Glossary of Terms
Attributable expenses
Operating expenses that are directly related to the fulfilment of current insurance contracts, such as acquisition costs, general operating expenses and policy administration expenses
Basis points (bps)
A ‘basis point’ is 1/100th of a percentage point
Cash earnings
Net profit after tax adjusted for the amortisation of acquisition intangible assets, recoverable amount adjustments on intangibles, the profit or loss on divestment and their tax effect
Cash earnings per share
Basic: cash earnings divided by the weighted average number of ordinary shares (net of treasury shares) outstanding during the period.
Diluted: cash earnings adjusted for consequential changes in income or expenses associated with the dilutive potential ordinary shares divided by the weighted average number of diluted shares (net of treasury shares) outstanding during the period
Cash return on average shareholders' equity
Cash earnings divided by average equity attributable to owners of the Company. Averages are based on monthly balances over the period. The ratio is annualised for half years
Cash return on average shareholders' equity pre-goodwill
Cash earnings divided by average equity attributable to owners of the Company less goodwill. Averages are based on monthly balances over the period. The ratio is annualised for half years
Cash return on average shareholders' equity pre-goodwill and intangibles
Cash earnings divided by average equity attributable to owners of the Company less goodwill and intangibles. Intangibles excludes any capitalised costs (software or broker commissions). Averages are based on monthly balances over the period. The ratio is annualised for half years
Claims Handling Expenses (CHE)
Costs incurred in the investigation, assessment and settlement of a claim, included as part of net incurred claims
Combined operating ratio
The percentage of net earned premium that is used to meet the costs of all claims incurred plus the costs of acquiring, writing and servicing the General Insurance business
Common Equity Tier 1 (CET1)
Common Equity Tier 1 Capital comprises accounting equity plus adjustments for intangible assets and regulatory reserves
Common Equity Tier 1 Ratio
Common Equity Tier 1 divided by the Prescribed Capital Amount for Life and General Insurance, or total risk-weighted assets for the Bank
Confidence level
Also referred to as “probability of adequacy”, represents the level of certainty that the estimated insurance liabilities, including the risk adjustment, will be adequate to cover future obligations
Cost to income ratio
Operating expenses of the Banking business divided by total income from Banking activities
Deferred acquisition costs (DAC)
The portion of acquisition costs not yet expensed on the basis that it can be reliably measured and it is probable that it will give rise to premium revenue that will be brought to account in subsequent financial periods
Deposit to loan ratio
Total retail deposits divided by total loans and advances, excluding other receivables
Diluted shares
Weighted average number of ordinary shares outstanding during the period, adjusted for potential ordinary shares that are dilutive, in accordance with AASB 133 Earnings per Share
Discount rate
The rate applied to future cash flows within the boundary of an insurance contract to reflect the time value of money, the characteristics of the cash flows and the liquidity characteristics of the insurance contracts
Effective tax rate
Income tax expense divided by profit before tax
Emergency services levies (ESL)
The expense levied on premiums for insurance policies, which is recoverable from insurance companies by the applicable State Government. Emergency services levies were established to cover corresponding emergency services charges
Equity reserve for credit losses
The equity reserve for credit losses represents the difference between the collective provision for impairment and the estimate of credit losses across the credit cycle, based on guidance provided by APRA
General insurance businesses
General insurance businesses include Insurance (Australia)'s general insurance business and New Zealand's general insurance business. This term is used when describing Suncorp's capital position and statement of financial position which are structured around the Group's legal entity structure, rather than business functions structure
Gross earned premium
The total premium on insurance earned by an insurer during a specified period on premiums underwritten in the current and previous underwriting years
Gross non-performing loans
Gross impaired assets plus past due loans
Gross written premium (GWP)
The total premium on insurance underwritten by an insurer during a specified period, before deduction of reinsurance premium
Illiquidity premium
An adjustment to the risk-free discount rate to reflect the liquidity characteristics of an insurance contract. The illiquidity premium increases the discount rate to reflect that the insurance portfolio is less liquid in nature than the reference portfolio upon which the risk-free rate is calculated
Impairment losses to gross loans and advances
Impairment losses on loans and advances divided by gross loans and advances. The ratio is annualised for half years
Insurance funds
Insurance funds explicitly back insurance liabilities. They are designed to match the insurance liabilities and are managed separately from shareholders' funds
Insurance revenue
The amount charged for insurance coverage when it is earned. This is equivalent to gross earned premium under AASB1023 less bad debts (part of operating expense in AASB1023)
Insurance service expense
Includes incurred claims and benefits excluding investment components, other directly attributable insurance service expenses, amortisation of insurance acquisition cash flows, and changes that relate to past service and future service on insurance contracts
Insurance Services Ratio (ISR)
The insurance services result expressed as a percentage of net insurance revenue
Insurance Services Result
Comprises insurance revenue, insurance service expenses and reinsurance income and expenses
Insurance Trading Ratio (ITR)
The insurance trading result expressed as a percentage of net earned premium
Insurance Trading Result (AASB 1023)
Underwriting result plus investment income on assets backing technical reserves
Insurance Trading Result (AASB 17)
Insurance services result adjusted for movements in claims liabilities, non-directly attributable expenses and investment income on assets backing technical reserves
Liability for incurred claims (LIC)
An obligation to investigate and pay valid claims for insured events that have already occurred. This replaces the outstanding claims liability under AASB 1023
Life planned profit margin release
Includes the unwind of policy liabilities which refers to the profit impact of changes in the value of policy liabilities due to the passing of time
Life risk in-force annual premiums
Total annualised statistical premium for all business in-force at the date (including new business written during the reporting period)
Life risk new business annual premiums
Total annualised statistical premium for policies issued during the reporting period
Life underlying profit after tax
Net profit after tax less market adjustments. Market adjustments represents the impact of movements in discount rates on the value of policy liabilities, investment income experience on invested shareholder assets and annuities mismatches
Liquidity Coverage Ratio (LCR)
An APRA requirement to maintain a sufficient level of qualifying high-quality liquid assets to meet liquidity needs under an APRA-defined significant stress event lasting for 30 calendar days. Absent a situation of financial stress, the LCR must not be less than 100%. The LCR is calculated as the ratio of qualifying high-quality liquid assets relative to net cash outflows in a modelled APRA-defined 30-day stress scenario
Loan-to-value ratio (LVR)
Ratio of a loan to the value of the asset purchased
Long-tail
Classes of insurance business involving coverage for risks where notice of a claim may not be received for many years and claims may be outstanding for more than one year before they are finally quantifiable and settled by the insurer
Loss component
An amount added to the Liability for Remaining Coverage and expensed to profit or loss where a contract or group of contracts is assessed as onerous at initial recognition
Loss ratio
Net claims incurred expressed as a percentage of net earned premium. Net claims incurred consists of claims paid during the period increased (or decreased) by the increase (decrease) in outstanding claims liabilities
Main Financial Institution Customer
A Bank customer that transacts every second day and spends $5,000 over a 90-day period
Maximum Event Retention
This is an estimate of the largest accumulated property loss (from a single event) to which Suncorp will be exposed (taking into account the likelihood of this event is up to one in 200 years), after netting off any potential reinsurance recoveries
Net incurred claims
The amount of claims incurred during an accounting period after deducting reinsurance recoveries and non-reinsurance recoveries
Net insurance revenue
Insurance revenue minus reinsurance premium
Net interest margin (NIM)
Net interest income divided by average interest earning assets (net of offset accounts). NIM is the percentage difference between revenue earned on interest bearing assets (loans) minus the cost of interest-bearing liabilities (funding)
Net interest spread
The difference between the average interest rate on average interest earning assets and the average interest rate on average interest-bearing liabilities
Net profit after tax (NPAT)
Net profit after tax attributable to owners of Suncorp, derived in accordance with Australian Accounting Standards
Net Stable Funding Ratio (NSFR)
The NSFR measures the amount of available stable funding (ASF) relative to the amount of required stable funding (RSF). The amount of ASF is the amount of capital and liabilities that are expected to be a reliable source of funds over a 1-year time horizon. The amount of RSF is based on the liquidity characteristics and residual maturity of assets and off-balance sheet activities. The requirement to maintain an NSFR of at least 100% was introduced on 1 January 2018
Net tangible asset backing per share
Total equity less intangible assets divided by ordinary shares at the end of the period, adjusted for treasury shares
Onerous contract
An insurance contract where the fulfilment cashflows allocated to the contract, and any previously recognised acquisition cash flows and any cashflow arising from the contract at the date of initial recognition in total are a net outflow
Operating expenses ratio
Operating expenses expressed as a percentage of net insurance revenue
Operating functions
The Suncorp Group comprises four businesses— Consumer Insurance, Commercial & Personal Injury Insurance, Suncorp New Zealand and Suncorp Bank. The operating functions are responsible for product design, manufacturing, claims management, and distribution. The core businesses have end-to-end responsibility for the statutory entities within the Suncorp Group
Past due loans
Loans outstanding for more than 90 days
Payout ratio – cash earnings
Ordinary shares (net of treasury shares) at the end of the period, multiplied by the ordinary dividend per share for the period divided by cash earnings
Payout ratio – net profit after tax
Ordinary shares (net of treasury shares) at the end of the period, multiplied by the ordinary dividend per share for the period divided by profit after tax
Prescribed capital amount (PCA)
This comprises the sum of the capital charges for asset risk, asset concentration risk, insurance risk, insurance concentration risk, operational risk, combined stress scenario and aggregation benefit as required by APRA
Profit after tax from functions
The profit after tax for the Consumer Insurance, Commercial and Personal Injury Insurance, Suncorp New Zealand and Suncorp Bank functions
Reinsurance
A form of insurance for insurance companies where, in exchange for an agreed premium, the reinsurer agrees to pay all, or a share of, certain claims incurred by the insurance company
Reserve releases
Reserve releases occur when provisions made to cover insurance claims made against underwritten policies are assessed as higher than long-run trends in actual experience
Return on average shareholders' equity
Net profit after tax divided by average equity attributable to owners of the Company. Averages are based on monthly balances over the period. The ratio is annualised for half years
Return on average total assets
Net profit after tax divided by average total assets. Averages are based on beginning and end of period balances. The ratio is annualised for half years
Return on Common Equity Tier 1
Net profit after tax adjusted for dividends paid on capital notes divided by average Common Equity Tier 1 Capital. Average Common Equity Tier 1 Capital is based on the monthly balance of Common Equity Tier 1 Capital over the period. The ratio is annualised for half years
Risk adjustment
The compensation that an issuer of insurance contracts requires for bearing the uncertainty attached to the amount and timing of the cashflows arising from non-financial risks as it fulfils insurance contracts
Shareholders' funds
Shareholders' funds are part of the investment portfolio and are managed separately from insurance funds
Short-tail
Classes of insurance business involving coverage for risks where claims are usually known and settled within 12 months
Suncorp Bank function
Suncorp Bank is focused on lending, deposit gathering and transaction account services to personal, small and medium enterprise, commercial and agribusiness customers
Suncorp New Zealand function
Suncorp New Zealand distributes consumer, commercial and life insurance products through intermediaries and corporate partners, as well as insurance and personal loans directly to customers via partnerships with the New Zealand Automobile Association.
Total capital ratio
Total capital divided by the Prescribed Capital Amount for Life and General Insurance, or total risk-weighted assets for the Bank, as defined by APRA
Total expense ratio – general insurance
Total expenses (commission and direct operating expenses) expressed as a percentage of net insurance revenue
Total risk-weighted assets
Bank credit risk-weighted assets, off-balance sheet positions and market risk capital charge and operational risk charge, as defined by APRA
Transitional excess profit and loss (TEPL)
Includes a profit normalisation mechanism which caps industry and insurer profits in the New South Wales CTP scheme
Treasury shares
Ordinary shares of Suncorp Group Limited that are acquired by subsidiaries
Ultimate net loss (UNL) – New Zealand
Financial obligation when an insured event occurs, net of the catastrophe treaty
Underlying Insurance Services Ratio (UISR)
The insurance services ratio is adjusted for reported prior year reserve releases and natural hazard claims costs above/below expectations, risk adjustment, loss component and any abnormal expenses
Underlying Insurance Services Result
The insurance services result is adjusted for reported prior year reserve releases and natural hazard claims costs above/below expectations, risk adjustment, loss component and any abnormal expenses.
Underlying Insurance Trading Ratio (Underlying ITR)
The insurance trading ratio is adjusted for reported prior year reserve releases and natural hazards claims costs above/below long-run expectations, investment income mismatch and any abnormal expenses.