Steve Johnston, Chief Executive Officer

Steve Johnston, Chief Executive Officer

9 August 2023

Dear Shareholders,

Back in 2020, with our purpose of building futures and protecting what matters as our guide, we devised a three-year plan that would unite our people and align them to our core banking and insurance businesses. By focussing on our people and customers, investing in technology and advocating for change, we set out to simplify our Group to drive improved performance. Our plan included 12 clear initiatives and targets that would allow all of our stakeholders to measure our progress. 

I’m proud to lead our dedicated team of people who have lived our purpose and values every day and successfully delivered on this plan. As outlined by the Chairman, this was against a backdrop of headwinds we could never have contemplated when embarking on this strategy. Most notably for Suncorp, this includes an unprecedented level of extreme weather events across our regions resulting in more than half a million claims over the past three years. We’re seeing this heightened activity result in significantly higher reinsurance costs as reinsurers globally reassess and price for the increased risk of such natural disasters across Australia and New Zealand. This, combined with the inflationary environment and supply chain pressures, is contributing to rises in insurance premiums across our communities. We recognise the cost-of-living pressures being experienced by our customers and the impact increased interest rates and more expensive insurance are having on household budgets.

This is why Suncorp continues to embed greater efficiencies in our own business through initiatives like our best-in-class claims program, and strongly advocates for increased investment in measures that help build a more resilient Australia and New Zealand and alleviate affordability pressures. This year we’ve seen encouraging progress on this front, including Federal and State government funding for a flood levee in Bundaberg, Queensland — something Suncorp has called for over many years. You can learn more on page 25. Our ability to meet our commitments to our customers and shareholders and drive change while navigating the challenging operating environment is testament to the strength and resilience of our business, which has improved considerably over the past three years. We know our capacity to address these complex changes will be even greater as a dedicated trans-Tasman insurer, and we will continue to work through the process as it relates to the sale of Suncorp Bank to ANZ.

#Our FY23 performance

The Group’s net profit after tax of $1,148 million, up 68.6%, and cash earnings of $1,254 million, up 86.3%, demonstrates the underlying quality of our business with continued top-line growth and improved margins. The result also reflects a significant turnaround in investment returns this year, despite ongoing market volatility. This helped offset the impacts of more than 130,000 natural hazard claims received by Suncorp during the year, which resulted in the Group exceeding our allowance of $1,160 million for such events by $97 million. The Group has successfully placed its comprehensive reinsurance program for FY24, increasing its allowance to $1,360 million.

Our Australian and New Zealand businesses achieved strong growth in premiums of 10.6%* and 14.3% respectively, reflecting price increases required to address material rises in reinsurance and natural hazard costs, and economy-wide inflation. Continued unit growth across our consumer portfolios demonstrates the ongoing importance our customers place in our products and brands, particularly in this environment.

The Bank’s continued growth in home lending of 9.1%, or $4.6 billion, while maintaining sound credit quality, reflects the benefits of improved broker and customer experiences. Process enhancements and productivity improvements reduced the average median turnaround time for brokers from approximately 14 days in FY21 to around 4 days throughout FY23. This saw the Bank’s Net Promoter Score shift from a 6-month rolling average of -33 in July 2020 to +49 in June 2023. Customer deposits grew 6.9% to $51.4 billion this year, reflecting increased demand for term deposits with higher yields in the rising interest rate environment.

#Our people

This year our teams across the Group worked tirelessly to achieve our FY23 plan while also supporting our customers and communities, including those impacted by 15 severe weather events. 

Given the enormity of the flooding and cyclone disasters that struck New Zealand’s North Island in early 2023, a team of more than 100 specialists from Australia’s insurance operations were quickly mobilised to provide both on-the-ground and remote support to our local New Zealand teams in their response and recovery efforts. This ability to scale up our workforce and deploy resources as required highlights the benefits of being a trans-Tasman insurer with strong event response capabilities. 

We continue to prioritise employee wellbeing and this year launched a partnership with mental health research institution, Black Dog Institute, aimed at building mental health literacy across our leader cohort. 

Suncorp’s employee engagement scores remained in the top quartile of our peer group, at 8.3 out of 10, which is consistent with our score last year. This is encouraging in what continues to be a tight labour market and reinforces the strength of our purpose and our compelling employee value proposition, both of which are key to attracting and retaining talent.

#Supporting our customers

We continue to make a conscious effort to put our customers at the heart of our decision making. This underpins our customer-led culture and is critical in our plight to deliver seamless customer experiences. Our senior leaders engaged in customer immersion experiences throughout the year to gain deeper insights into the issues that matter to our customers and to consider ways to better support them. 

We acknowledge that we don’t always get it right and we’ve seen this reflected in an uptick in complaints volumes this year in Australia. While this is largely a sign of the complex range of issues impacting banking and insurance customers, we recognise we must do better and our priority will be to drive meaningful improvements to our customers’ experience. 

We again maintained a strong focus on supporting our customers impacted by extreme weather events throughout the year, including the more than 31,000 impacted by the flooding and cyclone events on the north island of New Zealand in early 2023, while also finalising more than 90% of claims following the 2022 Australian East Coast Floods. 

Our ongoing investment in digital and data capabilities saw almost 47% of our insurance customers in Australia interact with us digitally, up from 40% last year, with 68% of customers purchasing home, motor and CTP products digitally over the year. This is good progress towards our long-term insurance sales and service goal of 70% digital and 30% voice.

#Investing in our communities

This year, Suncorp invested more than $9 million in the community, including a further 27 grants worth a combined total of $500,000 awarded to local community groups impacted by the 2022 East Coast Floods through our partnership with Foundation for Rural and Regional Renewal. In addition, the Group extended $200,000 to the Prime Minister’s Cyclone Gabrielle Appeal Fund to support the recovery of communities across the North Island of New Zealand. 

The Group is also proud to now be a major partner of the State Emergency Service (SES) groups right across the east coast of Australia, with AAMI signing on as a major partner to the NSW SES this year to support its focus on community resilience, engagement and education programs.

#Looking ahead

Our focus remains on building on the strong foundations and momentum achieved across our businesses over the past three years, while continuing to advocate strongly for measures that improve resilience to natural hazards to protect people and address insurance affordability and address the important issue of climate change. 

We know there are many opportunities to build further efficiencies and innovation to meet evolving customer needs that will underpin the success of Suncorp, and we will continue to prioritise this. 

We will work constructively and respectfully through the approval process in relation to the sale of our Bank to ANZ over the coming months and remain fully committed to supporting Suncorp Bank as this occurs. 

I would like to note that Paul Smeaton, our Chief Operating Officer for Insurance, has indicated his intent to retire at the end of 2023. Paul has served Suncorp for almost 29 years, and I’d like to take this opportunity to thank Paul and wish him well. I am delighted that Michael Miller, who has held various roles at Suncorp over the past 12 years, will join our executive leadership team in the newly created role of CEO, Commercial & Personal Injury Insurance. 

As always, I thank all of our teams for their ongoing dedication and support of our customers, communities and business, and also extend my appreciation to all of our shareholders for your continued confidence in our company.

*Excluding emergency services levies and portfolio exits 

#More from the Annual Report