Suncorp Group Limited...Suncorp Group Limited Financial results for the year ended 30 June 2013 21...

Suncorp Group Limited Financial results for the year ended 30 June 2013

21 August 2013

Suncorp Group Limited

21 August 2013


Patrick Snowball Results and operational highlights

John Nesbitt

CFO report • Core business lines

• Non-core Bank resolution

• Group capital

Patrick Snowball Suncorp’s strategic assets

Suncorp Leadership Team Q & A

Agenda Suncorp results presentation

2

Introduction Patrick Snowball

Chief Executive Officer, Suncorp Group Limited

21 August 2013


3

FY13 result overview

4

21 August 2013


FY13 FY12 %∆

General Insurance NPAT 883 493 79.1

Core Bank NPAT 289 289 -

Suncorp Life NPAT 60 251 (76.1)

Core Business lines NPAT 1,232 1,033 19.3

Non-core Bank (632) (263) n/a

Other profit and acquisition amortisation (109) (46) n/a

Net Profit After Tax 491 724 (32.2)

Key commitments

5

21 August 2013


One Company. Many Brands

Group ROE of at least 10% in the 2015 financial year

Simplification benefits of $225 million in the 2015 financial year

Group growth of 7% to 9% per annum over the next two years

‘Meet or beat’ an underlying ITR of 12% through the cycle

60% to 80% dividend payout ratio

Continue to return surplus capital

1

2

3

4

5

6

39,611 47,463

FY11 FY12 FY13

Core Bank lending assets 9.5%

Growth across all three business lines ($m)

Top line growth

7,280

8,589

FY11 FY12 FY13

General Insurance GWP

669

785

FY11 FY12 FY13

Suncorp Life individual in-force business 8.7%

21 August 2013


8.0%

15 20 25 20 20

30 15

20

FY11 FY12 FY13

Shareholder returns (cps) Interim dividend Final dividend Special dividend

36%

6

8.0%

10.0%

10.5%

11.2%

11.1%

13.1% 13.4%

13.6%

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13

General Insurance Underlying ITR

Meet or beat 12%

Above target levels Healthy margins

44

47 47 48

47 52 49

50

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13

21 August 2013


7

Target range 1.75% to 1.85%

1.76% 1.84%

1.83%

1.97% 1.92%

1.90%

1.83% 1.89%

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13

Core Bank Net Interest Margin

Core business profitability

557 392

493

883

268

259 289

289 222

149

251

60

FY10 FY11 FY12 FY13

General Insurance Core Bank Suncorp Life

21 August 2013


Improved earnings (Profit after tax $m)

8

19%

1,047

800

1,033

1,232

Financial Results John Nesbitt

Chief Financial Officer, Suncorp Group Limited

21 August 2013


9

Underlying ITR of 13.5% General Insurance

$m FY13 %∆

General Insurance profit after tax 883 79.1

21 August 2013


• GWP up 8.0%

• GWP up 8.5% after adjusting for FSL

• Reported ITR of 13.1%

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

• Natural hazard claims $75 million above allowance

• Reserve releases of $105 million broadly in line with long run expectations of 1.5% of NEP 10

GWP up 8.5% excluding FSL Gross Written Premium

21 August 2013


11

Product FY13 ($m)

%∆ Factors

Motor 2,764 4.7 A combination of unit and premium growth

Home 2,498 10.4 Premium increases to recover increased reinsurance

Commercial 1,987 8.4 Growth across all major product lines

CTP 978 8.5 Strong growth in NSW

Workers’ comp & other 362 13.5 Price increases, wage growth and improved retention

Total 8,589 8.0

Australia 7,645 7.3

New Zealand 944 13.6 10.7% in NZ$ terms

8.0%

10.0% 10.5%

11.2%

11.1%

13.1% 13.4%

13.6%

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13

Underlying ITR

21 August 2013


FY12 12.1%

Meet or beat 12% underlying ITR

12

FY13 13.5%

FY11 10.8%

FY10 9.0%

Sustainable growth Core Bank overview

$m FY13 %∆

Core Bank profit after tax 289 Flat

21 August 2013


• Home lending up 9.4% and Agribusiness up 11.8%

• Second half NIM was 1.89%, above target range of 1.75% to 1.85%

• Retail deposit to core lending 66.5% in target range of 60% to 70%

• Issued Senior Debt of $750 million and RMBS of $1.2 billion

• Impairment losses stable at $64 million, within operating range

13

Non-performing loans ($m)

14

21 August 2013


Core Bank credit quality

148 141 220 241 235 216 221 223

93 69

65 57 68 82 96 72

230 231

269 236 207 183 240 231

66

1.19 1.08

1.32 1.23

1.15 1.05

1.19 1.25 1.23

1.15 1.05

1.11

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

0

100

200

300

400

500

600

700

800

900

1000

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Impaired assets > 90 days past due SME & Agribusiness

> 90 days past due retail > 90 days past due due to change in hardship treatment

NPLs / total loans (%) Excl change in hardship treatment

592

471 441

554 534 510 481

557



NPLs / total loans (%)

148 141 220 241 235 216 221 223

93 69

65 57 68 82 96 72

230 231

269 236 207 183 240 231

66

1.19 1.08

1.32 1.23

1.15 1.05

1.19 1.25

1.11

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13



NPLs / total loans (%) Excl change in hardship treatment

220

65

269

1.32

3Q12

241 235 216 221 223

57 68 82 96 72

236 207 183 240 231

66

1.23 1.15 1.05

1.19 1.25

1.11

4Q12 1Q13 2Q13 3Q13 4Q13

Excl change in hardship treatment

Run-off expected to be less than $100 million by June 14

15

21 August 2013


Non-core Bank resolution

735

407

301

129

452

283

Jun 13 Sep 13 Dec 13 Mar 14 Jun 14

<$100

Residual portfolio expected run-off Residual portfolio run-off

• Provision coverage in excess of 50%

• Around $300 million in Dec13

• Less than $100 million by Jun14

• Removes future impairment risk

Residual portfolio

Performing

Impaired

Target Range 1.75 – 1.85%

Stranded funding impact

16

21 August 2013


Consolidated Bank

0%

1%

2%

3%

4%

5%

0

100

200

300

400

500

600

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

$m Spread over

BBSW [RHS]

Residual Non-core

maturities [LHS]

1.42

1.64

1.80 1.86

0.75

0.13

0

0.5

1

1.5

2

FY10 FY11 FY12 FY13

Consolidated Core Non-core

Suncorp Life overview

17

21 August 2013


Strong new business growth

• Market adjustments after-tax loss of $60 million due to:

• increasing discount rates; and

• negative investment income experience

• Disability claims experience negative $20 million, Lapse experience negative $26 million

• Individual Risk-in-force up 8.7%

• Embedded Value $2,569 million and VOYS $43 million

• New Zealand business performed strongly

$m FY13 %∆

Life underlying profit after tax 120 (17.8)

Life profit after tax 60 (76.1)

Direct distribution

18

21 August 2013


70,000 Life and Superannuation customers

Direct Life Sales ($m) Demonstrating growth

• 3 new Direct Life products sold via AAMI, GIO and APIA

• Everyday Super for sale through the Bank

• Transitioning Life business model in-house, allows greater scalability

• 23 Life FTEs in the GI call centre

• Further innovation to be pursued through the Group’s brands

8 15 17

15

15 16 23

30 33

FY11 FY12 FY13

Sales to General Insurance customers

Sales to Bank customers

Capital

19

21 August 2013


Working through changes = greater clarity Capital Management

20

21 August 2013


Regulatory change

• LAGIC

• Basel III

• Conglomerate Standards

Resolving the Non-Core Bank

• De-risking the Group

• Sale of the Non-core portfolio of $1.6 billion

• Residual portfolio with 50% provision coverage

• Core to provide stability of earnings

Capital Management

• NOHC

• Life and GI single licence

• Replaced hybrids

• Issued Basel III and LAGIC compliant CPS2 and Sub debt

• FY14 reinsurance program

Capital Targets

• CET1 targets for all business lines

• Provides a clear view of the use and management of capital

• Gearing levels set across the Group

Dividends funded by core business NPAT

21

21 August 2013


FY13 Capital movements

792 847

Excess 30-June-2012 (Pre-

LAGIC)

TransitionalLAGIC/Basel III

adjustments

BAU growth &other

Non-core Bank NPAT excludingNon-core

1H2013 dividend 2H2013 dividend Excess 30-June-2013

58 116

1,123 643

45

322

Excess

30 June 2012

792 847

58 116

1,123 643

45

322

Transitional

LAGIC Basel III

adjustments

BAU growth and

other

Non-core Bank

Loss and Run-off

Core business

NPAT

Interim dividend Final and special

dividend

Excess

30 June 2013

Pro-forma CET1 at 30 June 2013

22

21 August 2013


$801 million excess to CET1 targets

A$m General Insurance

Bank Life NOHC and other entities

Suncorp Group Total

CET1 3,079 2,373 468 190 6,110

CET1 Target 2,335 2,445 352 177 5,309

Excess 744 (72) 116 13 801

CET1 ratios 1.45x 7.76% 1.75x

CET1 Targets 1.10x 8% Amount equal to

sum of PCA plus a

target excess

Bank 8% target to be achieved by September 2013

Group

Total

NOHC benefits - Diversification Capital Strategy


Indicative Diversification potential*

Group

Total

GI

Bank

Life

Diversification

Potential NOHC

Group Surplus

Regulatory minimum Operating target Surplus to operating target

21 August 2013

Risk-based capital

will allow us to:

• Quantify risk and

optimise return

• Enhance decision

making

• Understand

diversification

benefits

*Chart not to scale

Conclusion Patrick Snowball

Chief Executive Officer, Suncorp Group Limited

21 August 2013


24

General Insurance Supply Chain

25

21 August 2013


Better outcomes for customers and shareholders

Capital S.M.A.R.T.

• 23 sites across the country

• 120,000 cars repaired per year

• $400 average cost saving per car

Q-Plus

• 50% of Sydney metro heavy repairs

• 150 cars per week

• $500 average cost saving per car

Parts joint venture

• Scale benefits • Reduced costs • Faster turnaround

Su

pp

ly c

hain

op

tim

isati

on

Suncorp’s strategic assets

26

21 August 2013


Our focus

• Demonstrating a diversification benefit through improved risk-based capital modelling

• A+/A1 credit rating Capital

• Deliver scale cost benefits on third party procured goods / services

• Share scale on infrastructure (real estate, enterprise technology) and non-unique business services

Cost

• Enhancing the value of 9 million customers connections by deepening their relationships with Group brands Customer

• Operating as ‘One Company. Many Brands. One Team’ Culture

Cost

27

21 August 2013


Simplification and procurement gains

• Simplification projects expected to deliver $225 million in FY15 and $265 million in FY16

• Increased project spend in FY13

• Further benefits from rationalising legal spend and Real Estate

(150)

(100)

(50)

0

50

100

150

200

250

300

$m

FY13

FY16 Original one-off project costs

FY14

FY15

Original Simplification benefits

Revised project costs

Revised Simplification benefits

Revised net impact Original net impact

Customer

28

21 August 2013


• 9 million customers • 9 million customers

• Nearly 2 million have

products from more than

one business line

• Simple, everyday products

for Australia and New

Zealand

• Trusted brands that reach

and connect with key

customer segments

• Multi-brand, multi-channel

approach

Growth from leveraging brands and the customer base

% of personal customers with products from more than one of the Suncorp Group business lines

Indicative Diversification potential*

Diversification in Suncorp’s business lines Capital

Suncorp Group Limited 21 August 2013

• NOHC structure

• Common Equity

targets set

• Strong excess capital

position remains

intact

• A+/A1 credit ratings

• Risk-based capital

program will quantify

diversification

benefits

*Chart not to scale

Group

Total

Group

Total

GI

Bank

Life

Diversification

Potential NOHC

Group Surplus

Regulatory minimum Operating target Surplus to operating target

Culture

30

21 August 2013


Engagement scores demonstrate the progress

63 66

71 70 72

80

66 65

77

0

10

20

30

40

50

60

70

80

90

Engaged Enabled Proud to work forSuncorp

2012 2013 Aus/NZ Norms• Single set of terms and conditions

• Reinforcing a Suncorp culture

• Driving operational excellence

• Lifting leadership capability

• A proud history and an optimistic future

4Cs drive the Group’s competitive advantage

21 August 2013


The Suncorp journey

FY13 - FY16 Optimise and differentiate

• ‘Meet or beat’ 12% underlying ITR

• 10%+ ROE by FY15

• Additional Simplification benefits

• Deliver value from points of difference

• 4Cs drive the Group’s strategic advantage

FY12 - FY16 Simplification program

• Licence consolidation

• Legacy system consolidation

• Operational Excellence and partnering

FY10 Stabilise the business & strengthen the balance sheet

• 3 year strategy • Non-core Bank run-off • Non Operating Holding

Company

FY10 - FY12 NOHC & Building Blocks

• One pricing engine • One claims system • One general ledger • One employment

agreement • One view of customer

31

Q&A session

21 August 2013


32

Suncorp’s shareholder focus

21 August 2013


Yield

• Dividend payout ratio of 60% to 80%

• Return surplus capital

• Organic strategy

• Focus exclusively in Australia and New Zealand

• Growth in low risk market segments

• 275 million franking credits

Growth

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

• Leverage the Group’s 9 million customers

• Multi-brand, multi-channel approach

• Simplification benefits

Supplementary slides

21 August 2013


34

(150)

(100)

(50)

0

50

100

150

200

250

300

$m

35

21 August 2013


Additional Simplification benefits

FY13

FY16 Original one-off project costs

FY14

FY15

Original Simplification benefits

Revised project costs

Revised Simplification benefits

Delivering more, sooner - $225 million in FY15

Revised net impact

Original net impact

Suncorp’s historical dividends

15 15 20 25

20 20 20

30

55

44

59

66

FY10 FY11 FY12 FY13

Interim Final 70% payout of cash earnings (ex non-core)

21 August 2013


The Non-core Bank impact

36

5.8bn

2.5bn

500m

Original cover Original cover

reinstatement Third cover

Third cover

reinstatement 250m

200m

NZ Dropdown NZ Dropdown Drop-down aggregate program 150m

50m

NZD 50m

NZD 25m NZ Dropdown NZ Dropdown

Retention 37

21 August 2013


FY14 Reinsurance program

Key Points

• Purchase more side-ways cover

• $250 million ICRC

• Top end increasing to $5.8 billion

FY14 Reinsurance program

38

21 August 2013


Drop-down aggregate program

250m 50m xs

200m xs 50m 100m xs

150m xs 200m

100m xs

150m xs 300m

200m

150m

100m xs

50m xs 200m

100m xs

50m xs 300m

Erosion contributes to

aggregate dropdown

50m Retention

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

19

67

19

68

19

69

19

70

19

71

19

72

19

73

19

74

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

NZ AUS Long run average

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

Natural hazards since 1967

Suncorp Group Limited 21 August 2013

Brisbane flood, Cyclone Tracy

Brisbane hailstorm

Newcastle earthquake

Sydney hailstorm

Hunter Valley storm

Melbourne & Perth hailstorms,

Christchurch earthquakes

39

Christchurch earthquakes, Brisbane floods, Cyclone Yasi, Melbourne hailstorm

Past due loans impacted by methodology change

21 August 2013


Core Bank - credit quality

0.34%

0.42%

0.28%

0.50% 0.46%

0.77%

0.83%

0.66%

0.74%

0.63%

0.54%

0.45%

0.59%

0.71%

0.50%

0.60%

0.39%

0.58% 0.55%

0.81%

0.96%

0.72%

0.82%

0.69%

0.59%

0.51%

0.65%

0.79%

0.62%

0.52%

Ju

n-0

8

Sep

-08

Dec-0

8

Ma

r-09

Ju

n-0

9

Sep

-09

Dec-0

9

Ma

r-10

Ju

n-1

0

Sep

-10

Dec-1

0

Ma

r-11

Ju

n-1

1

Sep

-11

Dec-1

1

Ma

r-12

Ju

n-1

2

Sep

-12

De

c-1

2

Ma

r-13

Ju

n-1

3

QLD home lending past due - 90 days (% of QLD loans)

Total home lending past due - 90 days (% of Total loans)

Excluding change in hardship treatment

Excluding change in hardship treatment (QLD)

QLD 59%

NSW 23%

VIC 9%

WA 6%

SA & Other

3%

Strong growth across all key segments

41


Core Bank

Geographic Split Core lending assets ($47.5bn)

up 9.5%

Commercial (SME) +9.2%

Mortgage +9.4%

Agri +11.8%

Consumer -3.9%

21 August 2013

40 95

292

7 18

36

88

36

117 6

Gold Coast QLD (ex. GC) NSW VIC WA

Performing Impaired

Residual Non-Core Residual loans $735 million as at 30 June 2013

21 August 2013


… by segment … by geography

42

27

193

26 37

101 68

5

23

29

124

39 63

Retail Office Land Other Dev.Finance

Other Prop.Invest.

Other Corp.

Performing Impaired

44%

60% 69%

42%

58% 56% 51%

15% 1%

10%

18% - -

10%

Retail Office Land Other Dev.Finance

Other Prop.Invest.

Other Corp. Non-core

Additional coverage

Provision coverage

Residual Portfolio

43

21 August 2013


Well provisioned with continued run-off expected

… Well provisioned Residual expected run-off ($m)

735

407

301

129

452

283

Jun 13 Sep 13 Dec 13 Mar 14 Jun 14

<$100

Residual Portfolio

Performing

Impaired

2009 2010 2011 2012 2013 2014 2015

Suncorp transformation


Stabilise

Building Blocks in place

Simplification Personal Insurance

Commercial Insurance

Bank

Life & Vero NZ

21 August 2013

Co

re B

us

ine

ss

es

Important disclaimer

21 August 2013


This report contains general information which is current as at 21 August 2013. It is information given in summary form

and does not purport to be complete.

It is not a recommendation or advice in relation to the Group or any product or service offered by Suncorp or any of its

subsidiaries. It is not intended to be relied upon as advice to investors or potential investors, and does not take into

account the investment objectives, financial situation or needs of any particular investor. These should be considered,

with or without professional advice, when deciding if an investment is appropriate.

This report should be read in conjunction with all other information concerning Suncorp filed with the Australian

Securities Exchange (ASX).

The information in this report is for general information only. To the extent that the information may constitute forward-

looking statements, the information reflects Suncorp’s intent, belief or current expectations with respect to 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). 45

Contacts Mark Ley [email protected] (+61) 07 3135 3991

Nicole McGinn [email protected] (+61) 07 3135 3993

Sam Miller [email protected] (+61) 07 3135 2415

Nick Perchey [email protected] (+61) 02 8121 9206

Andrew Dempster [email protected] (+44) 020 3178 8388

21 August 2013


46

mailto:[email protected]


mailto:samantha.miller@/suncorp.com.au



Suncorp Group Limited...Suncorp Group Limited Financial results for the year ended 30 June 2013 21...

Documents

Transcript of Suncorp Group Limited...Suncorp Group Limited Financial results for the year ended 30 June 2013 21...