Suncorp Group Limited · ASX:SUN
Suncorp — Suncorp Metway — Australian General Insurance Forum 2002
24 slides from Suncorp's conference presentation, Oct 16, 2002
Slide 1: Suncorp
Slide 2: Suncorp Metway Ltd - Australian General Insurance Forum
SUNCORP METWAY LTD Group Executive, GI John Trowbridge Australian General Insurance Forum Sydney Wednesday, October 16, 2002 2
Slide 3: Briefing Outline
Briefing Outline • Part One: New era or a false dawn in general insurance? • Part Two: Suncorp/GIO’s competitive position 3
Slide 4: Factors impacting industry
Factors impacting industry • Industry consolidation • NRMA demutualisation • New APRA requirements • The HIH Saga • Declining investment returns • Rising prices • Legislative changes 4
Slide 5: Industry Consolidation
Industry Consolidation Premium share (GWP): Top 15 private sector direct underwriters 1979 1987 2001 Top 15 Top 15 Top 15 56% 75% 89% CTP 41 Others Others 44% 44% Others 25% 11% Others Industry Total GWP $1.7b $4.6b $15.2b Source: APRA, Deloitte Trowbridge 5
Slide 6: NRMA demutualisation
NRMA demutualisation • NRMA as a mutual was not driven 142 to maximise returns to members • Traditionally reported 95 96 97 98 99 00 01 02 underwriting losses, relied on surplus capital and investment -22 returns • Demutualisation imposed new -165 -173 -151 -178 disciplines. Commenced risk- based pr
Slide 7: New APRA Requirements
New APRA Requirements The new requirements are very substantial - • risk based capital • prudential margins • solvency measures • corporate governance • risk management Risk of failure now extremely low? 7
Slide 8: The HIH Saga
The HIH Saga The HIH experience has already been influential - • Management is now more accountable, due to - • the new APRA requirements • public exposure of the inner workings of HIH, FAI • Community awareness of insurance is heightened - • economic function of insurance • security of insurance pr
Slide 9: Investment returns decline
Investment returns decline Equity Markets 10 Year Bond Dow Jones S&P 500 All Ords FTSE 9
Slide 10: Price Increases
Price Increases (%) 29 27 2000/01 24 2001/02 22 20 15 10 6 6 3 3 3 2 0 CTP Motor Home Marine and Professional Public Liability Fire & ISR Aviation Indemnity Source: ACCC. Second Insurance Industry Pricing Review, Sept 2002 10
Slide 11: Legislative changes
Legislative changes • CTP in NSW and Qld • Workcover reforms in most states • Public Liability across Australia • Negligence laws under review 11
Slide 12: New Era or False Dawn?
New Era or False Dawn? The Industry is characterised by - • pricing cycle • importance of distribution • difficulty of differentiation • importance of reinsurance • difficulty of management of long tail claims • consolidation • aversion of governments to accepting private sector risk 12
Slide 13: Briefing Outline
Briefing Outline • Part One: New era or a false dawn in general insurance? • Part Two: Suncorp/GIO’s competitive position 13
Slide 14: SUN experience - 1996 merger
SUN experience - 1996 merger Insurance & Investment Retail Banking Commercial Banking SUNCORP METWAY $19 billion assets 14
Slide 15: GIO - the next phase
GIO - the next phase • GIO acquired Sept 01 for $A 1.4 b • Combined premium $A2b, #2 in Australia • Nationwide expansion • Adds 1.5 million customers 15
Slide 16: Created diverse business mix
Created diverse business mix Dec 2001, Excl GIO Banking Gen Insurance Wealth Management Assets Premium Mix Sales * $A21b $A1.95b $A317m Consumer 2% Home 15% Super Residential 19% 49% mortgages Comrcl CTP Comrcial 61% 15% Risk 41 33% Property Motor 18% 15% 25% Investmt 7% Leasing * Risk sales figures
Slide 17: Scale advantage in GI
Scale advantage in GI Net Premium ($Billions) 2.9 2.0 1.7 1.6 1.3 1.3 0.6 0.5 IAG SUN* CGU RSA QBE Allianz Zurich Lloyds * Excludes motoring club joint venture premium Source: Deloitte Trowbridge, August 2002 17
Slide 18: Major market shares
Major market shares Combined SUN/GIO national market shares % 19 19 17 18 6 13 18 14 6 13 GIO 4 5 SUN 2 4 Commercial Motor WC/UW Home CTP Source: Roy Morgan, APRA, AMP/GIO Figures exclude JVs 18
Slide 19: Geographic Diversification
Geographic Diversification Other 4% Other NSW 5% 14% Vic 12% NSW 34% Qld 91% Qld 40% SUN SUN & GIO Net Premium Revenue, annual, excl JVs 19
Slide 20: Creating National Network
Creating National Network After Acquisition: National footprint Queensland • 2 million customers • 173 branches & agencies • 100 insurance agents and consultants 20
Slide 21: Creating National Network
Creating National Network After Acquisition: National footprint Rest of Australia Queensland • 1.5 million customers • 40 branches & sales centres • 2 million customers • 80 insurance representatives • 173 branches & agencies • 100 corporate agents 21
Slide 22: Integration progress
Integration progress • Information Technology support brought in-house, saving nearly $30 million per year • Call centre consolidation is well progressed with 100% of sales and 70% of claims calls now handled centrally. • Centralisation of back office operations from 41 to 6 sites progressing well.
Slide 23: Products per MFI customer
Products per MFI customer (Excluding GIO Customers) For SUN, 0.1 PPH 3.55 is approx $15m PBT 2.46 2.52 2.38 2.17 2.01 SGB CBA ANZ WBC NAB SUN March 98 Mar 02 * Customers who nominate SML as main financial institution. 12 month moving average Roy Morgan Research 23
Slide 24: Summary and Outlook
Summary and Outlook • Yes it is a new era, but the cycle will continue • As profitability improves, capacity will increase, then excess profits will be eroded • Potential for irrational pricing reduced through industry consolidation, strengthened regulatory requirements • Outlook for Suncorp remains
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