Suncorp Group Limited · ASX:SUN
Suncorp — Suncorp Metway — H1 2002 Earnings Presentation
36 slides from Suncorp's earnings presentation, Feb 28, 2002
Slide 1: Suncorp Metway Ltd Half Year Results presentation
SUNCORP METWAY LTD Half Year Results presentation 28 February 2002 1
Slide 2: Highlights
Highlights • NPAT of $154 million, down due to GIO goodwill and investment returns • Satisfactory underlying profit • GIO integration proceeding to plan, $36 million of $240 million in synergies already achieved • Good sales growth across all business lines • Cost efficiency maintained • Interim div
Slide 3: Underlying profit
Underlying profit* ($millions) 252 243 205 Wealth 177 171 GI 137 120 Banking Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 *Profit before tax and goodwill, excluding investment returns on GI shareholders fund 3
Slide 4: Normalised profit
Normalised profit* ($millions) 292 281 Normalised Inv income 233 208 Wealth 197 161 GI 143 Banking Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 *Profit before tax and goodwill, excluding investment returns on GI shareholders fund Includes normalised investment return on shareholders funds at 8.5
Slide 5: Income
Income* ($millions) 1676 93 128 1061 917 946 901 152 54 977 Inv Income 50 152 91 97 46 48 Recoveries 412 434 GI Premium 389 412 131 201 Fee & Other 92 91 145 Net Interest 238 259 255 277 277 Jun 00 Dec 00 Jun 01 Dec 01 Dec 01 Excl GIO Inc GIO *Excludes Life & Super policyholders’ interests 5
Slide 6: Expenses
Expenses* ($millions) 1427 70 781 848 649 635 29 707 31 27 24 Reinsurance 437 356 394 373 Claims 509 266 238 315 282 Operating Expenses Jun 00 Dec 00 Jun 01 Dec 01 Dec 01 Excl GIO Inc GIO Group Efficiency (%) 30.5 26.4 32.1 29.5 30.2 *Excludes Life & Super policyholders’ interests 6
Slide 7: Cash EPS
Cash EPS* Diluted (Cents) 41.5 41.5 39.0 35.2 35.2 28.5 25.3 22.6 22.9 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 *Earnings before goodwill and Wealth Management embedded value adjustment 7
Slide 8: Cash ROE
Cash ROE* Diluted (%) 17.9 18.5 16.7 15.9 14.1 12.9 11.8 11.8 11.1 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 *Based on earnings before goodwill and Wealth Management embedded value adjustment 8
Slide 9: Transformation Timeline
Transformation Timeline FY 01/02 FY 02/03 TOTAL Schedule of Changes H1 H2 H1 H2 $M Revenue 0 10 10 15 35 Claims Costs 0 15 15 0 30 Operating Costs 36 50 60 29 175 36 75 85 44 240 Implementation costs Expensed (0-3 yrs) 0 16 18 26 60 Capitalised in Goodwill 7 40 32 21 100 7 56 50 47 160 9
Slide 10: Transformation P&L impact
Transformation P&L impact ($millions) 196 85 Annualised 27 Benefit 111 75 38 24 36 7 18 18 1H01/02 2H01/02 1H02/03 P&L effect 7 42 83 Cost to Implement 0 16 18 Net P&L 7 26 65 10
Slide 11: Synergies in Context
Synergies in Context Projected Projected % Source Base Improvements Rationalisation, scale and process Operating Costs* 990 175 18 re-engineering Purchasing, recoveries and Claims 1320 30 2.2 leakage Price Increases over market movement Revenue 1950 35 1.8 (X-sell not included) *Includes GI costs an
Slide 12: Implementation Schedule
Implementation Schedule Examples of Ideas Ideas Scheduled Implemented in 1H for 2H • Re-negotiation of Group • Combine high level Telecoms contract management structures • Insource GIO Investment • Combine support areas: management Marketing, Finance, HR, IT, • Insource HR and payroll Actuarial • In
Slide 13: Profit by division
Profit by division Before goodwill and tax ($m) 150 153 134 81 82 39 43 36 17 Wealth Management Gen Ins Banking Dec 00 Jun 01 Dec 01 13
Slide 14: Banking income
Banking income ($millions) 338 316 315 Other income 286 53 43 49 Fee income 38 Net interest 259 255 277 238 income Jun 00 Dec 00 Jun 01 Dec 01 14
Slide 15: Loan portfolio mix and growth
Loan portfolio mix and growth ($billions) 21.1 19.9 18.0 18.7 2.2 2 2.2 3.2 Other 2.15 3.1 2.8 2.9 Commercial 3.1 3.1 2.8 2.8 Property Housing 11.7 12.6 10.2 10.8 Jun 00 Dec 00 Jun 01 Dec 01 Growth (%) 4.5 4.1 6.7 5.8 15
Slide 16: Owner-occupied housing growth
O/Occupied housing growth (Annual growth in assets %) Reporting period 20% 15% 10% 5% 0% Jun- Jul-00 Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul-01 Aug- Sep- Oct- Nov- Dec- 00 00 00 00 00 00 01 01 01 01 01 01 01 01 01 01 01 Suncorp Metway Banking system Source: APRA 16
Slide 17: Net interest margin and spread
Net interest margin and spread (%) 2.9 2.7 2.55 2.47 2.47 2.48 Margin 2.5 2.41 2.38 2.3 2.1 2.19 2.20 2.20 2.21 2.12 2.11 1.9 Spread 1.7 1.5 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 17
Slide 18: Banking expense ratios
Banking expense ratios (%) 80 2.2 75 2 70 1.8 65 1.71 60 Cost-to-assets 1.6 1.36 55 58.0 1.4 50 50.6 1.2 45 Cost-to-income 40 1 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 18
Slide 19: Asset quality
Asset quality Impaired assets, % of 0.70 0.77 0.97 0.96 0.93 0.94 0.64 gross loans Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Non-accrual Loans, net $m 92 102 107 125 86 81 121 Gen Prov (% of RWA) 0.56 0.55 0.54 0.55 0.62 0.59 0.56 19
Slide 20: Wealth Management profit
Wealth Management profit ($millions) 39 36 13 8 17 17 26 28 17 17 Jun 00 Dec 00 Jun 01 Dec 01 Pre-tax profit One-off gains 20
Slide 21: Wealth Management sales
Wealth Management sales ($millions) 230 206 136 131 114 81 3 5 6 Risk Investment Super Dec 00 Jun 01 Dec 01 21
Slide 22: General Insurance highlights
General Insurance highlights • GIO integration on track to achieve stated synergies • ITR of 10.2% in SUN business, ex-GIO • Investment returns affected by Sept 11 • Rates hardening across classes • Risks in force increased • Provisioning strengthened 22
Slide 23: GI pre-tax profit - excl GIO
GI pre-tax profit - excl GIO ($millions) 113 96 98 46 81 82 36 73 Inv Income 52 S/h Funds 81 80 32 60 82 60 67 Trading 46 41 Result 13 0 -1 1 -9 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 23
Slide 24: GI pre-tax profit - excl GIO
GI pre-tax profit - excl GIO 113 Insurance Trading 98 21.1 Margin (%) 96 18.5 81 82 73 Inv Income S/h Funds 12 12 10.2 9 80 32 Trading Result 0.3 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 24
Slide 25: GI pre-tax profit - inc GIO
GI pre-tax profit - inc GIO ($millions) 113 96 98 46 81 82 36 73 Inv Income 52 S/h Funds 43 Managed 81 80 32 8 60 82 Schemes 60 67 Trading 46 41 42 Result 13 -1 1 -9 -7 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Dec 01 Inc GIO 25
Slide 26: Normalised GI pre-tax profit
Normalised GI pre-tax profit* ($Millions, Assumes 8.5% return on shareholders funds) 111 99 95 Managed 29 8 Schemes 82 Inv Income 28 75 S/h Funds 71 24 49 26 80 33 Trading 35 82 32 Result 67 58 23 45 41 42 31 12 1 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Dec 01 Incl GIO 26
Slide 27: GI Premium Revenue
GI Premium Revenue ($Millions) 907 WC & 70 Other 176 273 388 383 403 362 Comm 58 64 71 76 82 100 176 Motor 83 90 Home 49 54 60 59 212 172 188 162 168 CTP Jun 00 Dec 00 Jun 01 Dec 01 Dec 01 Annualised Inc GIO Growth % -8 14.4 -2.5 10.4 27
Slide 28: SUN GI expenses
SUN GI expenses ($millions) 456 Other 430 400 66 35 Acquisition 44 51 50 31 Claims 325 340 344 Dec 00 June 01 Dec 01 Loss Ratio % 83.8 88.8 85.4 Expense Ratio % 19.3 30.3 21.3 COR % 103.1 119.1 106.7 28
Slide 29: SUN Risks in Force
SUN Risks in Force (,000) 2,608 2,672 2,503 2,558 255 256 Cssl 218 241 Personal 929 960 996 1,054 Lines 1,354 1,356 1,356 1,361 CTP Jun 00 Dec 00 Jun 01 Dec 01 Annualised growth % 0 4.4 4.0 4.9 29
Slide 30: GIO Covers
GIO Covers (,000) 1,827 1,905 1,781 702 731 Motor 659 Home 858 854 880 CTP 264 271 294 Dec 99 Dec 00 Dec 01 Annual Growth % - 2.6 4.3 30
Slide 31: Group GI Solvency
Group GI Solvency ($ Millions) 989 521 Net Assets 550 Solvency 263 Surplus 468 Minimum 287 Capital Dec 01 Dec 01 Excl GIO Inc GIO Coverage Existing system 1.92 2.11 Proposed system 1.53 1.50 31
Slide 32: Capital Adequacy
Capital Adequacy ($Millions) 18% (7.5%) 5.4% (5.4%) 1226 884 881 10.5% Share 2943 capital* $1720 Tier 1 Intangibles Tier 2 Deductions Net Capital *Including retained profits and reserves 32
Slide 33: Products per MFI customer
Products per MFI customer (Excluding GIO Customers) Mar-98 Mar-99 Mar-00 3.55 Mar-01 Sep-01 2.38 2.44 2.5 2.16 1.95 SGB CBA ANZ WBC NAB SUN * Customers who nominate SML as main financial institution. 12 month moving average Roy Morgan Research SGB St George, Advance, Bank SA; WBC Westpac, Bank Melbo
Slide 34: H1 Service Initiatives
H1 Service Initiatives • Seven day guaranteed car repair • Shortest call centre and branch wait times • Five day turnaround on business loan decisions • More initiatives in pipeline for H2 34
Slide 35: Strategic Focus
Strategic Focus • Realisation of GIO synergies • Allfinanz - GIO Branches and Customer Base - One Card • Performance and productivity metrics to support organic growth • Continue to scan for acquisition opportunities 35
Slide 36: Outlook
Outlook • Continued good sales growth across all divisions • GIO integration to deliver significant cost savings and benefits • Credit quality to remain strong • Underlying profit expected to improve at full year, subject to claims experience 36