Slide 1: FY18 Results Presentation
SUNCORP O FY18 Results Presentation Financial Results for the full year ended 30 June 2018 Create a better today RELEASE DATE 9 AUGUST 2018 SUNCORP GROUP LIMITED ABN 66 145 290 124 SUNCORP |)
Slide 2: Welcome
FY18 RESULTS PRESENTATION Good morning everyone and thank you for joining us. 2
Slide 3: Full year NPAT and dividends
FY18 RESULTS PRESENTATION Six months ago, we committed to a stronger second half, reflecting the early benefits of our strategy. I’m pleased to report a 34% uplift in NPAT between the first and second half. This gives us a full year NPAT of $1.059 billion. As expected the slightly lower year-on-year
Slide 4: Key highlights of the full year result
FY18 RESULTS PRESENTATION In addition to the strong second half performance there are a number of key highlights in the full year result. The Business Improvement Program exceeded our net benefits target by $30m. Digitisation of the business is beginning to drive our strategy to increase the number
Slide 5: Highlights in detail
FY18 RESULTS PRESENTATION Let’s look at the highlights in more detail. Top line growth was 2.4%. Australian Motor and Home GWP increased by 4.7%. This reflects both premium and unit growth. Our Life business experienced a turnaround and Bank home lending growth was 1.2x system for the year. The New
Slide 6: Business Improvement Program benefits
FY18 RESULTS PRESENTATION The first year of the Business Improvement Program has delivered a net benefit of $40m. That is well ahead of our target. We start FY19 with a $187m gross benefit annualised run rate, already locked in. This gives us confidence that we will exceed the $274m target for FY19.
Slide 7: Marketplace strategy and digitisation benefits
FY18 RESULTS PRESENTATION The one-off investment in the acceleration of the marketplace component of the strategy will increasingly deliver value to all stakeholders. The program was delivered on-time and on-budget. The expected benefits to emerge in FY19 remain in line with those reported at the ha
Slide 8: Balance sheet and dividends
FY18 RESULTS PRESENTATION The balance sheet is in very good shape. This has underpinned a full year dividend of 73 cents and together with the eight cent special takes total dividends to 81 cents. This represents a payout ratio of 95%. We remain committed to returning excess capital to shareholders.
Slide 9: Second half momentum and FY19 targets
FY18 RESULTS PRESENTATION At the half year, we pointed to a stronger second half and a significant uplift in performance in FY19. The second half position outlined on this slide reflects good momentum and gives us confidence in achieving our FY19 targets. The CTI ratio is likely to be challenging gi
Slide 10: Life business strategic review and divestment
FY18 RESULTS PRESENTATION In addition to the improving financial performance of the Life business we have completed the strategic review. The review involved the assessment of a number options, including additional reinsurance, partnership arrangements, and divestment. We concluded that a divestment
Slide 11: Australian Insurance
FY18 RESULTS PRESENTATION The Insurance business in Australia has seen Consumer GWP grow through a combination of unit growth and price. We’ve also experienced a good uplift in Commercial GWP. In addition to the strong top line growth claims performance has been better than industry levels assisted
Slide 12: Bank and Wealth
FY18 RESULTS PRESENTATION Home lending growth in the Bank over the year was 6.2% or 1.2x system. The very strong growth we reported in the first half moderated in the second half, as a result of high levels of competition, aggressive pricing across the industry, and slowing system growth. Deposit gr
Slide 13: New Zealand
FY18 RESULTS PRESENTATION In New Zealand, GWP growth was also very strong at 8.2% reflecting unit growth and premium increases. Claims and operating expenses were well managed driving a strong UITR. Natural hazards in New Zealand were above allowance but as reported on a Group basis were slightly lo
Slide 14: Handover to CFO
FY18 RESULTS PRESENTATION Thank you Michael and good morning. Before I move to the results commentary, let me take a moment to expand on some of the details associated with the Heads of Agreement we have announced today. 14
Slide 15: Life divestment decision and Heads of Agreement
FY18 RESULTS PRESENTATION The first point to make is that the decision to divest follows a comprehensive strategic review which considered a number of options – with retain and optimise at one end of a continuum, and full divestment at the other. As you will see later in my presentation, the improve
Slide 16: Life divestment key metrics
FY18 RESULTS PRESENTATION I have outlined some key metrics on this slide including an adjustment to better reflect the Australian Life EV for the purpose of a transaction. Headline consideration, including forecast adjustments to net worth through to completion, is expected to be around $725m. Once
Slide 17: Australian Insurance result
FY18 RESULTS PRESENTATION Turning to the result and starting with the Australian Insurance business which delivered a net profit after tax of $739 million, including a $58 million after tax contribution from Life. The General Insurance result demonstrated very strong underlying trends - consistent w
Slide 18: Premium growth in Home and Motor
FY18 RESULTS PRESENTATION First to premiums, and the positive momentum in our consumer portfolios has continued into the second half of the year. This is a slide I first introduced in February and it provides a five year, half on half, picture of written premium in the home and motor portfolios. You
Slide 19: GWP waterfall
FY18 RESULTS PRESENTATION The strong growth in Home and Motor is evident in this GWP waterfall, which shows that the consumer portfolio combined added $224 million of premium for the year. Commercial GWP increased by $12 million reflecting our disciplined approach to growth and the need to reprice t
Slide 20: Claims
FY18 RESULTS PRESENTATION Turning to claims and on the left of the slide I have included the undiscounted view of net incurred claims. This clearly shows the impact of BIP to claims costs with benefits realised helping offset inflation in underlying claims costs. Motor claims has been the main focus
Slide 21: Investment portfolio
FY18 RESULTS PRESENTATION Moving to the investment portfolio, and investment income on the insurance funds was $258 million. The headline result was supported by mark to market gains from narrowing credit spreads and a small outperformance from inflation linked bonds. The underlying yield on the por
Slide 22: Australian Life
FY18 RESULTS PRESENTATION Now to Australian Life, where the net profit contribution was $58 million. Planned margins continued to improve as the optimisation program gained traction through repricing, claims initiatives and product rationalisation. Experience has also been modestly positive, while u
Slide 23: Banking and Wealth
FY18 RESULTS PRESENTATION Turning to Banking and Wealth, which returned a net profit after tax of $389 million, down 2.8%. At the top line, the Bank grew net interest income by 4.4%, underpinned by lending growth of 6.1% for the full year. Home lending growth moderated from 2 times system in the fir
Slide 24: New Zealand result
FY18 RESULTS PRESENTATION Moving to New Zealand, which has delivered a strong result driven by premium increases, unit growth, claims management and strong expense control. In FY18, New Zealand has been impacted by a number of weather events which have resulted in hazard costs being $35m over allowa
Slide 25: Group operating expenses
FY18 RESULTS PRESENTATION Now to Group operating expenses presented here net of FSL, which increased 5% to $2.7 billion, impacted in part by strong growth and a range of other factors, which are outlined on this slide. Spending on regulation and technology has increased, which is unlikely to come as
Slide 26: General Insurance underlying ITR
FY18 RESULTS PRESENTATION Turning now to the General Insurance UITR which was 10.6% for the full year. Again I would make the point that the UITR is not a measure of profitability, rather a reference point for the performance from one period to another based on a consistent set of adjustments. As th
Slide 27: Capital position
FY18 RESULTS PRESENTATION Finally to capital, and the waterfall calls out the key movements over the course of the year, highlighting the underlying strength of our balance sheet. This means than in considering our capital position at year end, we were able to meet our commitment to look through the
Slide 28: Handover to CEO
FY18 RESULTS PRESENTATION Thanks Steve. 28
Slide 29: Business Improvement Program FY19 outlook
FY18 RESULTS PRESENTATION As previously discussed, we are tracking ahead of our BIP targets and already expect to exceed the net benefits for FY19. As was the case in FY18 we anticipate investment will be weighted to the first half with the benefits from those programs flowing in the second half. A
Slide 30: Insurance outlook
FY18 RESULTS PRESENTATION Moving to Insurance. Opportunities exist to achieve top line growth of 4 – 6% in Consumer GWP driven by the recovery of industry claims inflation. In Commercial, the focus will be on disciplined pricing and selective growth. We expect CTP reform to continue to reduce earnin
Slide 31: Bank and Wealth outlook
FY18 RESULTS PRESENTATION In the Bank and Wealth business, our current expectation is that system growth will moderate in FY19. We expect to be slightly ahead of this. Advanced accreditation systems have driven an improved impairment loss position. This is expected to remain at or below the bottom o
Slide 32: New Zealand outlook
FY18 RESULTS PRESENTATION New Zealand’s outlook is positive with a hardening market offsetting industry claims inflation. The economy is solid with strong GDP underpinned by agriculture, tourism and net migration. The RBNZ is expected to leave cash rates around 1.75%. Unemployment is also expected t
Slide 33: Regulatory environment and customer priorities
FY18 RESULTS PRESENTATION I am sure every financial institution is taking lessons from the current Royal Commission. We cannot yet know the extent of regulatory changes that will result from the Commissioner’s findings and recommendations. What we do know, is that the current regulatory environment
Slide 34: FY19 Cash ROE target
FY18 RESULTS PRESENTATION With that overview, today we confirm our target of Cash ROE of 10% for FY19. This excludes the positive impact of the Life divestment. Our target is driven by: — top line growth of 3% to 5% — an expense base of $2.7bn — an underlying ITR of at least 12%, — a Bank Cost to In
Slide 35: Five critical actions for FY19
FY18 RESULTS PRESENTATION We are focusing intensely on shareholder returns while maximising performance for all of our stakeholders. We have five critical actions to underpin the delivery of the FY19 targets. You should measure our progress against these throughout the year. First is ensuring the Bu
Slide 36: FY18 deliverables and FY19 priorities
FY18 RESULTS PRESENTATION This slide provides more detail on what we delivered in FY18 and our specific deliverables for the coming year. These are all aligned to our strategic priorities and should assist investors to monitor our progress. While these items may be refined and added to over time we
Slide 37: Conclusion
FY18 RESULTS PRESENTATION In conclusion we have delivered a strong second half performance and the Business Improvement Program has exceeded targets. The digitisation of the business is beginning to drive benefits and we have invested for future returns. We’ve announced a special dividend underpinne
Slide 38: FY18 RESULTS PRESENTATION
FY18 RESULTS PRESENTATION 38