Download PROFIT REPORTING SEASON

9 February 2017
PROFIT REPORTING SEASON
SUNCORP GROUP (SUN)
RESULTS
Half Year 2017 Half Year 2016 CHANGE
Revenue ($m)
8,638.0
7,797.0
+10.8%
General Insurance (Aus) NPAT ($m) 358.0
236.0
+51.7%
Bank Net Profit (NPAT) ($m)
203.0
194.0
+4.6%
New Zealand NPAT ($m)
36.0
78.0
-53.8%
Group NPAT ($m)
537.0
530.0
+1.3%
Bloomberg ($m) Consensus
598.0
Interim Dividend ($)
0.33
0.30
+10%
Suncorp (SUN) profits boosted by insurance but held back by NZ business

Queensland based financial services group, Suncorp (SUN) has posted a softer than hoped 1.3% lift in net profit to
$537m for the six months ended 31 Dec 16. The result w as driven by a strong performance from its General Insurance
(GI) division, steady operating costs but w as held back by a more than 50% slide in profits in its New Zealand business.

Profits from its GI arm (includes AAMI, APIA, Bingle and GIO brands) rose strongly by 51.7% to $358m. Gross
Written Premiums (sale of insurance policies) lifted 6.2% and w ere driven by its CTP portfolio (+27.3%) follow ing SUN’s
entry into the SA market and grow th in NSW. Commercial, Home and Motor insurance sales all edged higher but at a
much more modest pace. Its turnaround program on reducing claims in Home and Motor has had some success. Natural
hazard costs w ere $319M ($19m over allow ance), $107m of w hich w ere from the SA & VIC storms in Nov & Dec.

Its Banking & Wealth profit edged higher by just $1m on the prior corresponding period to $208m. Bad debts how ever
w ere very low (just $1m & <1% of total loans) w hile costs w ere kept under control. Lending grow th w as a modest 2.5%
and its Net Interest Margin (difference betw een interest income earned and interest paid out) fell to 1.78% (HY16: 1.85%)
due to regulatory and economic factors together w ith a cut to the RBA cash rate. Generally, low er interest rates squeeze
a bank’s margins. Its combined Life & Wealth profit of $33m w as slightly ahead of consensus. Its New Zealand
business w as the w orst pe rformer due to a sharp lift in claims w hich kept insurance profit under pressure. The
Kaikoura earthquake cost $28m and continued to receive claims from the 2010/11 Canterbury earthquake.

SUN w ill be paying out a fully franked 33c dividend to investors on 3 April 2017. This marks a 3c or 10% lift on Feb
2016 and is a 72% payout ratio from cash earnings. The all-important ex-dividend date is 21 Feb 2017. SUN has a ~5.2%
dividend yield. Looking ahead, across its portfolio, SUN w ill be focusing on m argin grow th and seems confident on a
stronger 2H. Grow th in premiums and a strong focus on claims management is expected to boost its Insurance Trading
Result (ITR). ITR is a preferred measure of financial performance for insurance companies. It expects its recent increase
in mortgage rates and less aggressive competitor behaviour to deliver an improved second half NIM (margins). SUN
expects margins to remain stable in its Life business. SUN shares are dow n ~3% Year-to-Date.
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234945 ("the Bank") and both entities are incorporated in Australia with limited liability.
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