Slide 1: Welcome and introductions
For personal use only Good morning and welcome to all those joining us in person here in Sydney and also via the web- cast and audio links. In a moment we will be joined by our acting CEO, Chris Skilton. Also joining us on the podium today will be Clayton Herbert, who is the acting CFO and our Chair
Slide 2: Agenda for the presentation
For personal use only Thanks Steve, and thank you all for joining us today. The agenda this morning is slightly different to our most recent presentations. I will commence with an overview of the group result and then run through the divisional results at a fairly high level. As always, the detailed
Slide 3: Group NPAT result
For personal use only So, first to the Group NPAT result, which at $348 million, is in line with that flagged in our trading update a couple of weeks ago, and down some 40% on last years result. This slide provides the profit summary for each of the key P&L lines and, again, you can see that they ar
Slide 4: Changes made across the Group
For personal use only The fact is, over the past twelve months in particular, we have made significant changes to the Suncorp Group, and to each of our operating business lines. At the Group level, we have raised over $1 billion in additional capital and taken the difficult but necessary decision to
Slide 5: Turning to each of the businesses
For personal use only Let me now turn to each of the businesses in more detail… 5
Slide 6: Bank underlying profit
8/25/2009 For personal use only And as usual, commencing with the Bank, underlying profit was solid, with profit before tax, bad debts and non-recurring items of $781 million, an increase of 16.9% on the prior year. The result featured extremely strong net interest margins and higher average receiva
Slide 7: Core and non-core banking
8/25/2009 For personal use only You will see that we have included additional disclosures in the pack relating to the core and non- core elements of the banking business. It’s important to note that we only commenced accounting for this segmentation with effect from the 1st of April, consequently we
Slide 8: Bank asset growth and loans
For personal use only To asset growth now and total loans and advances reduced 1.3% to $54.4 billion, comprising approximately $36.8 billion in core lending and $17.5 billion in non-core. This was in line with our expectations and the guidance we presented at the half year. In the core portfolio, ho
Slide 9: Contractual run-off profile
For personal use only The transition of some of the commercial assets to non-core obviously will have a minor impact on the run-off profile so we’ve updated the contractual chart that we disclosed to the market in May of this year. I would like to reiterate what we pointed out in May and that is tha
Slide 10: Retail deposits
For personal use only To deposits now, and retail deposits grew 13.2% over the year which was below system. The Bank, along with all regional banks, suffered in September from the crisis in international financial markets and the resultant ‘flight to quality’ impact on the deposit market. Pleasingly
Slide 11: Funding and liquidity
For personal use only Now to funding and the significant de-risking activity we have undertaken in lengthening our balance sheet, which of course is aligned to our decision to identify non-core lending and place it into run-off. As you’ll know, we have increased our liquid assets ratio from 12.5% to
Slide 12: Core and non-core funding
For personal use only If we segment our liabilities between the core and non-core book you will see that in the former, approximately 64% of the loan book is funded through retail deposits and 27% from long-term borrowings including securitisation. In the non-core book, you can see the impact of the
Slide 13: Net interest margin
8/25/2009 For personal use only To NIM now and the waterfall slide highlights the key drivers affecting margin over the year. The most notable factor, and one that we foreshadowed in February, has been the steep increase in wholesale funding costs associated with the Bank's strategy of increasing te
Slide 14: Credit quality
For personal use only To credit quality now and while there has clearly been some deterioration in the second half, the rate of deterioration has actually slowed. This slide provides all the key metrics and you can see that impaired assets represent 2.7% of gross loans & advances across the consolid
Slide 15: Provisioning
For personal use only Now to provisioning, and the composition of our collective and specific provisions by segment is set out in these two charts. As you can see, just under 75% of our provisions balance relates to the economic overlay, corporate provisions (virtually all Babcock & Brown) and provi
Slide 16: Provision coverage
For personal use only This slide highlights that we now have strong provisioning coverage in place across both core and non-core books. The table on the left demonstrates that we have increased provision levels generally consistent with the increase in impaired assets we have experienced. This is be
Slide 17: General Insurance trading result
8/25/2009 For personal use only Let me now move onto GI. The headline Insurance Trading Result of $462 million represents a margin on Net Earned Premium of about 7.7%. While this is below the guidance we set at the start of the year, the variance can broadly be explained by natural hazard events wel
Slide 18: General Insurance key metrics
For personal use only In this next slide I have updated some key GI metrics taking into account the results for the current year. You’ll note that GWP is up 6% for the year, at the top of our guidance of 4% to 6%. In fact, if we were to ignore the weakness in the NZ$, the increase would be 6.7%, and
Slide 19: GWP and motor premiums
8/25/2009 For personal use only A key feature of the revenue story is that we are now definitely seeing the benefits of price increases in the premium lines as we continue to attempt to restore profitability by focusing on price rather than volume. Overall, GWP now stands at $6.8 billion with all th
Slide 20: Home and CTP premiums
8/25/2009 For personal use only Home GWP increased by 9.2% as we look to restore profitability following two years of adverse natural hazard events. Premium increases are expected to continue into 2009/10 as additional reinsurance costs and increasing allowances for natural hazards are factored in.
Slide 21: Natural hazard events
8/25/2009 For personal use only As I’m sure you’re aware, 2008/09 was another terrible year for natural hazards. The major events, including the tragic Victorian bushfires and the November storms that created havoc in Brisbane, are summarised on this slide and collectively cost $430 million net of o
Slide 22: Wider impact of natural hazards
8/25/2009 For personal use only But the full impact on the Group’s profit isn’t limited to the major natural hazard events. During the year, we also paid around $30million for a reinstatement of our catastrophe reinsurance cover and extra protection following the Victorian bushfires. Another item th
Slide 23: Expenses
For personal use only I included this slide in the February presentation and I thought it was worth updating here. On a reported basis, expenses are down half on half by 4.3%, however if we exclude the impact of the LAT which was a $33 million debit in the first half and a $14 million credit in the
Slide 24: Investment income
For personal use only To investment income, and these simple charts show how volatile the past two years have been. In the first half we saw the significant fall in interest rates provide a significant boost to income. This reversed in the second half as the value of fixed income securities fell due
Slide 25: Underlying performance of the general insurer
For personal use only So, how should one interpret all this data and try to get behind the underlying performance of the general insurer? I know there are many of you who will seek to normalise the result taking into account all the factors we have outlined today. As I have said many times in the pa
Slide 26: Short tail margins
For personal use only Home, of course, is more difficult to predict given the greater impact that the indiscriminate nature of major weather events has on this portfolio. However it is interesting and relevant to note that this year most of the events occurred in Queensland and Victoria with NSW bei
Slide 27: Suncorp Life
8/25/2009 For personal use only We are encouraged by the performance of Suncorp Life over the course of the past 12 months. Life has been focused on responding to the economic environment and simplifying the business model. This culminated in the change in strategy announced in June 2009. The busine
Slide 28: Life Risk portfolio
For personal use only In Suncorp Life’s core Life Risk portfolio, underlying profit was up 13% to $87 million, reflecting strategies implemented to take advantage of the current favourable environment for the Life Risk industry. In-force premiums are up by 7.3%, demonstrating Life’s continued focus
Slide 29: Funds management and investments
For personal use only Market volatility has resulted in reduced asset-based fee revenue because of the impact the investment market has on asset values and funds flows. The mandatory savings environment in Australia, and the move towards that state in New Zealand, however, ensure these markets remai
Slide 30: Technical issues in the result
For personal use only Thank you Chris, and good morning Ladies and Gentlemen. I’ll just take some time to cover off some of the more technical issues in our 08/09 result. 30
Slide 31: Capital position
8/25/2009 For personal use only Firstly to capital and at 30 June our capital adequacy ratio is at a prudent 12.77% and our Tier 1 was also strong at 11.31%. With the emergence of bad and doubtful debts in the first half and general concerns about the capital strength of the banking sector facing th
Slide 32: Insurance and Life capital
8/25/2009 For personal use only The General Insurance capital requirements were also managed by de-risking the shareholder funds, and selling out of equities in the first half. I would also highlight that although the MCR coverage is slightly less than this time last year, the quality of that capita
Slide 33: Integration progress
For personal use only To Integration now and I thought we should update on the progress we’ve made during this highly turbulent year. As Chris has outlined, the benefits of integration can be seen in the expense lines of all three of our lines of business. Since we last updated the market, we had re
Slide 34: Reinsurance program
For personal use only Turning to reinsurance and the Group has completed renewal of its main 2009/10 reinsurance programs. The strategy of the renewal was to obtain a similar level of earnings protection as afforded in the prior year from both single loss occurrences, and accumulations of losses. We
Slide 35: Catastrophe and aggregate cover
For personal use only The main catastrophe and aggregate programs are designed to work in tandem to provide robust cover. There is also no "gap" in the cover, that is, the full amount of losses above $10m fully erode the aggregate deductible, and if they exceed $200m, are covered by the main catastr
Slide 36: Investment returns
For personal use only I now turn to investment returns and the significant half on half fluctuations. The largest impact has been the mark to market movement caused by falling interest rates in the first half with a rebound in the second half. The first adjustment that we make is to offset investmen
Slide 37: Accounting and economic mismatch
For personal use only The next piece of the puzzle is what I have called the accounting mismatch. This is the impact of the movement in risk free rates on the assets that back liabilities that are not marked to market for accounting purposes, namely unearned premium net of insurance debtors which to
Slide 38: Legal Entity Restructure
For personal use only Finally, I will update you on the Legal Entity Restructure. As you know, the merger between Suncorp- Metway Limited and Promina Group Limited brought together about 150 companies. In 2008, a Legal Entity Restructure program of work was implemented to streamline and simplify our
Slide 39: NOHC structure
For personal use only We are also continuing to work through the benefits and implications of a NOHC structure and, obviously, LER II is compatible with any restructuring of the group under a NOHC as the parent entity. While there remain no insurmountable roadblocks affecting the ability of the Grou
Slide 40: Group outlook
For personal use only Thanks Clayton…..Finally to the Group’s outlook and I don’t intend to go through this in detail other than to make a couple of obvious points. The first is the most obvious. On September 1, Suncorp will have a new Chief Executive. Now, I’m sure you would agree that it makes no
Slide 41: Closing remarks
For personal use only I said earlier in the presentation that Suncorp had responded appropriately to the crisis. I genuinely believe this. There has been much change completed and more initiated, in order to position this business for the future. Some of it has been uncomfortable. All of it has been
Slide 42: Presentation outline and speakers
+ Introduction & overview — Chris Skilton + Divisional performance — Chris Skilton + Banking + General Insurance * Life * Technical topics — Clayton Herbert * Capital + Integration + Reinsurance + Investment returns + Legal Entity Restructure update * Outlook — Chris Skilton + Closing comments — Joh
Slide 43: Questions
For personal use only And now I’ll hand over to Steve Johnston to moderate questions….. 43
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Slide 45: Disclaimer
This report contains general information which is current as at 25 August 2009. It is information given in summary form and does not purport to be complete. It is not a recommendation or advice in relation to Suncorp-Metway Limited or any product or service offered by the Suncorp Group. It is not in
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