Suncorp Group Limited · ASX:SUN
Suncorp — Suncorp-Metway — H1 2003 Earnings Presentation
33 slides from Suncorp's earnings presentation, Feb 28, 2003
Slide 1: Suncorp-Metway Ltd 2003 Half-Year Results Presentation
SUNCORP-METWAY LTD 2003 Half-Year Results Presentation 28 February 2003 1
Slide 2: Agenda
Agenda • Financial Overview - CEO John Mulcahy • Divisional performance - CFO Chris Skilton - General Insurance - Banking - Wealth Management • Strategy update - CEO John Mulcahy • Outlook • Questions 2
Slide 3: Group Overview
Group Overview NPAT ($millions) Dividend (cents/share) 29 28 26 25 24 24 206 189 178 154 157 155 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 3
Slide 4: Profit by Division
Profit by Division Before goodwill and tax ($millions) 153 150 72 43 36 17 Dec 01 Dec 02 Dec 01 Dec 02 Dec 01 Dec 02 General Banking Wealth Insurance Management 4
Slide 5: Normalised Profit
Normalised Profit* ($millions) 310 288 278 Normalised Inv income 208 Wealth GI Banking Jun 01 Dec 01 Jun 02 Dec 02 *Profit before tax, goodwill. Includes normalised investment return on shareholders funds at 8.5% 5
Slide 6: Group Efficiency Ratio
Group Efficiency Ratio Operating Expenses/Operating Income (%)* 40.1 33.3 32.1 31.1 30.3 29.4 30.0 26.4 27.0 25.9 24.4 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 *Excluding GI shareholder funds investment income and excluding life insurance policyholders’ interests
Slide 7: P&L Impact of Transformation
P&L Impact of Transformation Net of implementation costs ($millions) 97 Incremental 28 effect in half 69 year 43 69 Achieved in 26 prior periods 19 7 26 7 Dec 01 Jun 02 Dec 02 Jun 03 Annual value 36 111 206 240 of ideas implemented 7
Slide 8: Transformation Activity
Transformation Activity • Re-engineered GI distribution model – GIO phone sales & service transferred from 26 offices to three call centres resulting in improved productivity, increased sales at lower cost and greater customer satisfaction • Motor Vehicle Claims management streamlined – Reduced numb
Slide 9: General Insurance Profit
General Insurance Profit Incl Discount ($millions) Half year to: Dec 01 Dec 02 Net earned premium 876 1003 Net claims (720) (866) Operating expenses (227) (230) Reinsurance Commission 13 8 Underwriting result (58) (85) Inv Revenue - Tech Prov 100 165 Trading result 42 80 Other insurance income 8 18
Slide 10: General Insurance Profit
General Insurance Profit Incl Discount Excl Discount ($millions) Half year to: Half year to: Dec 01 Dec 02 Dec 01 Dec 02 Net earned premium 876 1003 876 1003 Net claims (720) (866) (696) (774) Operating expenses (227) (230) (227) (230) Reinsurance Commission 13 8 13 8 Underwriting result (58) (85) (
Slide 11: Premium Revenue
Premium Revenue ($millions) Growth Vs Dec 01 1003 14.5% 921 93 32.9% WC & 876 61 Other 70 215 39.6% 185 Comm’l 154 300 295 3.9% Motor 284 Home 158 165 5.8% 156 212 217 235 10.8% CTP Dec 01 Jun 02 Dec 02 11
Slide 12: Transformation Impact on GI
Transformation Impact on GI Expense reduction. Net of implementation costs ($millions) 65 Incremental 17 effect in half 48 year 30 18 48 Achieved in 11 prior periods 7 18 7 Dec 01 Jun 02 Dec 02 Jun 03 12
Slide 13: GI Expenses
GI Expenses ($millions) 262 18 48 5 2 19 244 230 Jun 02 Transf Transf Former Growth Branches Dec 02 MD Interstate 13
Slide 14: GI Ratios
GI Ratios % of Net Premium Combined 119 118 Ratio 106 108 104 102 100 99 Loss Ratio 92 82 75 86 91 80 77 77 Expense 27 24 25 22 27 24 25 22 ratio Jun 01 Dec 01 Jun 02 Dec 02 Jun 01 Dec 01 Jun 02 Dec 02 Including Discount Excluding Discount Rate Adjustment Rate Adjustment 14
Slide 15: Group GI Solvency
Group GI Solvency ($millions) 1368 = 1.56x Minimum Capital Surplus 491 Req’d 877 Catastrophe risk 50 Investment risk 233 Insurance risk 594 Required Capital Capital Base 15
Slide 16: Banking Profit
Banking Profit ($millions) Half year to: Dec 01 Dec 02 % Net interest revenue 277 295 7 Fee Income 53 65 23 Other revenue 8 5 (38) Total revenue 338 365 8 Operating expenses 171 189 10.5 Profit before bad debts 167 176 5 Bad debt expense 14 26 86 Profit before tax 153 150 (2) 16
Slide 17: Loan Portfolio Mix and Growth
Loan Portfolio Mix and Growth Growth Vs ($billions) Dec 01 23.9 11.5% 22.9 21.4 Total 20.3 Other 8.6 9.1 7.8 16.0% Commercial 7.6 12.7 13.3 13.7 8.4% Housing* 11.8 Jun 01 Dec 01 Jun 02 Dec 02 *Includes securitised assets 17
Slide 18: Total Lending Growth
Total Lending Growth Annual growth in assets (%) 15% 10% 5% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Suncorp Metway Banking system Source: RBA, SUN (Includes securitised assets) 18
Slide 19: Housing Loan Portfolio
Housing Loan Portfolio $bn % 13.5 5% 13.0 12.5 4% 12.0 11.5 3% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Home Loan Receivables (incl. Securitisation) Market Share 19
Slide 20: Business Lending Growth
Business Lending Growth Annual growth in assets (%) 17% 15% 13% 11% 9% 7% 5% 3% 1% -1% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Suncorp Metway Banking system Source: RBA Financial Aggregates, Suncorp 20
Slide 21: Net Interest Margin and Spread
Net Interest Margin and Spread (%) 3.0 Margin 2.7 2.55 2.48 2.41 2.37 2.38 2.33 2.4 2.1 2.20 2.21 2.12 2.11 2.13 2.14 Spread 1.8 1.5 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 21
Slide 22: Bank Funding
Bank Funding ($billions) Growth Vs Dec 01 24.7 12.9% 23.3 21.9 Total 20.4 1.1 0.5 Securitised 11.0 (0.2)% Wholesale 11.0 11.1 10.2 11.7 12.6 16.4% Retail 10.1 10.8 49.8%* 49.5%* 51.3%* 53.4%* Jun 01 Dec 01 Jun 02 Dec 02 * Percentage of total bank funding 22
Slide 23: Banking expenses
Banking expenses ($millions) 2 5 3 7 189 172 150 base Jun 02 Growth CPI Branches Former Dec 02 MD 23
Slide 24: Banking Expense Ratios
Banking Expense Ratios (%) 80 2.03 2.0 72.1 1.8 70 1.60 1.6 1.49 Cost-to-assets 60 1.41 1.44 1.36 1.34 1.38 1.4 57.4 52.9 50 50.9 51.8 50.8 50.6 1.2 47.8 Cost-to-income 40 1.0 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 24
Slide 25: Asset Quality
Asset Quality Impaired assets, % of gross loans 0.93 0.94 0.77 0.70 0.65 0.65 0.57 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 25
Slide 26: Provisioning
Provisioning 150 Total provisions, % of impaired assets 125 110 113 105 100 86 79 80 72 75 Specific provisions, % of 50 impaired assets 25 27 29 25 25 18 17 12 0 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 26
Slide 27: Provisioning
Provisioning General provision, % of RWA 0.75 0.62 0.59 0.58 0.58 0.54 0.55 0.56 0.5 Bad debt expense, 0.25 % of RWA 0.16 0.15 0.13 0.08 0.10 0.10 0.09 0 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 27
Slide 28: Quality Control - Agribusiness
Quality Control - Agribusiness • Total portfolio of $1.9 billion. Impaired assets of $76 million, specific provisions of $7 million • Loan to Valuation ratio of 56% • 100 year’s experience in agribusiness • Third drought in 11 years, so most producers who have survived are experienced • Low levels o
Slide 29: Quality Control - Property Devt
Quality Control - Property Devt • Total portfolio of $1.3 billion • Do not fund “land-banking” - must be capable of development approval within 6-9 months • Only lend to selected, known developers with proven capability. 90% is repeat business • Lend up to 80% of hard “costs to complete”, not agains
Slide 30: Capital Adequacy
Capital Adequacy ($millions) 17.8% (7.2%) 4.6% (5.2%) 1227 769 869 10.0% 3003 1676 Tier 1 Intangibles Tier 2 Deductions Net Capital 30
Slide 31: Wealth Management Profit
Wealth Management Profit ($millions) 39 36 One Offs 13 8 22 17 28 26 Underlying Jun 01 Dec 01 Jun 02 Dec 02 31
Slide 32: Strategy - the Next Steps
Strategy - the Next Steps • Developing a plan for the next five years • Defining our corporate aspirations, and the steps we need to take to achieve them • Fully engaged senior management team in development process, to ensure broad ownership of the strategy • Board sign off by the end of June • Com
Slide 33: Outlook for Full Year
Outlook for Full Year • Banking - Modest growth in revenues, exceeding expense growth, and leading to an increase in pre-tax profit in the range of 8-10%. • GI - Earnings reduced by Canberra bushfires. Targeting expense ratio of 21% and insurance trading margin of 9- 12%, assuming no major claims ev