SUNCORP GROUP LIMITED - Interim / Quarterly Report 2018

Financial Results for the half year ended 31 December 2017

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Create a better today

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DATA PACK RELEASE DATE 15 FEBRUARY 2018 SUNCORP GROUP LIMITED ABN 66 145 290 124

Result Overview

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Includes the impact of Victorian hail storm
Impacted by significant business investment
Reflects good top line growth
Payout ratio well above historical levels

	HY18 ($m) HY17 ($m) Change (%) Insurance (Australia) 264 369 (28.5) Banking & Wealth 197 208 (5.3) New Zealand 61 36 69.4 NPAT from functions 522 613 (14.8) Other (50) (29) 72.4 Cash earnings 472 584 (19.2) Acquisition Amortisation (20) (47) (57.4) Reported NPAT 452 537 (15.8) Interim dividend 33 cps 33 cps –

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HY18 RESULTS

Highlights

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Business growing with strong top line growth
Digital transformation to drive improved customer experience and efficiencies is well progressed
Investment in the Business Improvement Program to improve processes and deliver a more resilient Suncorp model, on track to deliver sustainable benefits
Dynamic regulatory environment has driven short term costs and longer term growth opportunities
Outlook is for a significant uplift in performance in FY19 and FY20

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HY18 RESULTS

1. Business growing with strong top line growth

Australian Motor & Home GWP up 3.9%¹, unit growth up and market shares stabilised. Focus on Insurance claims processes has driven margin expansion

‒ Commercial has prioritised margin over growth in units

‒ Life business metrics lifted, 56% underlying NPAT improvement to $39m

Bank loan growth 8.7%, well above system, with strong margins and low loss rates, underpinned by improvements in customer experience and increased customer retention
‒ New Zealand Consumer GWP up 11%, driven by unit and premium growth, with NPAT up 81%

Result included the Business Improvement Program $50m, Marketplace $36m and Natural Hazards unfavourable $65m.

Excludes emergency services levy.

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HY18 RESULTS

2. Digital transformation well progressed

Innovation is improving the customer experience
Pilot of the Reward & Recognition program, 55,000 users
33% of the Group’s online claims are now ‘zero touch’
Adoption of digital platform continues to grow:
67 million digital interactions with our customers up by 19%, while self service transactions up by 20%
3.38m Connected Customers¹
10% reduction in customer complaints received by front line staff
82% customer retention maintained despite competition and price increases
Increase in consumer NPS to 7.6
A customer is considered to be connected if they have two or more needs met across the need categories of Home, Self, Mobility and Money, or if they hold four or more Suncorp products.

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HY18 RESULTS

3. Investment in Business Improvement Program (BIP) on track to deliver benefits

Investment in Business Improvement Program $50m YTD, focused on:
Improving customer experience
Driving efficiencies
Embedding a culture of continuous improvement
On track to deliver net benefits, with $124m gross benefit annualised run rate already locked in

	Cost	Benefit	Net¹
FY18	$97m	$107m	$10m
FY19	$79m	$274m	$195m
FY20	$62m	$391m	$329m

Pre tax benefits

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HY18 RESULTS

4. Dynamic regulatory environment has driven short term costs and longer term growth opportunities

CTP structural change providing opportunities to enter new markets and improve share and returns over the longer term
Banking has benefitted from opportunities created by regulatory focus on

increasing competition in the sector and relative margin benefit

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HY18 RESULTS

5. Outlook is for a significant uplift in performance in FY19 and FY20

In FY19:
Business Improvement Program to drive annualised operating expenses back to $2.7bn
Underlying ITR expected to return to at least 12%, with the Cost to Income ratio around 50%, and Net Interest Margin between 1.80-1.90%
Combined with the initial results from digital transformation, will produce a Cash ROE of 10%
Plan to increase dividend payout ratio in FY18, then sustainable range of 60-80%
Excess capital returned to shareholders

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HY18 RESULTS

Insurance (Australia)

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Gross Written Premium – Motor and Home (excluding FSL) ($m)

GWP driven by unit growth and premium increases
Working claims ratio improved reflecting benefits of operating efficiencies designed to offset inflation
Business Improvement Program investment has impacted margins but will improve competitive position
CTP reforms have short term impact on top line growth, long term benefits

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2,500
2,450 2,443
2,411
2,400
2,351
2,350
2,334
2,301
2,300
2,250
2,200
Dec 15 Jun 16 Dec 16 Jun 17 Dec 17
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Life optimisation program delivering improvement in pricing

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HY18 RESULTS

9.00%

7.00%

5.00%

1.00%

Banking & Wealth

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Growth in lending of 8.7% materially above system
Simplified origination processes and higher customer retention contributed to growth
Increased investment in the business in FY18 to drive margins and more competitive position in future periods

Retail lending portfolio ($m)

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48,000
47,190
47,000
46,000
45,098
45,000 44,564 44,343
44,000 43,391
43,000
42,000
41,000
40,000
39,000
Dec 15 Jun 16 Dec 16 Jun 17 Dec 17
Retail lending portfolio ($m) Gross impaired assets/Total portfolio (%)
Business lending portfolio ($m)
10,569
10,500
10,226
10,000 9,845
9,716
9,461
9,500
9,000
8,500
8,000
Dec 15 Jun 16 Dec 16 Jun 17 Dec 17
Business lending portfolio ($m) Gross impaired assets/Total portfolio (%)
0.06% 0.07% 0.08% 0.10%
0.06%
1.84% 1.57% 1.36%
1.60% 0.84%
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3.00%
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-1.00%
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10.00%
9.00%
8.00%
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7.00%
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6.00%
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5.00%
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4.00%
3.00%
2.00%
1.00%
0.00%
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HY18 RESULTS

New Zealand

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Strong result driven by premium increases, unit growth, strong claims management and expense control driving an ITR of 12.3%
Pricing changes implemented in prior periods have been effective in offsetting the impacts of increased reinsurance premiums and claims cost inflation
The rollout of SMART repair centres has been an effective response to cost inflation

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Gross Written Premium (NZ$m)
800
768
750
714
710
700 681
658
650
600
550
500
Dec 15 Jun 16 Dec 16 Jun 17 Dec 17
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HY18 RESULTS

Insurance (Australia) NPAT

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NPAT down 28.5% to $264 million
GWP flat with strong consumer growth offset by reform headwinds
Home and Motor loss ratios improved by 80bps and 290bps
Natural hazards $395 million (HY17: $319 million)
Reserve releases of $129 million (HY17: $149 million)
Underlying investment yield of 2.3%

	HY18 ($m)	HY17 ($m)	Change (%)
Gross written premium	4,004	4,031	(0.7)
Net earned premium Net incurred claims Operating expenses	3,643 (2,724) (773)	3,552 (2,374) (722)	2.6 14.7 7.1
Investment income - insurance funds	120	35	242.9
Insurance trading result	266	491	(45.8)
General Insurance profit after tax	234	358	(34.6)
Life Insurance profit after tax	30	11	172.7
Insurance (Australia) NPAT	264	369	(28.5)

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HY18 RESULTS

INSURANCE (AUSTRALIA)

Home and Motor

portfolio

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Positive momentum across Home and Motor
Motor positive premium and unit growth
Home positive premium growth offset by small unit losses

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3.4% 3.5%
Motor portfolio 2.6%
2.1% 2.2%
1.6% 2.0%
1.0% 1.2%
1.1% 0.9% 4.7%
-0.5%
}
-0.1% -0.1%
-0.7%
-3.0%
-3.0%
-5.3%
Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17
Units AWP growth
8.3%
4.8%
Home portfolio 3.0% 3.7%
2.2% 2.6% 2.3%
0.3%
-0.1% 0.7% [2.9%]
}
-0.8%
-1.1% -1.2%
-1.6% -1.6%
-2.4% -2.3%
-4.8%
Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17
Units AWP growth
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HY18 RESULTS

INSURANCE (AUSTRALIA)

Gross written premiums ($m)

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15
11
(32)
92
(53)
(27)
(33)
4,031
4,004
1H17 GWP Home & Commercial Workers' NSW NSW CTP CTP 1H17 1H18 GWP
(inc FSL) Motor growth growth comp & Other FSL unearned pricing SA CTP (inc FSL)
growth premium novated
refund premium
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HY18 RESULTS

INSURANCE (AUSTRALIA)

Claims

Home active claims volumes (‘000)

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Net incurred claims ($m) 20 20 30 50 76 154 2,724

2,374

HY17 net Risk free Natural Risk margin Claims incurred MTM hazards handling claims

Working Prior year HY18 net losses releases incurred claims

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70
60
50
40
30
20
10
0
Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
■ Working claims ■ Natural hazard claims
Motor active claims volumes (‘000)
200
160
120
80
40
-
Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
■ Working claims ■ Natural hazard claims
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Motor active claims volumes (‘000)

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HY18 RESULTS

INSURANCE (AUSTRALIA)

Investments

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Insurance funds $8.9 billion

Investment income of $120 million (HY17: $35 million)

$24 million MTM loss from an increase in risk-free rates

$30 million MTM gain from narrowing credit spreads $8 million MTM gain from outperformance of ILBs

2.3% annualised underlying return

Shareholders’ funds $2.9 billion

Investment income of $72 million (HY17: $35 million)

5.1% annualised return

Returns driven by improving equities and narrowing credit spreads

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■ Cash ■ ILBs ■ Corporate ■ Semi-Govt ■ Govt

■ Cash ■ Fixed interest (domestic) ■ Fixed interest (global) ■ Equities ■ Infrastructure ■ Alternatives

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HY18 RESULTS

INSURANCE (AUSTRALIA)

Life Insurance

NPAT

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Improving planned margins from repricing
Optimisation program to deliver improved profitability
Strategic review continuing

	HY18 ($m) HY17 ($m) Change (%) Planned profit margin release 12 9 33.3 Experience 2 (2) n/a Other and investments 25 18 38.9 Underlying profit after tax 39 25 56.0 Market adjustments (9) (14) (35.7) Life Insurance NPAT 30 11 172.7 In-force annual premium 808 801 0.9 Total new business 32 33 (3.0)

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HY18 RESULTS

INSURANCE (AUSTRALIA)

Banking & Wealth

NPAT

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Annualised lending growth of 8.7%
– NIM of 1.86% (HY17: 1.78%)
– Sound credit quality
– Stable funding profile
– Strong capital and balance sheet

	HY18 ($m) HY17 ($m) Change (%) Net interest income 598 558 7.2 Net non-interest income 34 39 (12.8) Operating expenses (347) (307) 13.0 Profit before impairment losses 285 290 (1.7) Impairment losses (13) (1) n/a Income tax (81) (86) (5.8) Banking profit after tax 191 203 (5.9) Wealth profit after tax 6 5 20.0 Banking & Wealth NPAT 197 208 (5.3)

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BANKING & WEALTH

HY18 RESULTS

New Zealand

NPAT

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GWP grew 7.6%, driven by all product classes
Lower natural hazard costs
New SMART centres improving claims costs

	HY18 (NZ$m) HY17 (NZ$m) Change (%) Gross written premium 768 714 7.6 Net earned premium 616 586 5.1 Net incurred claims (348) (372) (6.5) Operating expenses (199) (196) 1.5 Investment income – insurance funds 7 4 75.0 Insurance trading result 76 22 245.5 General Insurance profit after tax 50 19 163.2 Life Insurance profit after tax 17 18 (5.6) New Zealand NPAT 67 37 81.1

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HY18 RESULTS

NEW ZEALAND

Group operating expenses ($m)

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11 4
16
11
17
32
1,437
(14)
1,360
1H17 FSL Net BIP Regulatory Commissions Marketing DAC Other 1H18
operating expenses spend spend operating
expenses expenses
BIP expenses ($m)
1H18 Operating expenses Claims expenses Total
Expenses (38) (12) (50)
Benefits 6 16 22
Net expenses (32) 4 (28)
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HY18 RESULTS

GI underlying ITR

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1.1% (0.8%) (1.2%) (0.4%) (0.5%) (0.8%) 12.0% 10.2% 9.4% 2H17 UITR Natural Operating Investment CTP Reform Margin 1H18 UITR BIP costs 1H18 UITR hazards expenses returns improvement (Ex-BIP) allowance (Ex-BIP)*

Refer to Group operating expense walk

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HY18 RESULTS

Capital position ($m)

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CET1 excess of $381 million

Increase in GI PCA driven by both Insurance Risk Charge and Asset Risk Charge (ARC)

Reduction in GI Excess Technical Provisions due to normal seasonality

Bank growth in risk weighted assets offset by RMBS issuance Reduction in Life DAC

Removal of temporary Group target for expected ARC movements

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452 (393)
(62)
15
(43) 35
(37) 37
377 381
Excess 1H18 Dividends Increase GI Excess Bank Life DAC Group Net DTA & Excess
CET1 NPAT (Net of in GI PCA Technicial RWA Target Other CET1
(Jun-17) DRP) Provisions growth (Dec-17)
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HY18 RESULTS

Strategy Evolution

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2009 - 2011 Capital Restructure & Building Blocks

One pricing engine
• One claims system
• One general ledger
• One employment agreement
• One view of customer

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2011 - 2015 Simplification

Licence consolidation
• Legacy system consolidation
• Partnering

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2016 One Suncorp

Organisational re-design
Customer focus
Strengthen capabilities

2017+ Build resilience & drive growth

Business Improvement Program

“Owner’s mindset”
Digitisation
Channel optimisation
• Process improvement
• Supply chain re-design
• Smarter procurement
Marketplace Acceleration “Faster and sooner”
• Single digital customer experience
Brand refresh
• Journeys & Integrated offers
Third party partnerships
• Reward & recognition

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HY18 RESULTS

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Approach to delivering the strategy
Simultaneously improve customer experience and operational excellence
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•
Personalised and empowered experiences ‘Future-
ready’
•
Customer of the Group
OUR PATHWAY
•
Mobile capability
• Address pain points Faster
•
Cost conscious culture focused
on continuous improvement
Leaner
•
Simplify processes to improve
customer experience
•
Refocus activity to align with strategy
DRIVING OPERATIONAL EXCELLENCE
BUSINESS IMPROVEMENT PROGRAM (BIP)
EXPERIENCE
CUSTOMER
MARKETPLACE
IMPROVING
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HY18 RESULTS

Driving shareholder value

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Drivers of Growth

Deeper relationships for longer

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3x 6x 9x Value per
Customer
Tenure
1 2 3 4
Products per customer
Tenure
% of customers
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The majority of Australian personal customers hold one or two products.

Our strategy will deepen customer relationships with more products per customer which drives longer tenure and better outcomes for customers and shareholders.

Economic Model

Revenue sensitivity

+1 product for 25% of customers[1] = ~$97m NPAT pa +5% GI Australia Retention = ~$25m NPAT pa +Third party revenues

Products per customer and profit sensitivity

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+$39m +$78m +$116m +$155m NPAT
Growth
Current
2.6 2.7 2.8 2.9 3
Average products per customer
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Expenses sensitivity

a 5% reduction in opex costs = ~$95m NPAT pa
- a 5% reduction in claims = ~$195m NPAT pa

Value Creation

FY19 profit growth components²

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9%
43%
48%
Accelerated Net BIP BAU Growth
Investment Benefits
Benefits
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More revenue, lower claims costs, flat operating expenses

Australian personal customers; 2. FY18 base normalised for accelerated investment in Marketplace

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HY18 RESULTS

Engagement with our 9.6m Customers

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	HY18
Increasing Connected Customers¹
Proportion of Customers Holding Multiple Products Across Different Needs	35%
Consumer Net Promoter Score (NPS)	7.6
Driving customer engagement via digital channels
Number of Digital² Users	1,680,900
Proportion of Digital Claims	11.6%
Number of Digital Sales	359,100

A customer is considered to be connected if they have two or more needs met across the need categories of Home, Self, Mobility and Money, or if they hold four or more Suncorp products.
Digital users are unique visitors that have logged into our authenticated digital assets like internet banking, mobile banking app, insurance policy self-service web and mobile applications.

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HY18 RESULTS

Senior Leadership Team – Deep Industry Experience Across Functions

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—
P&L, Balance Sheet, Claims Enabling Functions
Steve Johnston Amanda Revis
Gary Dransfield David Carter
Finance & Legal People
Insurance Banking & Wealth
Functions and
Accountabilities
Paul Smeaton
New Zealand
Sarah Harland Fiona Thompson
Technology Risk
Distribution, Sales and Service
Lisa Harrison
Programs
Pip Marlow
Customer
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HY18 RESULTS

Regulatory Environment

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Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
Banking Executive Accountability Regime (BEAR)
New Industry Codes of Practice
QLD CTP Scheme
ACCC Northern Australia Insurance Inquiry
Productivity Commission Review into Competition in the Australian Financial System

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HY18 RESULTS

Outlook and FY19 Targets¹

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Key FY19 targets are:

  - Group top line growth of 3% to 5%

  - Expense base of $2.7bn

  - An underlying ITR of at least 12%, Bank Cost to Income (CTI) of around 50%, and Net Interest Margin (NIM) of 1.80% to 1.90%

  - Producing a Cash ROE of 10%

Reserve releases above 1.5% of net earned premium (NEP)
Maintaining a dividend payout ratio of 60% to 80% of cash earnings and returning surplus capital to shareholders
Subject to natural hazards at or below budget, movements in investment markets and unforeseen regulatory reform

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2929

HY18 RESULTS

Summary

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Business growing with strong top line growth
Digital transformation to drive improved customer experience and efficiencies is well progressed
Investment in the Business Improvement Program to improve processes and deliver a more resilient Suncorp model, on track to deliver sustainable benefits
Dynamic regulatory environment has driven short term costs and longer term growth opportunities
Outlook is for a significant uplift in performance in FY19 and FY20

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HY18 RESULTS

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HY18 Results

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Financial Results for the half year ended 31 December 2017

Click to edit Master title styleSuncorp Group

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Top 20 ASX listed company ASX: SUN | ADR: SNMCY

$18 billion market capitalisation at 31 December 2017[1]

$98 billion in group assets

13,400 employees in Australia and New Zealand[2]

Approximately 9.6 million customers Credit ratings A+ / A1 / A+[3]

1 Based on share price at 29 December 2017 of $13.86. 2 As at 30 June 2017 and reported in the 2016-17 Annual Review. 3 S&P Global Ratings, Moody’s Investors Service and Fitch Ratings. Suncorp Group ratings are on a stable outlook.

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HY18 RESULTS

Strategy

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HY18 RESULTS

Strategic priorities

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—
	Description	Focus for 2H18
		‒	Further embed customer culture
Elevate the	Creating a customer-centric culture, and providing solutions that meet their needs	‒ ‒	Scale the Reward and Recognition pilot program Enhance customer experience through process improvement, removal of pain points and provision of self-service options
customer		‒	Unify and lift the digital experience for customers
		‒	Launch the app to open up our brands, products, services and solutions to
	Building a connected network of brands,		customers
Create the Marketplace	partners, products and channels, to make it faster, simpler and easier for our customers	‒ ‒ ‒	Completion of the Brand refresh and roll out nation-wide Integrated offers and build out of home and car buying customer journeys Retain focus on third party partnerships
		‒	Focus on employee engagement and cultural behaviour through the One Suncorp
	Fostering a diverse, inclusive and engaged		model
Inspire our people	workplace, where our people can be their best	‒ ‒ ‒	Building the workplace and workforce of the future Exploring future opportunities for robotics and partnering Introducing a Climate Change Action Plan and Reconciliation Action Plan
		‒	Business Improvement Program on track, with work to continue on operational
Maintain momentum and grow	Targeting revenue growth opportunities, operational excellence and disciplined portfolio management	‒ ‒ ‒	excellence in claims, supply chain and smarter procurement Continue Life strategic review and optimisation Focused on targeted volume and premium growth, leveraging strong brands and scale to remain competitive Further progress Store and Contact Centre optimisation

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HY18 RESULTS

Driving shareholder value

—

Investment thesis

Shareholder value

Leading financial services brands in Australia and New Zealand

are: Suncorp’s key FY19 targets[1]

Group top-line growth of 3% to 5%
Strategy focused exclusively in Australia and New Zealand
Business Improvement Program driving operational excellence
Expense base of $2.7 billion

– An underlying ITR of at least 12%, Bank cost to income ratio of around 50% and net interest margin of 1.80% to 1.90% – Producing a Cash ROE of 10%

Reserve releases above 1.5% of net earned premium
Marketplace driving improved customer experience
Maintaining a dividend payout ratio of 60% to 80% of cash earnings and returning surplus capital to shareholders

1 Subject to natural hazards at or below budget, movements in investment markets and unforeseen regulatory reform

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HY18 RESULTS

FY18 Executive remuneration structure

—

Remuneration mix

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Target STI is 100% of fixed remuneration, with maximum STI being 150% of fixed remuneration.

Performance measures and delivery of variable pay

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Short-term incentive (STI) performance measures

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Long-term incentive (LTI) performance measures

Profit & Financials | Adjusted NPAT: 40%, Cash RoE: 20%
Relative TSR: 100%
Risk | Risk maturity measure: 5%, Risk management practices: 5%
People | Organisational culture: 10%
Customer | Marketplace deliverables: 10%, Customer measures: 10%

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HY18 RESULTS

Corporate Responsibility Framework

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HY18 RESULTS

Corporate Responsibility roadmap

—

Performance highlights

Focus for 2H18

	Progressed implementation of Corporate	‒	Stakeholder research on environmental, social and governance
	Responsibility Roadmap		(ESG) topics and refresh materiality assessment
		‒	Improve measurement and reporting of ESG performance
		‒	Publish 2016-17 Tax Transparency Report
	Published Responsible Investment Policy	‒	Launch Environmental Performance Plan
	Invested in social impact bond to reduce youth	‒	Launch Climate Change Action Plan to reduce carbon emissions,
	homelessness		build community resilience and support climate innovation
	Completed Cyclone Ready Streets program	‒	Launch refreshed Supplier Code of Practice and improve social, local
			and indigenous procurement
	Implemented 2017 Financial Inclusion Action Plan	‒	Relaunch Financial Inclusion Action Plan
	Completed independent review of processes and	‒	Improve processes for vulnerable customers
	services for vulnerable customers	‒	Fund community partners to provide accessible financial products,
	Developed financial inclusion training strategy		financial literacy and financial counselling
	Refreshed Community Investment Strategy	‒	Launch Reconciliation Action Plan
		‒	Relaunch Brighter Futures employee community giving and
			volunteering program

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HY18 RESULTS

Shareholder overview

—

Source: Orient Capital, 15 December 2017

SUN shareholders by type

SUN shareholders by geography

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1%
2% [1%]
4%
6%
26%
39% 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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HY18 RESULTS

Key financial highlights

—

Key financial highlights —
	HY18	HY17	Change (%)
Net profit after tax $m Cash earnings $m Profit after tax from functions $m	452 472 522	537 584 613	(15.8) (19.2) (14.8)
Insurance trading ratio % Underlying insurance trading ratio (adjusted for BIP costs) % Bank net interest margin (interest-earning assets) %	8.0 10.2 1.86	12.5 11.0 1.78
Cash return on average shareholders’ equity % Cash earnings per share – diluted cents Ordinary dividends per ordinary share cents Payout ratio – cash earnings %	6.8 36.11 33.0 90.1	8.5 44.61 33.0 72.5	(19.1) -
General Insurance Group PCA coverage times Bank Common Equity Tier 1 ratio %	1.66 9.01	1.78 9.20

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HY18 RESULTS

Result overview

—

Includes the impact of Victorian hail storm
Impacted by significant business investment
Reflects good top line growth
Payout ratio well above historical levels

	HY18 ($m) HY17 ($m) Change (%) Insurance (Australia) 264 369 (28.5) Banking & Wealth 197 208 (5.3) New Zealand 61 36 69.4 NPAT from functions 522 613 (14.8) Other (50) (29) 72.4 Cash earnings 472 584 (19.2) Acquisition Amortisation (20) (47) (57.4) Reported NPAT 452 537 (15.8) Interim dividend 33 cps 33 cps -

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HY18 RESULTS

Shareholder returns

—

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----- Start of picture text -----

Dividends (cps) Cash ROE
105
88
30
8.5%
12 73 8.3% 8.1% 8.2%
68
6.8%
38
40
40
38
35 38 30 33 33
FY14 FY15 FY16 FY17 FY18 1H16 2H16 1H17 2H17 1H18
■ Interim ■ Final ■ Special
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HY18 RESULTS

Group profit and operating expenses ($m)

—

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----- Start of picture text -----

615 613
592
Profit after tax
544
36 522
105 46
from functions
78 61
208
192
211
207 197
369 354
299
259 264
1H16 2H16 1H17 2H17 1H18
Insurance Banking & Wealth New Zealand
1,437
1,360 1,360 1,386
Operating expenses 1,309
198
186 203 197
186
390
368 353 353 377
806 770 804 812 849
1H16 2H16 1H17 2H17 1H18
Insurance Banking & Wealth New Zealand
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HY18 RESULTS

General Insurance ITR

General Insurance ITR ($m)

—

Successful delivery of BIP will assist in delivering 12% UITR

Continue to reprice for claims cost inflation and higher natural hazards

Improvement in margins will be evident from the second half of this year

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----- Start of picture text -----

34
59
(62) 67 (3)
431
397
336
Reported ITR Reserve Natural Investment Other Underlying BIP costs Underlying
releases hazards income ITR (inclusive ITR (adjusted
above above mismatch of BIP costs) for BIP costs)
expectation allowance
14.8% 14.6%
12.8% 12.5%
12.0%
11.0%
12%
10.1% 10.2%
11.0% 11.2%
10.3%
9.9%
9.4%
8.0%
1H15 2H15 1H16 2H16 1H17 2H17 1H18
Reported ITR Underlying ITR
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HY18 RESULTS

50 year history of major weather events ($m)

—

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----- Start of picture text -----

Christchurch earthquakes,
Brisbane floods, Cyclone Yasi,
Melbourne hailstorm
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Australia New Zealand Long run average Melbourne hailstorm
6,000
5,000
4,000
Brisbane flood,
Cyclone Tracy Newcastle Kaikoura
earthquake Melbourne & earthquake
3,000
Perth hailstorms,
Christchurch
Sydney
hailstorm earthquakes
2,000 Brisbane
hailstorm
Cyclone
Debbie
1,000
-
1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017
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Note: adjusted for inflation, population growth and market share

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HY18 RESULTS

Reinsurance program – natural hazards

—

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----- Start of picture text -----

$6.9b
$500m
Original cover Reinstatement Reinstatement Reinstatement
$250m
$200m Dropdown aggregate
Dropdown aggregate
$50m
Retention * Natural hazards protection
Event 1 2 3 4 5
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Relates to Australian events

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HY18 RESULTS

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 hazards protection
Retention
300m xs 475m
Event 1 2 3 4 5
Relates to Australian events
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HY18 RESULTS

General Insurance General Insurance reserve releases ($m)

—

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----- Start of picture text -----

210
5.3%
158
137
3.9%
131
125
3.4%
3.2%
3.0%
Long-term
assumption
1.5% of Group NEP
1H16 2H16 1H17 2H17 1H18
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HY18 RESULTS

Insurance investment assets

—

63% 21% 9% 3% 2% 2% Insurance (Australia) ■GI - insurance funds ■GI - shareholders’ funds ■Life shareholder assets New Zealand ■GI - insurance funds ■GI - shareholders’ funds ■Life shareholder assets		HY18 ($m)
	Insurance (Australia) investments
	General Insurance - insurance funds	8,906
	General Insurance - shareholders’ funds	2,910
	Life shareholder assets	1,276
	Insurance (Australia) total	13,092
	New Zealand investments
	General Insurance - insurance funds	380
	General Insurance - shareholders’ funds	328
	Life shareholder assets	222
	New Zealand total	930
	Total investments	14,022

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HY18 RESULTS

Group capital position

($m)

—

1 Capital ratios are expressed as coverage of the PCA for General Insurance and Life, and as a percentage of Risk Weighted Assets for the Bank
2 The Bank and General Insurance targets are shown as the midpoint of the target operating ranges
3 Group dividend net of expected shares issued under the Dividend Reinvestment Plan

						Total as at 30 June 2017 6,625 5,772 853 (476) 377 9,512 7,880 1,632 (476) 1,156
	As at 31 December 2017
	GI2	Bank2	Life	SGL, Corp Services & Consol	Total	Total as at 30 June 2017
CET1 CET1 target	2,948 2,655	2,930 2,846	535 331	193 -	6,606	6,625 5,772
					5,832
Excess to CET1 target (pre div)	293	84	204	193	774	853
Group dividend3					(393)	(476)
Group excess to CET1 target (ex div)					381	377
Common Equity Tier 1 ratio1	1.22x	9.01%	2.37x
Total capital Total target capital	4,013 3,620	4,381 3,985	670 391	248 (19)	9,312	9,512 7,880
					7,977
Excess to target (pre div)	393	396	279	267	1,335	1,632
Group dividend3 Group excess to target (ex div)					(393)	(476) 1,156
					942
Total capital ratio1	1.66x	13.47%	2.96x

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HY18 RESULTS

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General Insurance Bank
Group Risk Based Capital
7% [3%]
—
38%
24%
54%
66%
Group
8%
8%
6% Life Insurance Corporate
100%
9%
23%
17%
28%
58%
51%
■ Insurance risk ■ Market risk ■ Operational risk ■ Counterparty credit risk
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HY18 RESULTS

Group General Insurance capital

—

Total capital ($m)

Prescribed Capital Amount (PCA) ($m)

Capital ratios vs peers

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1.81x
4,013 1.66x 1.69x
1.66x PCA
555
510 2,413
CET1 Target
304
(1.0 – 1.2x
PCA) 883
250
1.22x 1.19x 1.24x
2,948 565
932
1H18 (521) SUN Peer 1 Peer 2
1H18
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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■ Common Equity Tier 1 ■ Additional Tier 1

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HY18 RESULTS

Group Life Insurance capital

—

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Total capital ($m) Prescribed Capital Amount
(PCA) ($m)
700
670
600
2.96x PCA
100
35 500
400
300
226
535
200 21
58
31
100
90
26
-
1H18
1H18
■ Insurance risk ■ Combined stress
■ Common Equity Tier 1
■ Asset risk scenario adjustment
■ Additional Tier 1
■ Operational risk ■ Other regulatory
■ Tier 2
requirements
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HY18 RESULTS

Bank capital

—

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Total capital ($m) Risk-weighted assets ($m) Capital ratios vs peers
14.83% 14.76% 14.82% 14.58%
4,381
32,530 13.47%
12.98%
901 13.47% RWA 3,441 70 12.37%
CET1 Target 550
(8.5% – 9.0% 9.01% RWA
RWA)
29,019
10.57% 10.42% 10.56% 10.06%
2,930 9.01% 9.39% 8.61%
1H18 1H18 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
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Source: Latest published company reports

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HY18 RESULTS

Credit ratings

—

S&P Moody’s Fitch Ratings Global Ratings Investors Service A+ A1 A+ Suncorp Stable Stable Stable AAAa3 AAMajor banks[1] Negative Stable Stable BBB+ A3 A- Regional banks[2] Stable Stable Stable

1 Major banks include Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac 2 Regional banks include Bank of Queensland and Bendigo and Adelaide Bank

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HY18 RESULTS

Shareholder metrics

—

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EPS (basic) EPS (diluted)
$0.41 $0.40 $0.42 $0.42 $0.41 $0.39 $0.41 $0.41
$0.35 $0.35
1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18
Cash EPS (basic) Cash EPS (diluted)
$0.43 $0.42 [$0.46 ] $0.44 $0.42 $0.41 [$0.45 ] $0.43
$0.37 $0.36
1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18
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EPS (basic)
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Cash EPS (basic)
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HY18 RESULTS

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Insurance (Australia)

—

Financial Results for the half year ended 31 December 2017

Insurance (Australia)

NPAT

—

NPAT down 28.5% to $264 million
GWP flat with strong consumer growth offset by reform headwinds
Home & Motor loss ratios improved by 80bps & 290bps
Natural hazards $395 million (HY17: $319 million)
Reserve releases of $129 million (HY17: $149 million)
Underlying investment yield of 2.3%

	HY18 ($m)	HY17 ($m)	Change (%)
Gross written premium	4,004	4,031	(0.7)
Net earned premium Net incurred claims Operating expenses	3,643 (2,724) (773)	3,552 (2,374) (722)	2.6 14.7 7.1
Investment income - insurance funds	120	35	242.9
Insurance trading result	266	491	(45.8)
General Insurance profit after tax	234	358	(34.6)
Life Insurance profit after tax	30	11	172.7
Insurance (Australia) NPAT	264	369	(28.5)

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HY18 RESULTS

INSURANCE (AUSTRALIA)

General Insurance

gross written premium

—

Motor premium increases of 3.5% with unit growth of 1.2%
Home premium increases of 3.7% with unit losses of 0.8%
Commercial underwriting discipline with some positive pricing momentum
CTP reforms have short term impact on top-line growth
Strong retention in workers’ compensation

	HY18 ($m)	HY17 ($m)	Change (%)
Motor	1,350	1,289	4.7
Home	1,093	1,062	2.9
Commercial Compulsory third party Workers’ compensation and other	768 609 120	757 722 105	1.5 (15.7) 14.3
Total	3,940	3,935	0.1
Fire Service Levies1	64	96	(33.3)
Total	4,004	4,031	(0.7)

1 Home $45 million, Commercial $16 million and Motor $3 million

Re-introduction of NSW FSL commenced late 2017

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HY18 RESULTS

INSURANCE (AUSTRALIA)

General Insurance General Insurance Gross gross written premium Written Premium excluding FSL

—

Total GWP of $3.9 million

Portfolio by product

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Portfolio by geography
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3% 2% [4%]
5%
15%
7% 27%
34%
20% 23%
32%
28%
■ Motor ■ CTP ■ Queensland ■ Western Australia
■ Home ■ Workers’ ■ New South Wales ■ South Australia
■ Commercial compensation & other ■ Victoria ■ Tasmania
■ Other
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HY18 RESULTS

INSURANCE (AUSTRALIA)

General Insurance gross written premium compulsory third party —

	HY18 ($m) HY17 ($m) Change (%) CTP GWP by geography Queensland 221 253 (12.6) New South Wales 352 366 (3.8) ACT 31 31 - South Australia 58 55 5.5 Total 662 705 (6.1) CTP GWP one-off movements New South Wales refunds (53) - n/a South Australia FY16 novated premium - 33 n/a Queensland FY16 NIIS claw-back - (16) n/a Total 609 722 (15.7)

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HY18 RESULTS

INSURANCE (AUSTRALIA)

General Insurance

key ratios

—

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Loss ratio Total operating expenses ratio
74.8% 74.8%
73.2%
72.4%
21.2%
20.8%
20.1% 20.3% 20.5%
66.8%
1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18
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Loss ratio
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Combined operating ratio Reported ITR
13.8%
96.0%
94.9% 12.0%
94.0%
92.9%
9.3%
8.7%
7.3%
87.1%
1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18
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HY18 RESULTS

INSURANCE (AUSTRALIA)

Natural hazard

events

—

Natural hazard costs $65 million above the allowance for the period
Natural hazard allowance of $660 million for the full year

	Date Event Net costs ($m) Oct 2017 Toowoomba Newcastle Hail 37 Nov 2017 Lismore Bundaberg Hail 27 Dec 2017 Southern Flooding 20 Dec 2017 Grafton Hail 15 Dec 2017 Victoria Hail 167 Total events over $10 million 266 Other natural hazards attritional claims 129 Total natural hazards 395 Less: allowance for natural hazards (330) Natural hazards costs above allowance 65

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HY18 RESULTS

INSURANCE (AUSTRALIA)

General Insurance

investment asset allocation

—

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----- Start of picture text -----

Insurance funds Fixed income credit quality Shareholders’ funds
$8.9 billion $2.9 billion
5%
2%
2%
7% 7%
17%
10%
27%
42%
12%
42%
22%
62%
24%
19%
■ Cash & short-term ■ Semi-Government ■ AAA ■ A ■ Cash & short-term ■ Equities
deposits bonds ■ AA ■ BBB deposits ■ Infrastructure
■ Inflation-linked bonds ■ Commonwealth ■ Australian interest- and property
■ Corporate bonds Government bonds bearing securities ■ Alternative
■ Global interest- investments
bearing securities
----- End of picture text -----*

The total notional exposure to inflation-linked securities, after accounting for both physical bonds and derivatives, in the insurance funds is $2.4 billion.

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HY18 RESULTS

INSURANCE (AUSTRALIA)

Personal lines market share

—

Source: Roy Morgan, November 2017

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NT
20% 11%
QLD
WA
32% 34%
15% 15%
SA
15% 15%
NSW
29% 26%
VIC
35% 30%
Motor Home
TAS
35% 35%
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HY18 RESULTS

INSURANCE (AUSTRALIA)

Personal lines market share

—

Source: Roy Morgan, November 2017 2016

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Total market
$17.8 billion
26% 28%
4%
2%
Home 4% Motor
$8.0 billion 7% $9.8 billion
29%
27% 27% 25%
29%
5%
4%
2%
2%
7% 2%
7%
27%
6%
30%
■ Suncorp ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Peer 4 ■ Peer 5 ■ Others
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HY18 RESULTS

INSURANCE (AUSTRALIA)

Commercial lines market share

—

Source: Latest Suncorp estimates

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----- Start of picture text -----

Total market
$12.7 billion
12%
30%
19%
6%
20%
13%
■ Suncorp ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Peer 4 ■ Others
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HY18 RESULTS

INSURANCE (AUSTRALIA)

Personal Injury market share

—

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----- Start of picture text -----

CTP * Workers’ compensation
$4.2 billion $1.5 billion
4%
17%
24%
20%
34%
4% 19%
23%
17%
19%
19%
----- End of picture text -----**

CTP source: Latest Suncorp estimates Includes QLD, NSW, ACT & SA schemes

** Workers’ compensation source: Latest Suncorp estimates Includes WA only

■ Suncorp ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Peer 4 ■ Others

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HY18 RESULTS

INSURANCE (AUSTRALIA)

CTP market share

—

Source: State scheme regulators * as at November 2017
** as at September 2017 *** as at August 2017

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----- Start of picture text -----

QLD
NSW
$1.0 billion 8%
$2.6 billion
23%
28%
17%
47%
28% 30% 19%
ACT * SA
$164 million $373 million
30%
45%
55%
70%
■ Suncorp ■ Peer 1 ■ Peer 2 ■ Peer 3 ■ Peer 4 ■ Rest of market
----- End of picture text -----**

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HY18 RESULTS

INSURANCE (AUSTRALIA)

Life Insurance

NPAT

—

Improving planned margins from repricing
Optimisation Program to deliver improved profitability
Strategic review continuing

	HY18 ($m)	HY17 ($m)	Change (%)
Planned profit margin release	12	9	33.3
Experience Other and investments	2 25	(2) 18	n/a 38.9
Underlying profit after tax	39	25	56.0
Market adjustments1	(9)	(14)	(35.7)
Life Insurance NPAT	30	11	172.7
In-force annual premium Total new business	808 32	801 33	0.9 (3.0)

1 Market adjustments consist of life risk policy discount rate changes and investment income experience

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HY18 RESULTS

INSURANCE (AUSTRALIA)

Life Insurance in-force premium

—

Total in-force premium of $808 million

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Premium by product Premium by geography Premium by channel
6% 8% 10% 8%
12%
34%
27%
48%
19%
82%
19%
27%
■ Direct via General Insurance brands
■ Term & TPD ■ Income protection ■ Queensland ■ Western Australia
■ Trauma ■ Group ■ New South Wales ■ Other ■ Advised ■ Group & other
■ Victoria & Tasmania
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HY18 RESULTS

INSURANCE (AUSTRALIA)

Life Insurance new business

—

Total new business of $32 million

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----- Start of picture text -----

New business by product New business by geography New business by channel
2%
4%
6%
17%
12%
28%
26%
54%
27%
81%
16%
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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HY18 RESULTS

INSURANCE (AUSTRALIA)

Life Insurance key metrics ($m) —

– Higher planned profit margins relative to the prior period reflect Optimisation Program benefits and revised lump sum claims assumptions

2H17 uplift due to allocated costs associated with the Optimisation Program

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Planned margins Experience
10
12 9
10
9
8
7 2
(2) (4)
1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18
In-force premium Operating expenses
813
808
806
92
801
798
82 83 82
76
1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18
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HY18 RESULTS

INSURANCE (AUSTRALIA)

Life Insurance

—

Life Insurance Optimisation

Australian Life Insurance Optimisation Program delivering improvement in claims outcomes and reduced costs
Review of strategic alternatives progressing

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Optimise efficiencies Streamline processes Improve customer Product and claims in claims and expense under new operating connectivity innovation management model

Life Insurance is a core component of the Suncorp financial services Marketplace, however, currently delivers sub-optimal ROE

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HY18 RESULTS

INSURANCE (AUSTRALIA)

Life Insurance Life Insurance market market share share

—

Individual risk

Source: NMG Consulting, September 2017 In-force portfolio includes IFA, Bank and Direct business

In-force

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$9.9 billion 14% 13% 14%
13%
12%
10%
9%
8%
7%
Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 SUN Peer 7 Others
22%
New business
15%
13%
$1.0 billion 12%
11%
9%
7%
7%
4%
Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 SUN Others
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HY18 RESULTS

INSURANCE (AUSTRALIA)

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Banking & Wealth

—

Financial Results for the half year ended 31 December 2017

Banking & Wealth

NPAT

—

Annualised lending growth of 8.7%
– NIM of 1.86% (HY17: 1.78%)
– Sound credit quality
– Stable funding profile
– Strong capital & balance sheet

	HY18 ($m) HY17 ($m) Change (%) Net interest income 598 558 7.2 Net non-interest income 34 39 (12.8) Operating expenses (347) (307) 13.0 Profit before impairment losses 285 290 (1.7) Impairment losses (13) (1) n/a Income tax (81) (86) (5.8) Banking profit after tax 191 203 (5.9) Wealth profit after tax 6 5 20.0 Banking & Wealth NPAT 197 208 (5.3)

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HY18 RESULTS

BANKING & WEALTH

Total lending portfolio

—

Lending assets by portfolio Lending assets by geography

Total assets of $57.8 billion

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<1%
8%
6% [4%]
11%
11%
52%
27%
81%
■ Housing ■ Agribusiness ■ Queensland ■ Western Australia
■ Commercial (SME) ■ Consumer ■ New South Wales ■ South Australia &
■ Victoria other
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HY18 RESULTS

BANKING & WEALTH

Banking key ratios

—

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Lending growth (annualised)
8.73%
5.43%
4.23%
3.58%
(0.34%)
1H16 2H16 1H17 2H17 1H18
Impairment losses to gross loans
and advances (annualised)
0.04% 0.04%
0.02% 0.02%
0.00%
1H16 2H16 1H17 2H17 1H18
HY18 RESULTS
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Net interest margin (interest-earning assets)

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----- Start of picture text -----

1.85% [1.86%] 1.87% 1.86%
1.78%
1H16 2H16 1H17 2H17 1H18
Return on Common Equity Tier 1
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13.1% [13.3%] [13.5%]
12.5%
11.9%
1H16 2H16 1H17 2H17 1H18
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Cost to income ratio

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53.9% [54.9%]
53.0%
52.0%
51.4%
1H16 2H16 1H17 2H17 1H18
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Deposit to loan ratio
66.1% [66.7%] [67.2%] [66.6%]
65.8%
1H16 2H16 1H17 2H17 1H18
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BANKING & WEALTH

Home lending portfolio

—

Total assets of $46.9 billion

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Portfolio by borrower type Portfolio by geography Portfolio by channel
3%
8%
29% 32%
11%
48%
68%
71%
30%
■ Owner occupied ■ Investor ■ Queensland ■ Western Australia ■ Direct ■ Intermediaries
■ New South Wales ■ South Australia &
■ Victoria other
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HY18 RESULTS

BANKING & WEALTH

Home lending origination by repayment type

—

Continued focus on high quality lending including serviceability, credit quality and loan-to-value ratios
Investor year-on-year lending growth of 7% within the supervisory measure of 10%
New business interest only loan repayment type of 25% for the half
excludes Lines of Credit (Asset Lines) Source: Latest peer financial reports

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New business
16%
26% 28% 27% 25%
origination by
repayment type
84%
74% 72% 73% 75%
1H16 2H16 1H17 2H17 1H18
Principal & Interest Interest only
Interest only
proportion of new
business home
39%
lending vs peers 34%
31%
27%
25% 25%
SUN Regional 1 Major 1 Major 2 Major 3 Major 4
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HY18 RESULTS

BANKING & WEALTH

Commercial (SME) portfolio

—

Total assets of $6.2 billion

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Portfolio by industry Portfolio by geography Portfolio by exposure size
3%
11% 12%
10%
5%
31%
7%
16%
20%
50%
21%
72%
14%
17%
11%
■ Property investment ■ Retail ■ Queensland ■ Other ■ <$5 million ■ $10 - $25 million
■ Hospitality & accommodation ■ Other ■ New South Wales ■ $5 - $10 million ■ $25 - $50 million
■ Construction & development ■ >$50 million
■ Services (including professional services)
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Manufacturing & mining
Includes a portion of small business loans, with limits below $1 million, that are not classified

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HY18 RESULTS

BANKING & WEALTH

Agribusiness portfolio

—

Total assets of $4.4 billion

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----- Start of picture text -----

Portfolio by industry
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Portfolio by geography
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Portfolio by exposure size

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4%
8%
16%
3%
24%
34%
3%
28%
50%
8%
64%
7%
22%
29%
■ Beef ■ Sugar ■ Queensland ■ Other ■ <$5 million ■ $10 - $25 million
■ Grain & mixed farming ■ Fruit ■ New South Wales ■ $5 - $10 million ■ $25 - $50 million
■ Sheep & mixed livestock ■ Other
■ Cotton
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HY18 RESULTS

BANKING & WEALTH

NIM movements

—

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0.01%
(0.01%) (0.01%)
1.87% 1.86%
2H17 NIM Lending mix / Funding mix / Earning on 1H18 NIM
spreads spreads invested capital
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HY18 RESULTS

BANKING & WEALTH

Credit quality impaired loans ($m)

—

Gross impaired loans reduced over the half due to improving credit quality in the Agribusiness and Commercial portfolios, an improvement in the Agriculture environment, the finalisation of longer running Banking recovery exposures and receipts from secured asset sales
Retail impaired assets increased over the half, partially due to more active management of long dated arrears
Gross impaired loans over $10 million have decreased consistently since 1H15 due to improved risk selection

Gross impaired loans by segment

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262
loans by segment 218
206
67
185
176 173
62
62
136
42 59
60
162 39
125
109 117 96 79 50
33 31 25 27 30 34 47
1H15 2H15 1H16 2H16 1H17 2H17 1H18
■ Retail ■ Agribusiness ■ Commercial (SME)
262
218
Gross impaired loans 206
96 185
by exposure 176 173
82 67 136
57
56 62
16
137
115 100 117 102 73 74
29 21 20 22 26 38 46
1H15 2H15 1H16 2H16 1H17 2H17 1H18
■ Exposure <$1m ■ Exposure >$1 to $10m ■ Exposure >$10m
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HY18 RESULTS

BANKING & WEALTH

0.21%

Credit quality

—

Relativity to peers

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Impairment losses
0.15%
to gross loans 0.14%
0.12%
0.11% [0.12%]
0.04%
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4
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Continued focus on credit quality and prudent risk management
Impairment losses 0.04% of gross loans and advances remains low and below the industry average

Source: Latest peer financial reports

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Net impaired 0.32%
assets to gross 0.28%
loans
0.21%
0.20%
0.17% 0.18%
0.12%
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4
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HY18 RESULTS

BANKING & WEALTH

Credit quality home lending

% gross home loans

—

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0.85%
0.74% 0.78% 0.79% 0.76%
0.69% 0.67%
0.10%
0.02%
1H15 2H15 1H16 2H16 1H17 2H17 1H18
Past due loans Impaired assets Loss rate
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HY18 RESULTS

BANKING & WEALTH

Loan-to-value ratio

(LVR)

—

Total home lending assets of $46.9 billion

Increase in home lending new business with >90% LVR due to support of genuine first home buyers through attractive 3 and 5 year fixed rates

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4%
12% 12% 9% 7% 5% 5%
19%
Home lending 22% 21%
22% 22%
assets by LVR 24% 22%
64% 66% 69% 71% 73% 74% 77%
1H15 2H15 1H16 2H16 1H17 2H17 1H18
■ 0.00 – 80.00% ■ 80.01% - 90.00% ■ 90.01%+
5% 3% 2% 1% 3% 3% 6%
10% 10% 13%
12% 18% 17%
Home lending new 16%
business by LVR
83% 87% 88% 86% 79% 80% 78%
1H15 2H15 1H16 2H16 1H17 2H17 1H18
■ 0.00 – 80.00% ■ 80.01% - 90.00% ■ 90.01%+
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HY18 RESULTS

BANKING & WEALTH

Credit quality business lending

—

Commercial (SME) portfolio

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6,160
6,000 5,593 5,353 5,203 5,356 5,462 5,729 15.00%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%
1H15 2H15 1H16 2H16 1H17 2H17 1H18
Commercial portfolio ($m) Gross impaired assets/Total portfolio (%)
1.20% 1.16% 0.81% 1.16% 1.08% 1.05% 0.63%
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Agribusiness portfolio

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5,000 12.00%
4,534 4,400 4,258 4,360 4,383 4,497 4,409
10.00%
4,000
8.00%
3,000
6.00%
2,000
4.00%
1,000
2.00%
- 0.00%
1H15 2H15 1H16 2H16 1H17 2H17 1H18
Agribusiness portfolio ($m) Gross impaired assets/Total portfolio (%)
3.58%
2.84% 2.56% 2.68%
2.19%
1.76%
1.13%
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HY18 RESULTS

BANKING & WEALTH

Collective provision ($m)

—

Collective provision reduced over the half primarily due to a continuing improvement in arrears for retail assets
Modelled collective provision has decreased consistently since 1H15 due to improved risk selection and enhanced models
Suncorp continuously reviews its management and operational overlays and is comfortable that the levels adopted are adequate

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129
126
119
12
15
108
102
27 96
94
25
28
25
25
117
111
92
83
74
71 69
1H15 2H15 1H16 2H16 1H17 2H17 1H18
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■ Modelled collective provision ■ Management overlays

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HY18 RESULTS

BANKING & WEALTH

Funding mix

—

Overall funding mix

Net stable funding ratio[1]

Stable funding composition

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$43.6bn
Wholesale $38.6bn
funding & Liquids &
21% 18% 16% 16% 17% 15% 13% Government & other liabilities other assets2
3
non-financial Other loans
20% 22% 23% 22% 21% 22% 24% corporate
106% 110% 113%
Retail &
SME Residential
59% 60% 61% 62% 62% 63% 63% deposits mortgages
<= 35%
Capital
1H15 2H15 1H16 2H16 1H17 2H17 1H18 1H17 2H17 1H18 Available Required
stable funding stable funding
■ Customer ■ Long term ■ Short term
deposits wholesale wholesale
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1 Historical NSFR figures disclosed are based on regulatory instructions available at the relevant reporting dates 2 Other assets includes derivatives and other assets

3 Other loans includes off balance sheet exposures and residential mortgages >35% risk weight

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HY18 RESULTS

BANKING & WEALTH

Long-term funding profile ($m)

—

Exercised ability to fund in a range of long-term wholesale markets during the half year, taking advantage of favourable market conditions
Executed $3.8 billion in term wholesale issuance over the half at a weighted average term of 3.5 years, including issuance under domestic and offshore senior unsecured, covered bond and RMBS programs
– Weighted average term remaining of the long-term wholesale portfolio is 2.8 years

Note: maturity profile shown on a quarterly basis

1,600
1,400
1,000 1,200
0 200 400 600 800	Q2 FY18	Q4 FY18	Q2 FY19	Q4 FY19	Q2 FY20	Q4 FY20	Q2 FY21	Q4 FY21	Q2 FY22	Q4 FY22	Q2 FY23	Q4 FY23	Q2 FY24	Q4 FY24	Q2 FY25	Q4 FY25	Q2 FY26	Q4 FY26	Q2 FY27
Domestic			senior		unsecured			Covered bond					Offshore		senior unsecured

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HY18 RESULTS

BANKING & WEALTH

Banking market share

—

Retail banking market share and Suncorp footprint

Banking increased its ATM footprint across Australia with its partnership with rediATM

Market share source: Roy Morgan, November 2017 Footprint as at December 2017

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NT 0.7%
40 QLD 9.1%
99 11 980
WA 0.7%
1 1 279
SA 0.4%
1 1 383
NSW & ACT 0.8%
37 6 1,009
VIC 0.6%
8 2 647
Store Business centre ATM TAS 0.5%
1 80
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HY18 RESULTS

BANKING & WEALTH

Housing lending growth vs system

—

Above system growth in the home lending portfolio was underpinned by improvements in internal processes, relationships with third parties and customer experience, as well as an increased focus on customer retention
Focus remains on appropriate risk selection to maintain a high-quality lending portfolio
Banking expects to deliver growth above system for the 2018 financial year

Source: APRA, December 2017

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26%
Housing lending 24%
market share
16%
15%
12%
3%
2% 2%
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4 Others
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1.75
Housing lending vs
1.49
system growth
1.18
1.04
0.95
0.67
0.24
0.17
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4 Others
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HY18 RESULTS

BANKING & WEALTH

Business lending growth vs system

—

Growth in Commercial (SME) driven by deliberate management action to achieve targeted growth within selected well-known market segments to balance total lending portfolio mix
Low loan balances in resources and inner-city apartment development sectors were maintained
Suncorp continues to balance growth with sound credit quality in Agribusiness, while understanding the inherent volatility of the industry

Source: APRA, December 2017

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Business lending 22% 23%
market share
19%
18%
14%
2%
1% 1%
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4 Others
Business lending vs 2.09
1.59
system growth 1.46 1.48
0.64
0.46
0.10
(0.99)
SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4 Others
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HY18 RESULTS

BANKING & WEALTH

Funds under

management and administration ($m)

—

Wealth continued to improve customer service capability through digital enhancements and self-service options for members and intermediaries
Focused on embedding changes, stabilising the new operating model, customer retention and targeting growth through the Marketplace

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322
(452)
175
7,511 7,556
Balance Inflows Outflows Investment Balance
Jun 17 income and Dec 17
other
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HY18 RESULTS

BANKING & WEALTH

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New Zealand

—

Financial Results for the half year ended 31 December 2017

New Zealand

NPAT

—

Strong result driven by premium increases, unit growth, strong claims management and expense control
GWP grew 7.6%, driven by all product classes
Lower natural hazard costs
New SMART centres improving claims costs

	HY18 (NZ$m) HY17 (NZ$m) Change (%) Gross written premium 768 714 7.6 Net earned premium 616 586 5.1 Net incurred claims (348) (372) (6.5) Operating expenses (199) (196) 1.5 Investment income - insurance funds 7 4 75.0 Insurance trading result 76 22 245.5 General Insurance profit after tax 50 19 163.2 Life Insurance profit after tax 17 18 (5.6) New Zealand NPAT 67 37 81.1

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HY18 RESULTS

NEW ZEALAND

General Insurance Gross Written Premium

—

Total GWP of NZ$768 million

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----- Start of picture text -----

Portfolio by product Portfolio by channel
1%
24% 25%
28%
42%
33%
47%
■ Motor ■ Commercial ■ Direct ■ Strategic partners &
■ Home ■ Other ■ Brokers financial intermediaries
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HY18 RESULTS

NEW ZEALAND

General Insurance key ratios

—

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----- Start of picture text -----

Loss ratio Total operating expenses ratio
63.5% 62.9%
56.5%
53.9% 53.6% 33.4%
33.1%
32.6%
32.3% 32.3%
1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18
Combined operating ratio Reported ITR
96.9% 96.0%
14.8% [16.5%]
88.8%
12.3%
86.5% 85.9%
3.8% 5.7%
1H16 2H16 1H17 2H17 1H18
1H16 2H16 1H17 2H17 1H18
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HY18 RESULTS

NEW ZEALAND

100100

Natural hazard

events

—

Events with a gross cost over $2 million, shown net of recoveries from reinsurance.

	Date Event Net costs (NZ$m) Jul 17 Winter Storm 3 Jul 17 Major Storm 7 Total events over $2 million 10 Other natural hazards attritional claims 9 Total natural hazards 19* Less: allowance for natural hazards (17) Natural hazards costs above allowance 2

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HY18 RESULTS

NEW ZEALAND

101

General Insurance investment asset allocation

—

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Insurance funds Fixed income credit quality Shareholders’ funds
NZ$418 million NZ$360 million
1% 2%
8% 9% 9%
24%
34%
41%
50%
57%
65%
■ Cash & short-term ■ Local government ■ AAA ■ A ■ Cash & short-term deposits
deposits bonds ■ AA ■ BBB ■ Interest-bearing securities
■ Corporate bonds ■ Government bonds ■ Equities
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HY18 RESULTS

NEW ZEALAND

102

General Insurance

market share

—

Total market NZ$5.7 billion

Source: Insurance Council New Zealand, September 2017

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----- Start of picture text -----

19% 19%
5%
6%
7%
44%
■Vero [■][AAI ] [■][Peer 1] ■Peer 2 ■Peer 3 ■Others
(Suncorp NZ) (Suncorp NZ)
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HY18 RESULTS

NEW ZEALAND

103

Life Insurance

NPAT

—

– Strong in-force premium growth of 5.0%, driven by new business and policy retention

	HY18 (NZ$m) HY17 (NZ$m) Change (%) Planned profit margin 16 15 6.7 Experience (5) 5 n/a Other 3 4 (25.0) Underlying profit after tax 14 24 (41.7) Market adjustments 3 (6) n/a Life Insurance NPAT 17 18 (5.6) In-force annual premium 252 240 5.0

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HY18 RESULTS

NEW ZEALAND

104

Life Insurance in-force premium

—

Total in-force premium of NZ$252 million

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Premium by product Premium by channel
3% 3%
6%
16%
19%
52%
20%
81%
■ Term & TPD ■ Other ■ Direct ■ Group & other
■ Trauma ■ Group ■ Advised
■ Income protection
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HY18 RESULTS

NEW ZEALAND

105

Life Insurance key metrics (NZ$m)

—

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----- Start of picture text -----

Planned margins Experience
16 16 15 16 16
5
3
1
(4) (5)
1H16 2H16 1H17 2H17 1H18
1H16 2H16 1H17 2H17 1H18
In-force premium Operating expenses
252
245
240
229
222
18 16 17 17 16
1H16 2H16 1H17 2H17 1H18 1H16 2H16 1H17 2H17 1H18
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HY18 RESULTS

NEW ZEALAND

106106

Life Insurance market share

—

Individual risk

Source: Melville Jessup Weaver, September 2017 Note: excludes Group policies

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----- Start of picture text -----

27%
In-force
20%
NZ$2.2 billion
13%
11% 11%
10%
8%
Peer 1 Peer 2 Peer 3 SUN Peer 4 Peer 5 Others
25%
New business 23%
NZ$62 million
17% 17%
8%
7%
3%
Peer 1 Peer 2 Peer 3 Peer 4 SUN Peer 5 Others
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HY18 RESULTS

NEW ZEALAND

107

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Economy

—

Financial Results for the half year ended 31 December 2017

Economic

fundamentals

—

Supportive fundamentals for both Australia and Queensland
Australian economic growth has proven resilient while the labour market has strengthened
Queensland is seeing higher interstate immigration along with improved business investment

	Australia	Queensland	Data
Population growth	1.6%	1.6%	Jun-17, annual
Economic growth	2.8%	1.8%	AUS: Sep-17 annual QLD: 2016-16 annual
Unemployment rate	5.4%	5.8%	Nov-17, trend
Inflation	1.8%	1.5%	Sep-17, annual
Budget position	$24bn deficit (1.3% of GDP)	$2.4bn deficit (0.7% of GSP)	2017-18 estimate
Credit rating (S&P / Moody’s)	(AAA neg outlook / Aaa stable)	(AA+ stable / Aa1 stable)	Jan-18

“The most likely path for Australia doesn’t see a triggering of those new risks (China and/or housing). Rather, it sees both our national income and our national production growth gradually return to a steadier path”

Source: Deloitte Access Economics, Business Outlook, September 2017

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HY18 RESULTS

ECONOMY

109

Growth outlook

—

Australia’s economy continues to successfully adapt
GDP growth has lifted, both actual and forecast
Queensland is benefitting from improved construction, rising LNG production, affordable housing, and tourism / student inflows

“The underlying pulse of the State’s (QLD’s) economy might be better than indicated by the State’s current output growth”

Source: Deloitte Access Economics, September 2017

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GDP outlook State prospects
4.0
Annual % change
3.5
3.0
2.5 3.5%
3.4%
2.0
2.1%
1.5
2.1%
1.0
3.1%
0.5
ACT: 2.2%
0.0
FY12 FY13 FY14 FY15 FY16 FY17 FY18e FY19f FY20f 3.4%
2.1%
Gross State Product annual average forecast FY18-FY20
Source: ABS, Deloitte Access Economics, September 2017 Source: Deloitte Access Economics, September 2017
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HY18 RESULTS

ECONOMY

110

Business investment

—

As homebuilding slows, other sources of demand are supporting activity
Net exports are forecast to recover, supported by stronger global growth
Importantly, non-mining business investment is rising while mining investment has flattened out, after falling for five years

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Sources of GDP
Net Exports
growth
Dwelling Investment
Government Investment
Government Consumption
Business Investment
Inventories
Household Consumption
TOTAL (Annual GDP Growth)
-0.5 0.5 1.5 2.5
Percentage contribution to annual GDP growth (trend) as at September 2017
Source: ABS
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45
$bn
40
35 Total
30
25
Non-Mining
20
15
Mining
10
Source: Suncorp, ABS
5
Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 Sep 17
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Trends in business investment

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HY18 RESULTS

ECONOMY

111

Monetary policy remains highly supportive

—

With the cash rate well below ‘neutral’, monetary policy remains expansionary
The labour market has been a key beneficiary, with strong job growth and unemployment at a four year low
The RBA is expected to begin gradually lifting rates from mid2018

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----- Start of picture text -----

8
Inflation and Source: ABS, RBA, Bloomberg
%
interest rates 7
6
5
4
RBA ‘Neutral’ Cash Rate Estimate
3
Inflation
Target Range 2
1
Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18
Std Var Mortgage Rate RBA Cash Rate Headline Inflation Rate
80 6.4
Change Per Month ('000)
6.2
Labour 60
market 6
40
5.8
20
5.6
0
5.4
-20
5.2
Source: Bloomberg
-40 5
Nov 12 Nov 13 Nov 14 Nov 15 Nov 16 Nov 17
Employment Unemployment Rate
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HY18 RESULTS

ECONOMY

112

Housing has clearly

slowed

—

Australian housing has slowed amid increased supply, reduced offshore demand and higher rates for certain mortgage categories
To date, the indicators are more consistent with softer activity than a sharp downturn
Our analysis of supply suggests that while there may be pockets of oversupply, it is not a nationwide issue due to the underbuilding before 2014
Suncorp only lends to experienced developers, with the majority of individual development finance loans under $20 million

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----- Start of picture text -----

1,100
House prices Median house price ($ '000)
1,000
900
800
700
600
500
400
Source: Bloomberg, ABS, RP Data
300
Dec 07 Dec 09 Dec 11 Dec 13 Dec 15 Dec 17
Sydney Melbourne Brisbane
12
Source: ABS, Bloomberg, Suncorp
Dwelling supply 11 Annual approvals per '000
and demand of population (RHS)
Overbuilding
10
9 Long Term Average
8
7
Underbuilding
6
Sep 87 Sep 92 Sep 97 Sep 02 Sep 07 Sep 12 Sep 17
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HY18 RESULTS

ECONOMY

113

Opportunities and risks

—

Stronger global activity is boosting commodity prices and Australia’s resource export outlook
Rising fuel prices will lift inflation yet potentially impact household budgets
Elevated household debt represents a risk. However, mortgage arrears are low and the RBA has observed that “most indicators of household financial stress remain fairly benign” (October 2017)

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----- Start of picture text -----

Commodity 170
$US price
prices 150
130
Thermal Coal
110
90
Iron Ore
70
50
WTI Oil
Source: Bloomberg
30
Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18
200 14
Household debt % %
13
& debt servicing 190
Interest payments to disposable income (RHS) 12
180
11
10
170
9
160
Debt to disposable income (LHS) 8
Source: RBA
150 7
Sep 07 Sep 09 Sep 11 Sep 13 Sep 15 Sep 17
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HY18 RESULTS

ECONOMY

114

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Glossary

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Financial Results for the half year ended 31 December 2017

Glossary

—

Acquisition expense ratio – general insurance	Acquisition expenses expressed as a percentage of net earned premium
Acquisition expense ratio – life insurance	Acquisition expenses, including upfront commissions, as a percentage of new business
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 the Life Insurance underlying profit and recorded as annuity market adjustments
APRA	Australian Prudential Regulation Authority
Banking & Wealth function	Suncorp's Banking & Wealth business provides banking and wealth solutions to personal, small to medium enterprise and agribusiness customers
Basis points (bps)	A ‘basis point’ is 1/100th of a percentage point
Business Improvement Program (BIP)	A three-year, company-wide program focusing on five streams of work including digitising of customer experiences, sales and service channel optimisation, end-to-end process improvement, claims supply chain re-design and smarter procurement and streamlining the business
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

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HY18 RESULTS

GLOSSARY

116

Glossary

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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
Cash return on average shareholders' equity pre-goodwill	Cash earnings divided by average equity attributable to owners of the Company less goodwill. Averages are based on monthly balances over the period. The ratio is annualised for half years
Claims Handling Expenses (CHE)	Costs incurred in the investigation, assessment and settlement of a claim
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
Commercial Insurance	Commercial products consist of commercial motor insurance, commercial property insurance, marine insurance, industrial special risk insurance, and public liability and professional indemnity insurance
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 customers	A customer is considered to be connected if they have two or more needs met across the need categories of Home, Self, Mobility and Money, or if they hold four or more Suncorp products
Consumer Insurance	Consumer Insurance products consist of home and contents insurance, motor insurance, boat insurance, and travel insurance
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

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HY18 RESULTS

GLOSSARY

117

Glossary

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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
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) – Insurance (Australia)	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
Fire service levies (FSL) – New Zealand	The expense levied on premiums for insurance policies with a fire risk component, which is recoverable from insurance companies by Fire and Emergency New Zealand. Fire service levies were established to cover corresponding fire brigade charges
Funds under management and administration	Funds where the Wealth business, in Australia and New Zealand, receives a fee for the administration and management of an asset portfolio
General insurance businesses	General insurance businesses include Insurance (Australia)'s general insurance business and New Zealand's general insurance business. This term is used when describing Suncorp's capital position and statement of financial position which are structured around the Group's legal entity structure rather than business functions structure

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HY18 RESULTS

GLOSSARY

118

Glossary

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Gross earned premium	The total premium on insurance earned by an insurer during a specified period on premiums underwritten in the current and previous underwriting years
Gross non-performing loans	Gross impaired assets plus past due loans
Gross written premium	The total premium on insurance underwritten by an insurer during a specified period, before deduction of reinsurance premium
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 (Australia) function	Suncorp's Insurance (Australia) business provides consumer, commercial, personal injury and life insurance products to the Australian market. Consumer insurance products include home and contents insurance, motor insurance and travel insurance. Commercial insurance products include commercial motor insurance, commercial property insurance, industrial special risk insurance, public liability and professional indemnity insurance. Personal injury insurance products includes CTP insurance and workers' compensation insurance
Insurance funds	Insurance funds explicitly back insurance liabilities. They are designed to match the insurance liabilities and are managed separately from shareholders' funds
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 businesses	Life insurance businesses include Insurance (Australia)'s life insurance business, the wealth business within Banking & Wealth and New Zealand's life insurance business. This term is used when describing Suncorp's capital position, statement of financial position and embedded value which are structured around the Group's legal entity structure rather than business functions structure
Life insurance policyholders' interests	Amounts due to an entity or person who owns a life insurance policy. This need not be the insured. This is distinct from shareholders’ interests

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HY18 RESULTS

GLOSSARY

119

Glossary

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Life planned profit margin release	It includes the unwind of policy liabilities which refers to the profit impact of changes in the value of policy liabilities due to the passing of time
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
Liquidity Coverage Ratio (LCR)	An APRA requirement to maintain a sufficient level of qualifying high-quality liquid assets to meet liquidity needs under an APRA-defined significant stress event lasting for 30 calendar days. Absent a situation of financial stress, the LCR must not be less than 100%. The LCR is calculated as the ratio of qualifying high-quality liquid assets relative to net cash outflows in a modelled APRA-defined 30-day stress scenario
Loan-to-value ratio (LVR)	Ratio of a loan to the value of the asset purchased
Long-tail	Classes of insurance business involving coverage for risks where notice of a claim may not be received for many years and claims may be outstanding for more than one year before they are finally quantifiable and settled by the insurer
Loss ratio	Net claims incurred expressed as a percentage of net earned premium. Net claims incurred consists of claims paid during the period increased (or decreased) by the increase (decrease) in outstanding claims liabilities
Maintenance (or renewal) expense ratio	Expenses related to servicing in-force life insurance policies, including renewal or trail commissions, policy management and claim costs, expressed as a percentage of in-force premiums

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HY18 RESULTS

GLOSSARY

120

Glossary

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Marketplace	Suncorp's Marketplace is a connected network of brands, solutions, partners, and channels to empower customers to improve their financial wellbeing and deliver outstanding customer experiences and deepen Suncorp’s relationships with its customers. This involves building an ecosystem of partners that will provide a suite of relevant products and offers that meet the needs of the customer in the key moments that matter in their lives
Maximum Event Retention	This is an estimate of the largest accumulated property loss (from a single event) to which Suncorp will be exposed (taking into account the likelihood of this event is up to one in 200 years), after netting off any potential reinsurance recoveries
Net earned premium (NEP)	Net written premium adjusted by the change in net unearned premium for a year
Net incurred claims – Insurance (Australia)	The amount of claims incurred during an accounting period after deducting reinsurance recoveries
Net incurred claims - New Zealand	The amount of claims incurred during an accounting period after deducting reinsurance recoveries and non-reinsurance recoveries
Net interest margin (NIM)	Net interest income divided by average interest earning assets. NIM is the percentage difference between revenue earned on interest bearing assets (loans) minus the cost of interest bearing liabilities (funding)
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 (NPAT)	Net profit after tax attributable to owners of Suncorp derived in accordance with Australian Accounting Standards
Net Stable Funding Ratio (NSFR)	The NSFR measures the amount of available stable funding (ASF) relative to the amount of required stable funding (RSF). The amount of ASF is the amount of capital and liabilities that are expected to be a reliable source of funds over a 1-year time horizon. The amount of RSF is based on the liquidity characteristics and residual maturity of assets and off-balance sheet activities. The requirement to maintain an NSFR of at least 100% was introduced on 1 January 2018

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HY18 RESULTS

GLOSSARY

121

Glossary

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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
New Zealand function	Suncorp's New Zealand business distributes consumer, commercial and life insurance products through intermediaries and corporate partners as well as directly to customers via joint ventures
Operating functions	Suncorp has three operating functions - Insurance (Australia), Banking & Wealth and New Zealand. The operating functions are responsible for product design, manufacturing, claims management and end-to-end responsibility for the statutory entities within Suncorp Group
Other underwriting expenses ratio	Other underwriting expenses expressed as a percentage of net earned premium
Outstanding claims provision	The amount of provision established for claims and related claims expenses that have occurred but have not been paid
Past due loans	Loans outstanding for more than 90 days
Payout ratio – cash earnings	Ordinary shares (net of treasury shares) at the end of the period multiplied by the ordinary dividend per share for the period divided by cash earnings
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
Prescribed capital amount (PCA)	This comprises the sum of the capital charges for asset risk, asset concentration risk, insurance risk, insurance concentration risk, operational risk, combined stress scenario and aggregation benefit as required by APRA
Profit after tax from functions	The net profit after tax for the Insurance (Australia), Banking & Wealth and New Zealand functions

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HY18 RESULTS

GLOSSARY

122

Glossary

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Reinsurance	A form of insurance for insurance companies where, in exchange for an agreed premium, the reinsurer agrees to pay all or a share of certain claims incurred by the insurance company. Suncorp's reinsurance arrangements currently include a main catastrophe program, a 30 percent, multi-year, proportional quota share arrangement to reduce geographic concentration to the Queensland home insurance market and a natural hazards aggregate protection cover
Reserve releases	Reserve releases occur when provisions made to cover insurance claims made against underwritten policies are assessed as higher than long- run trends in actual experience
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
Shareholders' funds	Shareholders' funds are part of the investment portfolio and are managed separately from insurance funds
Short-tail	Classes of insurance business involving coverage for risks where claims are usually known and settled within 12 months
Top-line growth	Top-line growth is derived from a weighted-average calculation of underlying year-on-year growth in Suncorp Group’s key business segments. Top-line growth percentage is calculated as growth in short-tail and long-tail insurance gross written premium (excluding impacts of one-off items from time to time that can distort the underlying trend, such as South Australia CTP in 1H17 in recognition of the impact of acquiring that book in 1H18) (65% weighting), growth in retail and business lending assets (weighting 25%) and growth in life insurance in-force premium (10% weighting)

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HY18 RESULTS

GLOSSARY

123

Glossary

—

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 – general insurance	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
Ultimate net loss (UNL) – New Zealand	Financial obligation when an insured event occurs, net of the catastrophe treaty
Underlying Insurance Trading Ratio (underlying ITR)	The insurance trading ratio is adjusted for reported prior year reserve releases and natural hazards claims costs above/below long-run expectations, investment income mismatch and any abnormal expenses

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GLOSSARY

124

Important disclaimer

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This report contains general information which is current as at 15 February 2018. 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 factors should be considered, with or without professional advice, when deciding if an investment is appropriate.

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

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

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

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125

HY18 RESULTS

To see more, go online suncorpgroup.com.au

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Registered office

Level 28, 266 George Street Brisbane, Qld Australia 4000 +61 7 3362 1222

Investor relations contacts

Kelly Hibbins Ph: 02 8121 9208 Andrew Dempster Ph: 02 8121 9206 Susan Troy Ph: 07 3135 3729 Sophie Bastin-Byrne Ph: 07 3135 4700 Isabella Sinclair Ph: 02 8121 1206 Gabrielle Gulliver Ph: 02 8121 1225

Connect

suncorpgroup.com.au @SuncorpGroup

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AI assistant

SUNCORP GROUP LIMITED — Interim / Quarterly Report 2018

65879_rns_2018-02-14_d9e7ffaa-229a-4141-9eac-99b23285fec3.pdf

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Create a better today

Result Overview

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Highlights

2. Digital transformation well progressed

3. Investment in Business Improvement Program (BIP) on track to deliver benefits

4. Dynamic regulatory environment has driven short term costs and longer term growth opportunities

5. Outlook is for a significant uplift in performance in FY19 and FY20

Insurance (Australia)

—

Banking & Wealth

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Retail lending portfolio ($m)

New Zealand

—

Insurance (Australia) NPAT

Home and Motor

portfolio

Gross written premiums ($m)

Claims

Home active claims volumes (‘000)

Investments

—

Insurance funds $8.9 billion

Shareholders’ funds $2.9 billion

Life Insurance

NPAT

Banking & Wealth

NPAT

—

New Zealand

NPAT

Group operating expenses ($m)

GI underlying ITR

Capital position ($m)

Strategy Evolution

2009 - 2011 Capital Restructure & Building Blocks

2011 - 2015 Simplification

2017+ Build resilience & drive growth

Driving shareholder value

Drivers of Growth

Deeper relationships for longer

Economic Model

Revenue sensitivity

Products per customer and profit sensitivity

Expenses sensitivity

Value Creation

FY19 profit growth components²

Engagement with our 9.6m Customers

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Senior Leadership Team – Deep Industry Experience Across Functions

Regulatory Environment

Outlook and FY19 Targets¹

Summary

HY18 Results

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Click to edit Master title styleSuncorp Group

Strategy

Strategic priorities

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Driving shareholder value

Investment thesis

Shareholder value

FY18 Executive remuneration structure

Remuneration mix

Performance measures and delivery of variable pay

Short-term incentive (STI) performance measures

Long-term incentive (LTI) performance measures

Corporate Responsibility Framework

Corporate Responsibility roadmap

Performance highlights

Focus for 2H18

Shareholder overview

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SUN shareholders by type

SUN shareholders by geography

SUNCORP GROUP LIMITED Interim / Quarterly Report 2018