Suncorp Group Ltd · Suncorp Group Limited . Leading financial services brands in Australia and New...

Suncorp Group Limited

Asia Debt Investor Update April 2016 “Creating value for

our customers”

2 07 April 2016 Suncorp Group Limited

Suncorp Debt Investor Update

3 Suncorp Group

6 Group Financial Results

12 Capital

17 Suncorp Bank

31 Economy

Agenda

39 Appendix – Mortgage Origination

44 Appendix – General Insurance

27 Funding & Liquidity


Leading financial services brands in Australia and New Zealand

Suncorp Group

Top 20 ASX listed company

$15.4 billion market capitalisation at 07 April 2016

$94 billion in group assets

13,400 employees in Australia and New Zealand

9 million customers

End to end ownership of brands


Group Capital Structure

Ordinary dividend – 60-80% of cash earnings

100% of distributable earnings

Maintain capital targets Surplus assets

Suncorp Group

GI Life Bank

General Insurance

Bank (Suncorp Metway Ltd)

Life

Shareholders Surplus returned to shareholders

• Suncorp Metway Ltd is the entity that issues senior debt instruments on behalf of the Bank

• AAI Limited and SIF Limited are the entities that typically issue sub-debt instruments on behalf of General Insurance

• Suncorp Group Limited is typically the entity that issues Basel III compliant CPS and T2 sub-debt

Priorities

07 April 2016 Suncorp Group Limited

1. Maintain stability and momentum

2. Elevate the customer

3. Recalibrate costs

Key Targets

• Broadening of customer relationships

• Improving underlying NPAT

• Sustainable ROE of at least 10%, which implies an underlying ITR of at least 12%

• Maintaining a dividend payout ratio of 60% to 80% of cash earnings

• Returning excess capital

5

Strategic Refinements

Group Financial Results

“Creating value for our customers”


Natural hazards and investment income impact on the GI NPAT HY16 Results Overview ($m)

HY16 HY15 % change General Insurance 297 419 (29) Bank 194 176 10 Suncorp Life 53 86 (39) Business lines NPAT 544 681 (20) Other 12 (21) - Cash earnings 556 660 (16) Acquisition amortisation (26) (29) - Reported NPAT 530 631 (16)

External impacts: Pre-tax Post-tax Pre-tax Post-tax Investment returns 133 93 348 244 Natural hazards (362) (253) (470) (329) Reserve releases 137 96 214 150 Suncorp Life market adjustments - (5) - 34


Diversification of earnings Suncorp Group Business Line NPAT ($m)

64 -10 -19

34 -5

162 564 470 419

297

156 144

105 176 194

69 61 41 52 58

-54 -140

1H12 1H13 1H14 1H15 1H16

■ Life underlying NPAT ■ Life market adjustments ■ General Insurance

■ Bank ■ Non-core Bank

397 597 681 544

619

HY16 HY15 %change

GWP 4,417 4,357 1.4

Net earned premium 3,992 3,947 1.1 Net incurred claims (2,822) (2,805) 0.6 Operating expenses (892) (902) (1.1) Underwriting result 278 240 15.8

Investment income – insurance funds 99 266 (62.8)

Insurance trading result 377 506 (25.5)

Investment income –shareholder funds 34 82 (58.5) Managed schemes, JVs and funding costs 1 6 (83.3) Income tax (115) (175) (34.3)

NPAT 297 419 (29.1)


Claims inflation and lower investment returns reducing profitability General Insurance

Key highlights

• GWP up 1.4% • Return to top-line growth

across all portfolios • Claims inflation

challenges reducing underlying margin

• Underlying ITR 10.1% • Lower investment returns

and MTM adjustments • Reserve releases of

$137 million or 3.4% of NEP


Improving credit quality driving improved profit Suncorp Bank

HY16 HY15 %change

Net interest income 566 553 2.4

Net non-interest income 49 64 (23.4)

Total income 615 617 (0.3)

Total operating expenses (326) (322) 1.2

Profit before impairment losses 289 295 (2.0) Impairment losses on loans and advances (11) (43) (74.4)

Bank profit before tax 278 252 10.3

Income tax (84) (76) 10.5

Suncorp Bank NPAT 194 176 10.2

Key highlights • 5.1% lending growth • Ongoing improvement in

credit quality with non-performing loans down 15.1%

• NIM of 1.85% at the top end of the target range

• Cost to income reducing to 53%

• Good progress with key projects, Ignite and Advanced accreditation


Underlying profit increase of 11.5% Suncorp Life Insurance

HY16 HY15 %change

Planned profit margin release 22 17 29.4

Claims experience 3 6 (50.0)

Lapse experience 5 1 400.0

Other experience (6) (5) 20.0

Underlying investment income 16 15 6.7

Superannuation 18 18 -

Suncorp Life underlying profit after tax 58 52 11.5

Market adjustments (5) 34 n/a

Suncorp Life NPAT 53 86 (38.4)

Key highlights • In-force premium

growth of 5.2% • Direct growth via GI

brands up 20% • Embedded Value of

$1,936 million up 4.9% • Value of One Year

Sales up 28% to $23 million

• Third successive half of positive claims and lapse experience

Capital


1.25x 1.14x 1.25x

1.73x 1.70x 1.67x

SUN Peer 1 Peer 2

CET1 AT1 Tier 2

* Ratios listed relate to Prescribed Capital Amount (PCA). Source: Latest published company reports.

General Insurance capital ratios* Bank capital ratios*


Strong General Insurance and Bank capital ratios against peers Suncorp Capital Ratios

Additional $243 million capital held at Suncorp Group level

Advanced basis Standardised

9.45% 8.91% 8.17% 10.24% 10.24% 9.59% 9.50%

13.97% 12.72% 12.57%

14.15% 14.08% 13.29% 13.26%

SUN Regional 1 Regional 2 Major 1 Major 2 Major 3 Major 4

CET1 AT1 Tier 2

* Peer bank ratios exclude impacts of post balance date capital raisings and transactions. Source: Latest published company reports.


Outstanding at 31 December 2015 Capital Instruments

Semi-annual coupon rate / margin above 90 day BBSW

Optional Call / Exchange Date Issue Date

31 DECEMBER 2015 Total Balance

Regulatory Capital

GI Bank Life SGL

$M $M $M $M $M $M

AAIL Subordinated Debt 330 bps Nov 2020 Nov 2015 225 - - - 225 225

AAIL Subordinated Debt 6.75% Oct 2016 Oct 2006 101 - - - 101 108

AAIL Subordinated Debt - June 2017 Oct 2007 265 - - - 265 220

SGL Subordinated Debt 285 bps Nov 2018 May 2013 - 670 100 - 770 770

SML FRCN 75 bps Perpetual Dec 1998 - 72 - - 72 72

Total subordinated debt 591 742 100 - 1,433 1,395

SGL CPS2 465 bps Dec 2017 Nov 2012 110 450 - - 560 560

SGL CPS3 340 bps June 2020 May 2014 400 - - - 400 400

Total Additional Tier 1 Capital 510 450 - - 960 960

Total 1,101 1,192 100 - 2,393 2,355


Increased sophistication due to Risk Based Capital modelling

Capital

• Simplification and de-risking have supported capital returns

• Balance sheet strong

• Risk Based Capital embedded

• Enhancing decision making

*Chart not to scale

Group Total

Group Total

GI

Bank

Life

Diversification Potential*

NOHC

Group Surplus

Regulatory minimum Operating target Surplus to operating target


Capital volatility by key risk type

Group Risk Based Capital

Market risk

Counterparty credit risk

Insurance risk

Operational risk

Suncorp Group GI Bank

Life Corporate

73% 3%

21%

3%

65% 27%

8%

36%

57%

7%

14%

86%

62% 11%

24%

3%

Suncorp Bank



Key ratios Suncorp Bank

4.06% 3.17%

1.37%

6.49%

3.58%

1H14 2H14 1H15 2H15 1H16

Lending growth (annualised)

1.66%

1.78% 1.86% 1.83% 1.85%

1H14 2H14 1H15 2H15 1H16

Net interest margin (interest-earning assets)

59.57%

55.48%

52.19%

54.64% 53.01%

1H14 2H14 1H15 2H15 1H16

Cost to income ratio

0.18%

0.32%

0.17%

0.06% 0.04%

1H14 2H14 1H15 2H15 1H16

Impairment losses to gross loans and advances

(annualised)

7.59% 8.78%

12.13% 12.21% 13.11%

1H14 2H14 1H15 2H15 1H16

Return on Common Equity Tier 1

65.70% 65.80% 66.10%

65.30% 65.60%

1H14 2H14 1H15 2H15 1H16

Deposit to loan ratio

0.3%


Total lending assets $52.9 billion Retail banking market share Suncorp Bank

10.0%

0.8%

0.8%

1.8%

0.3%

Source: Roy Morgan

11

1

151

ATM

Branch

Business centre

19 122

9

524

40

3

414 9

1

545

1

1

245

1

48

0.5%

81%

10% 8%

1% Portfolio

54% 25%

10%

7% 4%

Geography

■ Commercial (SME) ■ Housing ■ Agribusiness ■ Consumer

■ NSW ■ QLD ■ VIC ■ SA & Other ■ WA

208 Points of Presence


Home lending assets $43 billion

Suncorp Bank

■ New South Wales and ACT

■ Queensland

■ Victoria, South Australia and Other

■ Western Australia

■ Investor ■ Owner occupied

■ Intermediary ■ Direct

51%

28%

13%

8%

Geography

70%

30%

Borrower type

37%

63%

Channel


Commercial (SME) assets $5.2 billion Suncorp Bank

■ New South Wales ■ Queensland ■ Other

54%

14%

20%

10%

2% Exposure size

■ Hospitality and accommodation

■ Property investment

■ Construction and development

■ Retail ■ Services ■ Manufacturing and

mining ■ Other

■ < $5 million ■ $5-$10 million ■ $10-$25 million ■ $25-$50 million ■ $50-$100 million

35%

16% 8%

17%

8%

5%

11%

Industry

74%

13%

13%

Geography


Agri assets $4.3 billion Suncorp Bank

■ Beef ■ Grain and mixed

farming ■ Sheep and mixed

livestock

■ Sugar ■ Cotton ■ Fruit ■ Other

49%

21%

24%

6%

Exposure size

■ < $5 million ■ $5-$10 million

■ $10-$25 million ■ $25-$50 million

■ Queensland ■ New South Wales ■ Other

30%

30%

10%

8%

3% 3%

16%

Industry

62% 29%

9%

Geography


Credit quality – gross impaired and past due loans Suncorp Bank

Gross impaired loans by segment ($m)

34 28 26 33 31 25

139 182 208

162 125 109

51

206 99

67

62 42

2H13 1H14 2H14 1H15 2H15 1H16

Commercial/SME lending Agribusiness lending Retail lending

Past due home loans (% gross home loans)

0.79%

0.98% 0.93%

0.74% 0.78% 0.69%

0.05%

-0.01%

2H13 1H14 2H14 1H15 2H15 1H16

Total home lending Home lending impaired HL Loss Rate


Credit quality - impairments Suncorp Bank

Impairment losses to gross loans Net impaired loans to gross loans

Source: Latest peer financial reports

0.22%

0.27%

0.38%

0.28%

0.16%

0.24%

0.29%

SUN Regional 1

Regional 2

Major 1 Major 2 Major 3 Major 4

0.04%

0.18%

0.14% 0.17%

0.13% 0.13%

0.24%

SUN Regional 1

Regional 2

Major 1 Major 2 Major 3 Major 4


Asset growth and credit quality ($m) Suncorp Bank

Commercial (SME) portfolio Agribusiness portfolio

4,039

4,311 4,484

4,624 4,534

4,400 4,258

2.46

%

3.22

%

4.06

%

4.50

%

3.58

%

2.83

%

2.56

%

1H13 2H13 1H14 2H14 1H15 2H15 1H16 Agribusiness portfolio ($m) Gross impaired assets/Total portfolio (%)

5,297 5,531

5,666 5,772 5,593

5,353 5,203

1.56

%

0.88

%

1.00

%

0.88

%

1.20

%

1.16

%

0.81

%

1H13 2H13 1H14 2H14 1H15* 2H15* 1H16* Commercial portfolio ($m) Impaired assets/Total portfolio (%)

61% 62% 64% 66% 69%

22% 23% 24% 23% 22%

17% 15% 12% 12% 9%

1H14 2H14 1H15 2H15 1H16

Home Lending Assets by LVR


Home lending assets $43 billion

Suncorp Bank

■ 0 - 80% ■ 80.01 % - 90% ■ 90.01% +

66% 71% 84% 87% 88%

8% 13%

12% 9% 9% 26%

17% 5%

3% 2%

1H14 2H14 1H15 2H15 1H16

Home Lending New Business by LVR

Funding & Liquidity



Maturity Profile Suncorp Bank

LT funding profile ($m)

0

200

400

600

800

1,000

1,200

1,400

Apr

16

May

16

Aug

16

Sep

16

Dec

16

Jan

17

Feb

17

Mar

17

Apr

17

Oct

17

Nov

17

Dec

17

Apr

19

Aug

19

Nov

19

Apr

20

Oct

20

Apr

21

Covered Bond Domestic Senior Unsecured Offshore Senior Unsecured


Ratings and Benchmark Transactions Suncorp Bank

Issue Date Amount Tenor

Covered Bond

Oct 2014 A$950m 5yr FRN/5yr Fixed

Nov 2012 A$600m 5yr Fixed

Jun 2012 A$1.1bn 4.5yr Fixed

Senior Unsecured (Benchmark)

Apr 2016 A$750m 5yr FRN/Fixed

Oct 2015 A$750m 5yr FRN/Fixed

Apr 2015 US$600m 5yr Fixed

Sep 2014 GBP250m 3yr FRN

Apr 2014 A$750m 5yr FRN

Mar 2014 US$850m 3yr FRN/Fixed

RMBS

Mar 2015 A$1.25bn 4yrs Weighted Average

May 2013 A$1.15bn 4yrs Weighted Average

Ratings Agency Short Term Long Term

Standard & Poors A-1 A+ (stable)

Fitch F1 A+ (stable)

Moodys P-1 A1 (stable)

• Strong Bank issuer credit rating of A+/A1/A+ creates genuine competitive advantage to other regional banks

• Suncorp Bank has issued in A$, US$, EUR, GBP, JPY & Asian currencies with all funds swapped into A$

• Modest term funding requirements for FY15/16


Liquid Assets Components of Liquid Assets ($bn)

1.2 1.6 1.9 3.6 2.8 3.5

9.7 7.7 6.2

5.3 5.0 3.3

4.2

4.2 4.2

4.0 4.3

4.4

1 2 3 4 5 6

Cash, Govt, Semi-govt Bank, NCD, Bills, RMBS, Supra, Covered Bonds Internal RMBS

Dec 15

15.1

13.5 12.3 12.9

12.1 11.2

Jun 13 Dec 13 Jun 14 Dec 14 Jun 15

Components of LCR ($bn)

LCR defined as Liquidity Coverage Ratio CLF defined as Committed Liquidity Facility HQLA defined as High Quality Liquid Assets

30 Jun 15 31 Dec 15

100% LCR 100% LCR

118% LCR 139% LCR

2.8

6.3

3.5

5.9

4.8

1.3

4.8

2.3

1 2 3 4 5

HQLA assets CLF

Required LCR qualifying liquid assetsBuffer

Economy


Favourable Economic Fundamentals


• Australia continues to see moderate economic growth despite the impact from the resources sector.

• Consensus forecasts expect growth to continue through 2016 and 2017.

• Fundamentals remain positive for both Australia and Queensland.

• Australia has also retained its AAA credit rating. • Population growth continues to support economic

activity while unemployment has declined.

Australia Queensland Data as at:

Population Growth (pa) 1.4% 1.2% Jun-15

Unemployment Rate 5.8% 5.8% Dec-15

Inflation 1.7% 1.7% Dec-15

Budget Position $33bn deficit (2.0% of GDP)

$1bn deficit (0.4% of GSP) 2015/16 forecast

Credit Rating (S&P/Moody’s) AAA / Aaa AA+ / Aa1 Feb-16

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2011a 2012a 2013a 2014a 2015e 2016f 2017f

Source: Consensus Economics Annual % Change

Australian economic growth Other key metrics supportive

Monetary Policy is Supporting Activity


• The RBA’s most recent reduction in the cash rate was in May 2015. No further changes are anticipated in the near term with recent RBA commentary noting the strength of the Australian economy.

• Credit growth remains stable. The increase in business loans has been offset with slower growth in residential investor lending following the macro-prudential measures taken by APRA in 2015.

1

2

3

4

5

6

7

8

Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Std Var Mortgage Rate RBA Cash Rate Headline Inflation Rate

Source: ABS, RBA, Bloomberg %

Inflation Target Range

-4

-2

0

2

4

6

8

10

12

Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Total Credit Business Total Housing Investor Housing

Source: RBA Annual % Change

Inflation & interest rates Lending growth

Favourable Trends in Building and Labour


• Dwelling approvals are at long term highs. However adjusting for population growth, high levels of residential building activity is likely to continue.

• The non-residential building market continues to harden albeit gradually.

• Labour market conditions continue to improve, with employment growth at the strongest levels since 2006.

• The unemployment rate has decreased to 5.8% from 6.0%.

6

7

8

9

10

11

12

120,000

140,000

160,000

180,000

200,000

220,000

240,000

Dec-85 Dec-90 Dec-95 Dec-00 Dec-05 Dec-10 Dec-15

Annual approvals per '000 of population (RHS)

Source: ABS, Bloomberg, Suncorp

Annual approvals (LHS)

Average

Building approvals Labour market

4.9

5.2

5.5

5.8

6.1

6.4

-50

-25

0

25

50

75

100

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Employment Unemployment Rate (%)

Change Per Month ('000) Source: Bloomberg

Other Indicators are Mixed


• Business and consumer confidence indicators improved through 2015 and remain above average despite continued volatility.

• Australia’s exports continue to rebalance due to a more competitive AUD.

• Service exports such as tourism and education performed well in 2015.

-10

-5

0

5

10

15

Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15

Sources: NAB, Bloomberg Index

Business Conditions

Business Confidence

Confidence indicators Shifting export trends

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15

Service Exports (RHS)

Mining Exports (LHS)

$m $m Source: ABS

Household Financial Conditions


• Notwithstanding the lift in household borrowing, interest payments have fallen, savings have been maintained and unemployment has fallen.

• Meanwhile, the RBA notes that “indicators suggest that household financial stress remains fairly benign” (Financial Stability Review October 2015).

• Increases in house prices have boosted household wealth.

• House prices in Brisbane are now showing a clear affordability advantage.

120

130

140

150

160

170

180

190

200

-2

0

2

4

6

8

10

12

14

Sep-00 Sep-05 Sep-10 Sep-15

Source: RBA

%

Debt to disposable income (LHS)

Interest payments to disposable income (RHS)

%

Household savings rate (RHS)

Debt and debt servicing House prices

200

300

400

500

600

700

800

900

1,000

Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15

Sydney Melbourne Brisbane

Source: Bloomberg, ABS Median House Price ($ '000)

Queensland Prospects


• Queensland is forecast to lead state growth in 2016, assisted by a diversified economic base.

• The pullback in resources has however had an impact on measures of real economic growth.

• Queensland saw a buoyant residential building market over 2015.

• However, population growth of >2% per annum over the past decade means that building levels adjusted for population are only back at average levels.

3.0%

3.0%

0.1% 2.5%

3.7%

1.4%

State economic growth QLD building approvals

6

7

8

9

10

11

12

120,000

140,000

160,000

180,000

200,000

220,000

240,000

Dec-85 Dec-00 Dec-15

Annual approvals per '000 of population (RHS)

Source: ABS, Bloomberg, Suncorp

Annual approvals (LHS)

Average

Gross State Product 2016 forecast Source: Deloitte Access Economics, Sep-15


Investor Reporting For further information on Treasury Funding please go to http://www.suncorpbank.com.au/financial-services/treasury/wholesale-funding

Contacts David Carter Scott McMullen Simon Lewis Adam Parry Katie Taylor-Groth

Chief Financial Officer Group Head of Treasury Executive Manager Funding and Treasury Sales Institutional Relationship Manager Institutional Relationship Manager

[email protected] [email protected] [email protected] [email protected] [email protected]

+61 7 3167 9619 +61 7 3362 4042 +61 7 3362 4037 +61 7 3362 4031 +61 7 3362 4049

mailto:[email protected]







APPENDIX Mortgage Origination

39


Home Loan Underwriting Process Suncorp Bank Mortgage Portfolio

Approved

Suncorp Central Processing Area

SUNCORP CENTRES

208 offices nationwide

AGGREGATORS 22 nationwide

Automated Credit Scoring Model

‘Sunloans’

37% 63% Customer

Referred

Delegated Credit Authority ‘DCA’

Declined

57%

30%

13%

Referred Approved

Declined Approved

60%

13%

• Suncorp has a custom built origination system called Sunloans

• This system has an automated decision engine model (scorecard) which reflects the Bank’s risk strategy and underwriting criteria

• Underwriting that is not approved via the scorecard is completed by accredited Suncorp staff under a Delegated Credit Authority approved by the Chief Risk Officer *

• Aggregators/ Brokers have no approval authority

• Post approval, audits are performed regularly by the hindsight review team and QBE LMI for LMI loans

* Delegated by the Chief Risk Officer to Executive Manager Credit Oversight and Assurance for Delegated Credit Authority below Banking Credit.


Underwriting criteria & valuation requirements Suncorp Bank Mortgage Portfolio

Underwriting Criteria Valuation Requirements

Overview: • Underwriting criteria is built into Suncorp’s automated Credit Scoring Model – • Credit Bureau reports required for all borrowers. Where report is not satisfactory, loan

is referred via the scorecard to a higher approval authority for decision • Delegated Credit Authorities are held in the Banking Credit team and selected

Lending Staff who are achieving benchmark results in Compliance

Overview: • All valuations are undertaken by Accredited Panel Valuers appointed by Suncorp • Suncorp utilises approx. 120 valuers nationwide • Independent valuations undertaken for approx. 85% of loans on Suncorp’s balance

sheet

Serviceability: • Customer serviceability determined via an assessment of affordability using the

greater of the “floor” rate (5 year BBSW average for the previous quarter + 3% buffer + an overlay of 171bps) or the actual Customer product rate + 2%

• Confirmation and stability of employment investigated and appropriate income details required

• To verify loan affordability, Minimum Household Living Expenses are aligned with income. These allowances are updated quarterly and align with recognised indices

Valuations are required: • Loans with LVR > 70% (subject to the purpose & loan amount) • For metro properties if loan amount > $500,000 ** • For non metro properties if loan amount > $300,000 ** • Suncorp valuations are processed via the valuation management system (VMS),

which is a fully automated system supplied by Core Logic that links the Bank to the Valuation firms – the selection of a valuer is random and controlled by the system.

• Credit Policy and valuation rules are applied via the valuation decision maker (VDM), which determines the type of valuation to be used for a particular scenario

• Lenders / Banking Credit can override the system and request a full valuation. ** If the LVR is <= 80% and the loan amount is < $1M, a valuation may not be required if the contract of sale is acceptable and the Bank can validate same**

Acceptable loan security: • Parameters establish acceptable security types, acceptable geographic locations,

maximum LVR and maximum loan amounts for particular locations • For fully verified loans, maximum LVR (inclusive of LMI fee) is capped at 95% LVR,

with maximum LVR for Interest Only and Investor loans capped at 90% • All loans are supported by registered 1st mortgage with full recourse to the borrower

Panel valuers are individually accredited based on: • Industry qualifications • Current professional development certificates • Minimum $1m professional indemnity insurance cover • Approval by Suncorp Banking Credit and LMI sign off


Mortgage brokers Suncorp Bank Mortgage Portfolio

Broker Accreditation Requirements Overview of Mortgage Brokers

Formal accreditation process: • Must have ASIC issued Australian Credit License or be appointed as a Credit

Representative by a license holder

• be a member of an approved Aggregator group

• Must be a member of the Mortgage and Finance Association of Australia or Finance Brokers Association of Australia (MFAA or FBAA)

• Cannot be registered without full industry accreditation (e.g. National Consumer Credit Protection (NCCP) training)

• Ongoing training requirements also need to be achieved

Broker responsibilities: • Act as intermediaries between the borrower and Suncorp in the initial phase of

mortgage origination

• Act solely as originators of loan applications and have no authority to perform any part of the loan assessment, approval or servicing

• Validation of employment and income data conducted by Suncorp staff

Experience and training (administered by Aggregators): • Must have a minimum of 2 years industry experience

• Must be a member of the Mortgage and Finance Association of Australia or Finance Brokers Association of Australia (MFAA or FBAA) and be personally identified (e.g. 100-point check)

• Have a Certificate IV in Mortgage Lending

• Subject to clear Australian Federal Police checks

• Must hold Professional Indemnity Insurance

An annual review process is performed by Channel Management on Aggregator relationships and includes: • The quality/quantity of mortgage applications

• Percentage of Suncorp business and arrears

• Portfolio trends compared to industry averages

• Changes in ownership

• Fraudulent and suspicious activity


Comprehensive arrears management Suncorp Bank Mortgage Portfolio

Customer Contact Strategy (Collections)

Mitigation Strategy (Recoveries)

Legal Process and Asset Realisation (Repossessions) Day 1 – Day 60 Day 60 – Day 90 90 + Days

• System generated arrears notice sent on Day 7

• After Day 7 continuous contact via predictive dialler

• Aim to elicit “Promise to Pay”

• 14 full-time Officers dedicated to covering outbound calls

• 5 full-time Officers dedicated to covering inbound calls

• Default Notice / Notice to Exercise Power of Sale 30 days

• Staff target 80-85 contacts per person per day

• Customer transferred to Late Collections Team (5 staff)

• Notice to Quit issued

• Strict adherence to NCC Guidelines

• Approval of Hardship Cases on application basis

• QBE LMI send arrears report at 60 days

• Lodge Statement of Claim with Supreme Court

• File Writ of Possession

• Judgement and execute warrant for vacant possession

• Obtain valuation, recommend real estate agent and complete any capital works as required

• Repossessions Team focus on loss mitigation strategy (5 staff)

• Auction and sale of property

• LMI claim made for any shortfall

APPENDIX General Insurance

44


Top-line positive in a very competitive market Gross Written Premium

Product HY16 ($m) %change Factors

Motor 1,413 1.7 Increase in average written premium rates partly offset by a small loss of units

Home 1,287 1.3 Increase in average written premium rates partly offset by a small loss of units

Commercial 1,115 (1.3) Growth in most commercial lines offset by a 33% reduction in the Workers Compensation segment

CTP 567 6.8 Growth across NSW, Qld and ACT portfolios

Other 35 (5.4)

Total 4,417 1.4

Australia 3,796 1.2

New Zealand 621 2.6 2.7% in NZ$ terms


Key ratios General Insurance

9.8% 8.7% 8.6% 8.1% 8.0%

1H14 2H14 1H15 2H15 1H16

Other underwriting expenses ratio

13.5% 14.0% 14.3% 14.4% 14.4%

1H14 2H14 1H15 2H15 1H16

Acquisition expenses ratio

67.5% 68.2% 71.1% 71.0% 70.7%

1H14 2H14 1H15 2H15 1H16

Loss ratio

23.3% 22.7% 22.9%

22.5% 22.4%

1H14 2H14 1H15 2H15 1H16

Total operating expense ratio


By product Gross Written Premium

■ Home ■ Motor ■ Commercial

■ Other ■ CTP

23%

30%

43%

4%

New Zealand $1.2b

34%

29%

22%

15%

<1%

Australia $7.6b $8.8b

32%

28%

27%

12%

1%

Total


Total GWP of $8.8 billion Gross Written Premium

■ New South Wales ■ Queensland ■ Victoria ■ South Australia

■ Western Australia ■ Tasmania ■ New Zealand ■ Other

■ Home ■ Motor ■ Commercial ■ CTP ■ Other

25%

28%

19%

6% 3% 2%

14%

3%

Geography

34%

29%

22%

15% <1%

Product


Impacted by claims inflation and lower investment yields Underlying and Reported ITR

8.0% 10.0%

10.5%

11.2% 11.1%

13.1% 13.4% 13.6% 14.0% 14.7%

14.8% 14.6%

10.1% 12.8%

6.4%

10.9%

1.9% 3.8%

11.1%

18.6%

7.8%

13.9%

17.0%

12.8%

9.9% 9.4%

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16

12% 12%

Underlying ITR Reported ITR


Conservative assumptions and world leading long-tail claims management Reserve Releases

1.1%

1.7% 1.4% 1.4%

5.4% 5.4%

3.4%

1H13 2H13 1H14 2H14 1H15 2H15 1H16

1.5%


Six months to 31 December 2015 General Insurance – Natural hazards

Date Event Net costs ($m) Aug 2015 South Coast NSW and Sydney Storms 29

Sep 2015 NSW Central Coast Hail 21

Oct 2015 Fernvale Chinchilla Hail 44

Nov 2015 Sunnybank Hail 16

Nov 2015 Pinery Bushfire 15

Nov 2015 Darling Downs Storms 25

Dec 2015 Kurnell Tornado 63

Dec 2015 Great Ocean Road Bushfire 31

Other natural hazards attritional claims (Australia) 114

Other natural hazards attritional claims (New Zealand) 4

Total 362 Less: allowance for natural hazards (334)

Natural hazards costs above allowance 28

-

1,000

2,000

3,000

4,000

5,000

6,000

1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

NZ AUS Long run average


45 years of natural hazards* General Insurance – Natural hazards

Retention

Christchurch earthquakes, Brisbane floods, Cyclone

Yasi, Melbourne Hailstorm

Newcastle earthquake

Melbourne & Perth Hailstorms,

Christchurch earthquakes Sydney

Hailstorm

Hunter Valley storm

Cyclone Marcia and NSW Low

Storms

Brisbane Hailstorm

* Adjusted for inflation, population growth and market share

Brisbane Hailstorm

Brisbane flood, Cyclone Tracy


Conservative balance sheet protection against catastrophes General Insurance – FY16 Reinsurance Program

6.9b

6.1b 2.5b 500m

Original cover Reinstatement Reinstatement Reinstatement 250m

200m Dropdown aggregate Dropdown aggregate

50m

Retention


Drop-down aggregate program fully placed General Insurance – FY16 Reinsurance Program

250m 50m xs 200m xs 50m

100m xs 150m xs 200m

100m xs 150m xs 300m

200m

150m

100m xs 50m xs 200m

100m xs 50m xs 300m

50m Retention

Important disclaimer


This report contains general information which is current as at 07 April 2016. It is information given in summary form and does not purport to be complete.

Please note all references are in Australian Dollars ($) unless otherwise disclosed.

It is not a recommendation or advice in relation to the Group or any product or service offered by Suncorp or any of its subsidiaries. It is not intended to be relied upon as advice to investors or potential investors, and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.

This report should be read in conjunction with all other information concerning Suncorp filed with the Australian Securities Exchange (ASX).

The information in this report is for general information only. To the extent that the information may constitute forward-looking statements, the information reflects Suncorp’s intent, belief or current expectations with respect to our business and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices at the date of this report. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties, many of which are beyond Suncorp’s control, which may cause actual results to differ materially from those expressed or implied.

Suncorp undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this report (subject to ASX disclosure requirements)

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