Full year results 2010 25 August 2010
Agenda • Introduction & highlights – Patrick Snowball • Detailed results – John Nesbitt • General Insurance • Banking • Life • Capital • Group update – Patrick Snowball • Conclusion – Patrick Snowball • Questions 2
Challenges and priorities for 2009/10 PRIORITIES CHALLENGES Stabilisation • Restore credibility Balance sheet strength • Rebuild confidence Simplification • Change the culture Executive team Plan for growth ONE COMPANY, MANY BRANDS 3
Challenges and priorities for 2009/10 Stabilisation • Match funding & run off of Non-core portfolio • Restore confidence in the Core Bank Balance sheet strength • Strengthen provisioning & revise methodology • Conservative dividend Simplification • Remove distractions (LJ Hooker/RACQI/RAAI) • Presentation of capital on a NOHC view Executive team • Completed executive team appointments • One company, many brands Plan for growth • Strategy presentations for businesses • Implementation of strategic plans 4
Result highlights % Δ A$m FY10 General Insurance profit after tax 557 34% Consolidated Bank profit after tax before one offs 44 19% Life profit after tax 222 90% PROFIT AFTER TAX FROM BUSINESS LINES 823 37% LJ Hooker/RACQI/RAAI 160 n/a Intangible amortisation & other (203) n/a GROUP NPAT 780 124% Cash earnings per share (basic) 73.5 cents up 56% Final dividend per share (fully franked) 20 cents Full year total dividend per share (fully franked) 35 cents 5
Group performance 80% 40 • Final dividend of 20cps, 70% 35 fully franked 35 60% 30 • Dividend payout ratio, 50% 25 excluding divestments of 20 40% 20 58% 30% 15 15 • Neutralised dilutive effect of 20% 10 the DRP 10% 5 46.5% 70.8% 58.1% • Strong capital position but 0% 0 1H 2H FY regulatory uncertainty Dividend payout ratio (ex disposals) Dividend per share (cents) 6
Agenda • Introduction & highlights – Patrick Snowball • Detailed results – John Nesbitt • General Insurance • Banking • Life • Capital • Group update – Patrick Snowball • Conclusion – Patrick Snowball • Questions 7
General Insurance overview % Δ A$m FY10 General Insurance profit after tax 557 34% 600 12.0% • GWP up 6.5% excluding Covermore travel insurance 500 10.0% 9.6% • Natural hazard claims above allowance by $165m 7.7% 400 8.0% • Revised Average Weekly Earnings (AWE) assumption by 0.5%, costing $75m 300 6.0% • One off reduction in deferred acquisition costs reduced profit by $47m 200 4.0% • Reserve releases of $256m but conservative provisions remain 100 2.0% 416 557 • Good momentum in underlying ITR improvement 0 0.0% • New Zealand ITR contribution of $70m or 12.2% FY09 FY10 Profit after tax ITR Ratio Underlying ITR 9% for FY10 8
Gross Written Premium % Δ Product FY10 Factors Motor 2,451 6.4 Solid premium and net written unit growth Significant premium increases and resilient Home 1,725 13.6 customer retention Increases in short-tail classes offset by exit Commercial 1,709 (0.1) in some business lines CTP 837 13.3 Higher average premiums Workers’ Comp 222 5.7 Moderate increases in Western Australia Cessation of Covermore travel insurance Other 83 (75.1) partnership Total 7,027 3.1 GWP up 6.5% excluding the Covermore impact 9
General Insurance claims Other impacts on claims expense: Major natural hazard events $m • Positive experience in working loss claims QLD – NSW storms (Feb 10) 27 • Some claims inflation in Perth and NSW storms (Feb 10) 20 Melbourne following major events West QLD floods (Mar 10) 29 • Reserve releases of $256m well above Melbourne storm (Mar 10) 200 long-run expectations of 1.5% of NEP Cyclone Ului (Mar 10) 42 ($95m) Perth storm (Mar 10) 155 2010/11 outlook Total claims 473 Natural hazard allowance increases to $460 Less: aggregate reinsurance cover (163) million Total net claims 310 Reinsurance program based on 2009/10 with: Minor natural hazards 255 • Catastrophe retention of $200m Allowance for all natural hazards (400) • $400m of aggregate cover if events Natural hazards above allowance 165 over $10m exceed $300m 10
General Insurance investment income FY10 Investment income A$m Underlying yield 355 Discount rate impact on insurance liabilities 142 Economic and accounting mismatch 105 Total 602 11
General Insurance expenses Expense Ratio of 26.4% down 1.1% Acquisition and operating expenses of $1,670m up 1.7% 27.5% 26.4% Impacted by: • One off DAC charge of $47m Acquisition Acquisition expenses expenses • $34m of one off restructure costs • $29m increase in Fire Service Levies Other Other underwriting underwriting expenses expenses Jun-09 Jun-10 12
General Insurance margin 14% 12% 2.6% 2.6% 10% 9.6% 1.6% 9.0% 1.0% 8% 6% 4% 2% $605m $165m ($161m) ($105m) $62m $566m 0% Reported ITR Natural Reserve Investment One-off Underlying hazards releases income expense ITR mismatch adjustments 13
Consolidated Bank overview % Δ A$m FY10 Consolidated Bank profit after tax before one-off items 44 19 Non-core Bank Core Bank • Loss after tax $224 million • Profit after tax $268 million • Total lending $12.6 billion • Total lending $37.4 billion • Run-off progressing well, ahead of • Strong deposit growth, ahead of system plan • Impaired assets stable and bad debts • Improved net interest margin reducing • Well positioned for future growth • De-risking has reduced margins 14
Core Bank: deposits and lending assets Total deposits growth, June 2010 1.51% 1 month 1.33% Suncorp 1.26% 3 months APRA System 2.23% 6.21% 6 months 4.89% 12.92% 12 months 7.99% Suncorp historical mortgage growth v RBA system (6 month rolling) 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jun-10 15 RBA System SUNCORP
Core Bank: credit quality Core gross non-performing loans trends, A$m Past 90 days due loans to gross loans 0.65% 0.69% 0.66% 0.59% 0.54% 0.53% 0.52% 241 249 0.45% 0.47% 0.44% 172 145 150 142 Jun-09 Dec-09 Jun-10 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Impaired assets past 90 days Bad and doubtful debt expense (normalised) A$m FY10 1H10 2H10 Reported BDD 51 2 49 Methodology change 4 14 (10) Normalised BDD 55 16 39 Normalised BDD to RWA 0.28% 0.17% 0.40% 16
Non-Core Bank: assets Forecast run-off, A$bn Non-core assets, A$bn 17.5 Actual run-off ahead 1.5 15.6 20 of forecast by $1.4bn 1.2 18 Expected 12.6 16 6.6 Actual 0.8 5.9 14 12 5.0 10 8 6.1 5.6 6 4.3 4 2 3.3 3.0 2.5 - Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Jun-09 Dec-09 Jun-10 09 09 10 10 11 11 12 12 13 13 14 Corporate Development Finance Property Investment Lease Finance 17
Non-Core Bank: credit quality Impaired asset movements, A$m (170) 2,077 1,972 251 (141) (45) Dec-09 BBP Portfolio sale Security New from Jun-10 realisation watchlist Impaired loss trends, A$m Non-core Total Bank* 355 355 272 156 1H09 2H09 1H10 2H10 * Reporting periods prior to Core/Non-core reporting split Total Bank charges are materially Non-core 18
Life overview % Δ A$m FY10 Life underlying profit after tax 192 7 250 250 • Life Risk profit $137m, up 1% 192 180 200 200 • Planned profit margin release $85m, up 8% • In-force premiums $784m, up 7% 150 150 • Life new business sales flat at $86m 100 100 • Super & Investments profit $41m, up 28% 50 50 • Asset Management profit $14m, up 17% 117 222 • Operating expenses $321m, down 5% 0 0 FY09 FY10 NPAT Underlying PAT Embedded Value of $2.4 billion, up 12% 19
Embedded Value (A$m) Value of One Year’s Sales (VOYS) over time Embedded Value over time 2,450 2,406 60 53 2,350 2,301 46 50 38 2,250 40 2,145 2,150 30 2,050 20 1,950 10 1,850 0 Jun-09 Dec-09 Jun-10 Jun-09 Dec-09 Jun-10 Change in Embedded Value: 30 June 2009 → 30 June 2010 38 (72) 2,406 36 69 190 2,145 June 2009 Expected Current year's Assumption VOYS Dividends / June 2010 return experience changes franking credits 20
Group Balance Sheet Balance Sheet • Net assets of $14 billion • Includes goodwill and intangibles of $6.6 billion • Net tangible assets of $7.4 billion Core Capital Levels General Bank Life Insurance $2.6bn $1.7bn $3.0bn Group $7.4bn* * Includes non-regulated entities of $162 million 21
Capital ratios Total Bank Capital Ratios (%) Adjustment Fundamental Tier 1 (%) Tier 1 Tier 2 14.71 13.70 12.77 13.23 7.03 11.96 6.24 11.31 5.78 Jun-09 Dec-09 Jun-10 Jun-09 Dec-09 Jun-10 22
Agenda • Introduction & highlights – Patrick Snowball • Detailed results – John Nesbitt • General Insurance • Banking • Life • Capital • Group update – Patrick Snowball • Conclusion – Patrick Snowball • Questions 23
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