
suncorpgroup.com.au
REGISTERED OFFICE
Level 28, 266 George Street Brisbane, Qld Australia 4000 +61 7 3362 1222
INVESTOR RELATIONS CONTACTS
Mark Ley Ph: 02 8121 1221 Andrew Dempster Ph: 02 8121 9206 Susan Troy Ph: 07 3135 3729 Carly Jefferson Ph: 02 8121 1225 Sophie Bastin-Byrne Ph: 07 3135 4700
CONNECT
suncorpgroup.com.au @SuncorpGroup
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