Suncorp Group Limited · ASX:SUN
Suncorp — H1 2023 Earnings Presentation
28 slides from Suncorp's earnings presentation, Feb 8, 2023
Slide 1: 1H23 Results Investor Presentation
1H23 Results Investor Presentation 1
Slide 2: Good morning and welcome
Good morning and welcome. For those joining us here at our Shelley Street offices, I’d ask if you could put your mobiles on silent and, of course, if there is any need to evacuate, please follow the instructions of our team. Let me begin the presentation by acknowledging the traditional owners of th
Slide 3: How value is created at Suncorp
As usual, I will start today’s presentation with an overview of how we believe value is created at Suncorp. As we reflect on another challenging period for our business we are again reminded of our purpose and how delivering to that purpose translates to the financial results we report today. Our pr
Slide 4: Group delivered cash earnings of $588 million
Turning to the result, and the Group has delivered cash earnings of $588 million - a significant increase on the prior period. Statutory NPAT was $560 million. The result confirms the underlying momentum we have across all our businesses and proves our three-year plan is delivering. I’ll reference o
Slide 5: Highlights within the result
This slide calls out some of the highlights within the result. At the bottom of the slide I have included the key metrics embedded in our FY23 plan so you can see the progress we are making towards those targets. Insurance Australia has again achieved strong growth in both premium and units. When ad
Slide 6: Natural hazards and La Niña impact
First to hazards and on the top left of this slide you can see the impact of three consecutive La Nina weather cycles on natural hazard claims costs relative to our allowances. While you continue to see us reporting actuals ahead of allowance you can also see the pace at which we have increased the
Slide 7: Inflation headwinds and response
To the next slide, and like all our financial service peers, we continue to stare into the considerable headwind of inflation, which is at a 30+ year high, and has impacted every aspect of the Group’s operations. For insurance companies, inflation has manifest itself in hardening global reinsurance
Slide 8: Sale of the Bank
Now turning briefly to the sale of the bank… As you know, the ACCC published ANZ’s merger authorisation application in December and expect to announce their determination by June this year. This is the first step in the approvals process, with the sale also subject to approval from the Queensland Go
Slide 9: 1H23 Financial Results
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Slide 10: Financial result overview
Thanks Steve and good morning everyone. Well it’s been pleasing for us to see the continuation of strong top-line growth along with underlying margin momentum feature in our results this half. In GI, the challenging operating conditions continued, with ongoing inflationary pressures and elevated nat
Slide 11: Insurance Australia topline growth
I’ll now unpack the result further, starting with Insurance Australia and topline growth. Overall, GWP grew by 9%, excluding portfolio exists. The Home portfolio grew by over 12% driven by strong premium increases in response to natural hazards and reinsurance costs. Motor also increased nearly 12%,
Slide 12: Claims
Now on to claims. As Steve touched on earlier, the deterioration in Consumer was driven by the Motor portfolio, largely due to higher average claim sizes with increasing second-hand car prices and supply chain disruptions. Our key responses have included pricing and repair capacity increases. Home w
Slide 13: Investment performance
Turning to investment performance. Whilst still volatile, investment markets stabilised somewhat from the extreme movements we experienced towards the latter half of last year. The mark-to-market losses on risk free and breakeven rates were more than offset by significantly higher running yields inc
Slide 14: New Zealand
Moving onto New Zealand. We continued to experience strong growth, and increasing market share, with targeted price increases across all channels driving GWP growth of over 12%. Natural hazard costs were lower than last year, but still $21 million above the allowance, with one large weather event in
Slide 15: Group underlying ITR
Turning then to the Group underlying ITR. We recorded an increase in the half to 10%, a good result given the headwinds of increased natural hazards and reinsurance costs and claims inflation. The three key factors that offset these impacts were: − Significant increases in premiums, in response to t
Slide 16: Natural hazards
Moving to natural hazards. Our natural hazard costs for the half exceeded the allowance by $99 million with a third consecutive La Nina weather cycle. Pleasingly, we saw a relatively benign November and December and note that the ENSO cycle is expected to return to neutral this half. Whilst January
Slide 17: Bank performance
Turning now to the Bank. And we’re very pleased with the progress against our FY23 targets. I’d particularly like to highlight the achievement of the long standing target for the Bank – a cost to income ratio of less than 50%. This was ahead of schedule and reflects the continued above system volume
Slide 18: Bank credit quality
Now I’ll quickly touch on the Bank's credit quality. It remains well positioned and strong on all key metrics with 91% of new business originated at an LVR below 80% and 90+ days past due loans continuing to reduce. Notwithstanding, we remain alert to signs of stress given the economic environment.
Slide 19: Group expenses
Turning to Group expenses. We’ve been subject to the same inflationary pressures that most businesses have faced, with inflation across all key elements of our expense base. Pleasingly, we’ve been able to more than offset these increases with efficiency benefits, including the steps we’ve taken to s
Slide 20: Capital
And finally moving onto capital. The capital position at 31 December has seen net capital generation of c. $110m since 30 June, and I’ll run through some of the key dynamics: − Firstly, the reversal of just under $100m of DTAs. This is consistent with the expected unwind we flagged at the full year
Slide 21: Strategic Outlook
Strategic Outlook Steve Johnston Group Chief Executive Officer SUNCORP ( ) 21
Slide 22: FY23 plan and 12 strategic initiatives
Thanks, Jeremy. Turning to our FY23 plan, which we presented to the Board in 2020 and first outlined to you in February 2021. The plan included an ambition to drive growth and deliver, by FY23, a sustainable return on equity above the through-the-cycle cost of equity. The plan centred around the 12
Slide 23: FY23 targets
On this slide, I’ve summarised the targets we set for FY23. What we didn’t know at the time of building our plan and setting our targets were the considerable headwinds we would face into during the plan period. The dislocation of the pandemic, geopolitical shocks in Europe, record inflation and thr
Slide 24: Insurance operational proof points
To the next slide and here are some more operational proof points underscoring our progress across our insurance businesses. Over the plan period, growth momentum has continued to build as a result of the efforts to reinvigorate our brands, refine our customer value proposition, improve our marketin
Slide 25: Bank progress over the plan period
Turning to the bank, which continues to grow in home lending, with the top left of the slide highlighting the improvements over the plan period. Growth has been supported by improvements in customer and broker NPS, but importantly, has not come at the cost of credit quality. Median application turna
Slide 26: Outlook
Now to the outlook. In Insurance, growth for remainder of the year will remain strong, albeit we expect it will be driven primarily by AWP as we prioritise margin over volume. The momentum of GWP will translate to NEP, thereby supporting underling margin. The Group underlying ITR continues to steadi
Slide 27: Future strategy as a pure play insurer
We will of course continue to update you on progress of the transaction and will also look to provide more information on the shape of Suncorp as we emerge as a pure play insurance company. This is a slide we used at the investor update in November. It's a snapshot of our future strategy and, the am
Slide 28: Important disclaimer
SUNCORP oO 4H23 Financial Results Important disclaimer This presentation contains general information which is current as at 8 February 2023. 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 s