Suncorp Group Limited · ASX:SUN
Suncorp — Macquarie conference 2008
29 slides from Suncorp's conference presentation, May 7, 2008
Slide 1: Introduction and welcome
Thank you [ ] for that kind introduction and welcome to all those delegates joining us in Sydney. SLIDE 1
Slide 2: Five key topics for today
Today I want to cover five key topics and in doing so provide you with an update on how Suncorp is managing its business in these volatile times. I’ll start by recapping the very satisfying progress we have made in integrating the Suncorp and Promina businesses and include an update around three key
Slide 3: Funding and capital topics
Flowing from this II’llll give you a sense of our funding program for the remainder of this calendar year and the maturity profile through calendar 09. And I will conclude by updating our capital position following the dividend reinvestment plan underwrite underwrite, our planned Tier 1 hybrid raisi
Slide 4: Recap of first half result: Bank
But before I begin II’d d like to recap some of the high level numbers from our first half result. First to the Bank which grew profit before tax and bad debts by 9.9% - a result which was in line with guidance guidance. In our view this was a very strong result in the context of the global credit c
Slide 5: Credit card transfer, general insurer and wealth management
And, earlier this year, we transferred our credit card portfolio to Citi Bank in a win-win win win deal allowing us to capitalise on the global leadership Citi brings to the card portfolio. The general insurer absorbed the impacts of a number of external events, including $280m in major weather even
Slide 6: Full year guidance
Following our half year result we were able to update the market on our expected guidance for the full year – and this remains in place today. In the Bank we have upgraded our expected growth in profit before tax and bad debts from our previous guidance of approximately 10% to now be between 10% and
Slide 7: Suncorp-Promina integration recap
Now to a very brief recap on the Suncorp-Promina integration. On 20 March we celebrated the first anniversary of the merger of Suncorp and Promina. While the external environment has certainly thrown up some significant challenges during the course of that first year, both the Board and management r
Slide 8: Integration financial disclosure framework
We have also invested a considerable amount of time and thought into the way we disclose financial aspects of the integration. In February, at our interim results, we provided the market with a framework f reporting for i on the h iintegration i moving i fforward d and you will see that the key P&L
Slide 9: Integration check point
As part of our usual integration program, the executive team recently came together for our quarterly integration “check point”. Thi was an opportunity This i ffor us to review i the h progress we’ve ’ made d since the beginning of the Implementation Phase and ensure that the ambitious plans we laid
Slide 10: Mainframe consolidation
The first is perhaps the integration initiative which had been identified as carrying the highest business risk, and that is the consolidation of the Group’s mainframe applications onto a single and new mainframe platform. The mainframe consolidation is part of a wider technology integration program
Slide 11: Technology milestones and sourcing synergies
The mainframe consolidation follows the achievement of a number of other significant milestones for the technology integration program including: • The migration of the New Zealand and Wealth platforms to the group data centre in January; • The collapsing our data storage environments to a shared gr
Slide 12: Group media negotiations
In our group media negotiations, our Marketing Centre of Excellence has also been able to leverage the new business model to deliver benefits to the Group. By developing a single group framework for media for all our brands, we have been able to deliver significant savings due to new scale advantage
Slide 13: General insurance and weather events
Turning now to our business lines and firstly general insurance. Obviously, we, and other Australian insurers, suffered from a series of ‘back to back’ events towards the end of 2007 and at the beginning of 2008, that were far in excess of our normal provisioning. From 1 January 2008, we took t k th
Slide 14: Home and motor premiums, technical reserves
In home and motor classes, our first half result showed GWP increases of 9.4% and 5.7% respectively and we expect premium increases to be a feature of calendar 2008. We continue to utilise our leading technology capability to ensure that we are appropriately pricing risks. This means that premium in
Slide 15: Credit spreads and general insurance conclusion
As you would be aware these spreads have continued to widen creating a further negative movement movement. But the volatility in the credit markets does mean that the mark to market process is a day to day proposition and today’s position could be materially different to that of next week – let alon
Slide 16: Banking: funding costs and economic slowdown
On the ba nking front, the management of increased funding costs, and the potential for a slowdown in the Australian economy, will be the focus of 2008. In 2008, the mismatch between the variable mortgage rate and the RBA cash rate – which was always a fallacy – has been addressed. While this has ca
Slide 17: Business Bank pricing and lending growth
Our Business Bank has been successful passing on additional funding costs as well as increasing risk margins in preparation for a potential slowdown in economic conditions. Our banking business can be broadly split into two main categories: Firstly, there are fixed rates where our funding costs are
Slide 18: Impaired assets versus peers
In light of recent market announcements by the major banks on their levels of provisioning, it is worth highlighting why Suncorp will always be slightly different from our peers. This slide, based on Macquarie research data, shows that we have generally had slightly higher impaired assets than the m
Slide 19: Write-offs versus peers
On the other hand, as this slide demonstrates, Suncorp has, and we expect will continue to be, at significantly lower levels of actual write-offs than our peers. Our conservative policy on lending ensures that our exposure to corporate collapses and personal bankruptcies is limited. Whilst our busin
Slide 20: Funding and liability duration
Turning to funding and it’s worth pointing out that in the four years prior to the credit crunch we embarked on a conscious effort to both gradually lengthen the maturity of our liability book and to diversify our funding sources. Therefore going into last year’s credit crisis we were conservatively
Slide 21: Commercial paper and maturity profile
In the US, we have reactivated our Commercial Paper facility and, in the past fortnight, raised US$400m, further underlining the diversity of funding options available. We remain in the fortunate position of not having any significant maturities in our wholesale funding during this half. We have a A
Slide 22: Private placements, liquidity and internal securitisation
The continued use of private placements, along with a benchmark issuance, an anticipated deal in the Samurai market, and the convertible preference share will increase the average liability duration to back over 0.4 in the coming months. It will also ensure that we remain on target for funding requi
Slide 23: Tier 1 hybrid capital raising
Turning now to capital and you will be aware that yesterday we announced a Tier 1 Hybrid capital raising in the form of a convertible preference share. We are planning to raise up to $325m from this transaction. For credit rating purposes, the instrument is two-notches below Suncorp’s general rating
Slide 24: Updated capital ratios
To capital, and its worth updating our capital ratios based on the recent initiatives. Clearly, our capital position, particularly the Bank ACE, has been strengthened by our decision to underwrite the dividend reinvestment plan to a 65% participation rate. This will provide us with additional flexib
Slide 25: APRA prudential standards impact
Another impact on our capital position is the recently announced finalisation of the APRA Prudential Standards. These changes give us confidence that we can restructure our General Insurance subsidiaries and unlock some of the capital that is currently trapped within the Vero Group. We expect that t
Slide 26: Wrap up
So, let me wrap up by saying: This has been one of the most challenging periods I have experienced in my time in the finance sector but Suncorp is responding prudently to the challenges of global markets. Our underlying businesses remain strong. We expect to deliver top-line growth in all of our bus
Slide 27: Disclaimer
Fal Disclaimer This report contains general information which is current as at 7 May 2008. It is not a recommendation or advice in relation to Suncorp-Metway Limited or any product or service offered by the Suncorp Group. This report should be read in conjunction with all other information concernin
Slide 28: Questions
I would now be happy to take any questions.. [Following questions] Thank you for your time today. If you need any more information, have a look at shareholder section of our website or contact our investor relations team. They are always ready to assist and happy to answer any further questions or h
Slide 29: Investor Relations Contacts
Investor Relations Contacts Steve Johnston e steve johnston@suncorp.com.au reales Tel: +61 (0)7 3835 5281 Buy-side enquiries Nicole Marques nicole. marques@suncorp.com.au Tel: +61 (0)7 3836 1960 Sell-side enquiries Mark Ley mark.ley@suncorp.com.au Tel: +61 (0)7 3835 5639 www.suncorp.com.au 29