Slide 1: Record 1H07 statutory performance
Mike Tilley — Chief Executive Officer F 2007 i 26 February 200 challenger te Challenger Group 31 December 2008 Record 1H07 statutory performance! Strong but disciplined headline revenue growth across divisions Group NPAT of $130m up 117% Assets under management of $46.4bn up 18% Basic EPS of 23.7 cp
Slide 2: Creating value for shareholders / Challenger strategy
$ million Challenger Group 31 December 2008 Creating value for shareholders 140 + 28.00 40.0% 120 y 36.0% + 26.00 100 30.0% + 20.00 80 28.0% 15.00 & 60 20.0% + 12.00 40 15.0% 20 7 600 10.0% ote z Ts) 5.0% +4 i f i SHOS HOS 1HOB 206 1HO7 1HOS -2HOS 1HOS |= HOS 1H? ENPAT Basic EPS (FSS w@Reiurn on Ne?
Slide 3: Contemporary business delivering value
31 December 2006 Challenger Group lue ivering va Contemporary business del § a Se < = ces = A o cs = oS ga oF 2 Be < x < = = oO = = sk He a8 o | Leveraging Challenge 5 core compelencies and capabilities Asset Management Mortgage Management Fy Financial Planning unds Management BUSINESSES DOUBLE DIGI
Slide 4: Financial highlights - Statutory
iii isi AN ee challenger © Challenger Group 31 December 2008 Financial highlights Statutory Assets under Management ; $47.5bn Net income 257m. 73.3% ‘Gown on aet ‘angie a ee : assets (RONTA)? , 7 50.8% ft EPS basic cps . . 73.0% ft 748% ft ‘.. refer appendix 2 for analysis of the profit result allow
Slide 5: Financial summary - Statutory
Challenger Group 31 December 2008 Financial summary Statutory 480 160 4 440 4 420 4 4160 4 $m 80 4 60 4 4059 20 4 34 NPAT 1HO6 Net Income Expenses: interest Tax NPAT 1HO7 esis challenger fot Challenger Group 81 December 2008 Statutory 75.0 asu 350 60% 300 85.0 300 50% 250 55.0 A0% = 200 & g = 46.0 =
Slide 6: Financial highlights - Historic cost
Challenger Group 31 December 2008 Financial highlights Historic cost i) ancials : Net income Expenses t 74% ? EBT tt 56.0% t NPAT! t 94.8% t ‘. refer appendix 5 for analysis of the profit result allowing for CIF impacts and other adjustmerits in each of the respective periods raed ae Vay challenger
Slide 7: Key performance trends
Challenger Group 31 December 2008 Key performance trends Historic Cost 350 70% 60.0 850 300 60% . 80.0 250 50% 40.0 5 40% § = a & & & 450 30% 20.9 100 20% 20.0 50 10% ole E | LE Es any 10.0 1MeS | oHoS «= t406.—sHOSS MO? 1HOS = 2HOS «1B HS HHO? sat Net Income Experises. Ens: Assets under management
Slide 8: Funds Management: strong FUM flow underpins result
ait challenger == “eae Hoe" Funds Management 31 December 2006 Strong FUM flow underpins result Financials Funds under Management! Net income Expenses EBIT $18m RONA? 27.0% Net Assets® $i3im ‘.. includes soutiaue partnerships segregated mandates of $523m %~ annualised 8 2.0 as att July 2006
Slide 9: Funds Management key performance trends
—# Cost to income ratio (HHS) Key performance trends 60 r 14086 L 120% 60 120 F 100% 40 4+ < | sa% g = at € @ + BO% zo+ oe fb 40% ‘Oy + 20% oe a EE a oe THOS = 2HOS— THOS. HOS THO? sate Net Income Expenses te BONA (FES) Ww Funds Management 31 December 20U6 20.0 5 60 18.04 50 16.04 14.04 40 12.05 < §
Slide 10: Funds Management FUM diversification / Mortgage Management
Significant progress in diversification of growing Funds under management Funds Management 31 December 20U6 FUM building well 160 Segregated boutique perinership mandates. 43% CAGR since 2004 ize] aman 1HO7 growth of $3.6bn 4 se (30%) to $15.5bn be oe Diversification wee FUM by asset class ~ Jun 200
Slide 11: Mortgage Management performance trends
Mortgage Management 31 December 2006, ao 50% 30.05 80 70 45% 70 25.0 4 40% 60 60 38% 20.0 | 9 y 50 30% U g 5 g : 2 = 20 25% = Fa & “« DO%, * 40 20% 15% 20 10% 0 8% 0 - = = 0% 0.0 = + 0 HOS = PHOS THOS HOB 1HOT 1HO5 = PHOS «= THOS) = HOG =~ THOT setei Net Income Expenses —— Cost to income ratio [RHS}
Slide 12: Equity stake in Homeloans
Mortgage Management 31 December 2006 Equity stake in Homeloans Challenger has agreed to invest $44.7m to subscribe for new shares in Homeloans' - Initial tranche of 8.3m shares at 80 cents per share Subsequent tranche of 31.7m shares at $1.20 per share subject to Hormeloan shareholder approval Follo
Slide 13: Asset Management EBIT contribution
EBIT Contribution Asset Management 31 December 2006, Statutory 160 120 4 . + 160 4 & million o o ‘ a o 1 EBIT 1H0G = =Netrentals & Capital gains Annuity Net tee Expenses EBIT THO7 yletds valuations income challenger @ Key Performance Trends Statutory 180 38% 160 20% 140 28% 120 20% § 100 2 a 80 18%
Slide 14: Asset Management - Historic cost
Asset Management 31 December 2006 Asset Management Historic Cost Expenses 34.5% EBIT TL 4% t RONA? 35.6% Net asseis® * ~ annualisec: 2. as at1 July 2006 A o challenger %5 Asset Management 31 December 2006, Asset Management Historic Cost 440 420 100 million $ The CIF deconsolidation income components
Slide 15: Spread business securing opportunities for growth
Asset Management 31 December 2006, Spread business securing opportunities for continued growth Realised gains replenished Active investment strategy focused on total return va » Continued capital growth Sirsa » Realising opportunities to w Realised capitel gaine + Unrealised capital gains (cumulativ
Slide 16: Financial Planning: re-focused on value drivers
Financial Planning 3% December 2006 Re-focused on value drivers Financials Funds under administration & advice’ Net income Expenses EBT RONA? _— Net Assets* $i44m includes revenue generating funds under advice in 1H07/2H06 ~ pre-2H06 data is not available ~ annualised 3 ag at ¢ July 2006 challenger
Slide 17: Corporate: investing in scalable platforms
Corporate 31 December 2006, Investing today to develop contemporary, scalable platforms for tomorrow Investment in support services lifting expenses $5m relating to: management reporting tools automated reconciliations new HR system process re-engineering As well as: clearing tax backlogs capital ma
Slide 18: 1H07 Dividend
1HO7 Dividend 2007 Interim dividend declared ~ § cents per share fully franked paid out of profits for the period ended 31 December 2006 Key dates record date 28 March 2007 ex date 22 March 2007 payment date 20 April 2007 Challenger Group 81 December 2008 Dividends ~. cents per share {eps} @ Payout
Slide 19: Outlook
Mike Tilley — Chief Executive Officer 26 February 2007 challenger Challenger Group 31 December 2008 Outlook Our contemporary platforms continue to build fee based income streams and our assets and funds under management will continue fo grow We are committed to the success of our customers and are w
Slide 20: Se Vv on CC LL i) whee id
Se Vv on CC LL i) whee id 39
Slide 21: Consolidated profit and loss
40 Consolidated profit and loss Statutory - Management presentation Smiltons ri 2H 08 108 2H 08 1H O8 income Not rortat heoma 40.7 40 Investment incame 100 5a Capital gainsillosses)” 23.8 23 Movement in polly labios, 438) 8), Nel investment income 1308 We Foes revered sai 280 Fees & commissions peid
Slide 22: Adjusted result
Adjusted result APPENDIX 2 Challenger Group Statutory — post tax 31 December 2008 Oisied Stalitory. : % A %A $m HOT FY 06 2H 06 tH 08 ‘uor-iHe6 wo? 2Hos Challenger Group NPAT 130 136 76 60 115% 72% Adjustments Other (non recurring) income - 6} : @ Hilton - 13 13 ~ CIF deconsolidation (89) 48 16 32 V
Slide 23: CIF deconsolidation reconciliation
42 : . «pe . APPENDIX 3 CIF deconsolidation reconciliation Challenger Group Statutory 31 December 2008 Gib elaiulsty Besonclistion: ABT y ENG: a Smiilions Stat CF Net Stat OF ‘Nat Stat cr Net Stat iF Net Asset Management Net ena income 4a 95 . 95 46 : a8 7 . 4 Invesiment income"* H0 (12) 9g 20 ng 46
Slide 24: Consolidated profit and loss - Historic cost
4g Consolidated profit and loss Historic Cost! Peale Smaiflions 1H07 2H 06 1H06 2H 05 4H05 fneorne Nat rental Incorne 45.8 a6 a a7 28 Investment income 837 50 0 e7 m1 Not realised gains/(lossea) 58.7 26 7 15 36 Intorosl paid & selling cosie (62.5) 6, ey 69) 62) Net investment income 128.7 71 55 48 7
Slide 25: Adjusted result - Historic cost
: APPENDIX 5 Adjusted result Challenger Group Historic Cost — pre tax 31 December 2008 LAdiUSted Histotle Gost sf Gb % A Sta tH OT FY 06 2H 06 1H O06 4H07- HOS 4H07- 2406 Challenger Group NPBT 150 161 7 8s 81% 91% Adjustments Other (non recurting) income: - {5} - (5) Hitton - 18 13 - CiF/inexus (23)
Slide 26: CIF deconsolidation reconciliation - Historic cost
. . ape . APPENDIX 6 CIF deconsolidation reconciliation Challenger Group Historic Cost 31 December 2008 Cie Hishinie Gast Beconclatin AMDT, i ill TIS Seniffions: He cr Net KC ce Net He Cir Net He clF Net Asset Management Net rental income AT - 47 935 - 95 45 - 45 49 ~ 49 Investrrent income!” Ba (By
Slide 27: Reconciliation of Statutory to Historic Cost
46 Consolidated profit and loss Reconciliation of Statutory to Historic Cost $millions Statutory net profit after tax Recurring items ) ii Subtract excess of movement in fair value of investment portfolio assets over accrued investment income under historic cost Add excess of movement in fair value
Slide 28: Consolidated balance sheet
47 Consolidated balance sheet CIF deconsolidated Assets Cash & cash equivalents Receivables Derivative Assets Financial assets fair valued through income statement infrastructure Investments Other financial assets investment properties Fixed assets Securitised assets Deferred tax assets Investment a
Slide 29: Cashflow
Cashflow Excluding SPV cashflows ‘ChailengerGroup = $millions 1H 07 Opening cash balance 426 Operating cashflows 60 Investing activities (1) Financing activities 502 Reclassification 23 Exchange rate fluctuations - Cash acquired on acquisition Closing cash balance 99g Available cash balance’ 88 1 2H
Slide 30: Issued share capital
issued share capital APPENDIX 10 Challenger Group 31 December 2008 ‘Number of shares Ordinary Shares: Quoted (CGF) tH OT 2H 96 HOE 2H 05 THOS 4g Opening B44,767.540 SS7 917.717 534,289.048 «= -52H,441048 «266,703,735 Additions (+) ) ORP 6 371823 530,669 0 cy) QiTiP 5,336,000 6,478,000 3,548,000 5,82
Slide 31: Contemporary long term incentive scheme
. . APPENDIX 11 Contemporary long term incentive scheme Challenger Group 31 December 2008 Introduction of a contemporary long term incentive scheme introduced with ability to acquire shares on-market to avoid dilution Class of securities: Options Initial number of options to issued: 7.6 million Prin
Slide 32: Earnings and dividends per share
. a APPENDIX 12 Earnings and dividends per share Challenger Group 31 December 2006 Earnings Pet share : ee l : i Half Year HO? 2H 06 1H 06 2H 05 THOS Basic - reported statutory 23.7 13.7 14.2 12.4 10.6 Basic - historic cost 20.6 10.8 10.8 76 3.6 Diluted - reported stalutory 22.98 13.4 10.5 12.3 10.6
Slide 33: Debt and gearing
Debt and gearing APPENDIX 13 Challenger Group 31 December 2006 ah | or 06 | Financial Debt Corporate facilities and other Operating Leverage? MM - NIM Facility AM - Senior property debt AW Us Subordinated debt AM - Wholesale annuity Gearing 160 eee OO nce 50 120 ; Available cash { Net debt Book equi
Slide 34: Funds Management results
APPENDIX 14 Funds Management Funds Management 31 December 2006 Smiflions 4HO7))-2H06))—1HOS)=— HOS! THOS income Net investment income 0 0 o 0 Fees received 85 52 44 32 Fees & commissions paid (18) (12) (10) ay Acquisition cost amortisation 0 0 0. 0 Net fee income 50 39 ced at Other income i 8 1 0 Ne
Slide 35: Mortgage Management results
APPENDIX 15 Mortgage Management Mortgage Management 31 Decernber 2006 Moridage Management Results $miltions 1HO7) = 2H06)=— 1HOG)=—2HOS = HOS Income Net investment Income 0.0 o if) 0 9 Fees received 154.3 145 137 122 Ha Fees & commissions paid (37.0) i87) (87) (83) (32) Acquisilion cost amortisation
Slide 36: Mortgage Management Residential
Mortgage Management 2H 0S 0 142 {63} (2) a7 8 47 (14) ©) (20) 27. 1H OS Morass Mansgement Residential Bus es Uh $milliens 1H 07 2H 06 income Net Investment Income 6.0 os) Fees received 140.4 133 Fees & commissions paid 37.0} (37) Acquisition cost amortisation 19) (37) Net fee income 615 59 Other inc
Slide 37: Mortgage Management Commercial
APPENDIX 17 Mortgage Management Mortgage Management 31 Decernber 2006 Mortgage Mavagemont Com il wo yy / $millions 1HO7)- 2HOG = THOG)=— 2H05 = 1H 05 income Net Investment income 0.0 0 6 6 is) Fees received 10.9 12 Hi 10 4 Fees & commissions paid 0.0 9) 0 ia is) Acquisition cost amortisation 0.0 0 s
Slide 38: Asset Management results
APPENDIX 18 Asset Management Asset Management at Management Smiblions MHO? = DHO6 = THOS 2HOS THOS ineome Nat rental income 40.7 46 49 38 30 investment income 410.0 46 53 69 nH Capital gains/(losses)' 23.8 56 23 29 107 Movement in policy liatilties (48.8) 63) (49) 53) (107) Net investment Income Bee
Slide 39: Asset Management Historic Cost results
APPENDIX 19 Asset Management Asset Management 31 December 2006 Reset Mabanoinant Histol Gost Results: Smithons: TH O07 2H 06 tH 66 2005 tHOS Income Net rental income 45 49 27 28 lnvestment income 50 50 67 ral Net realised gains/{losses} 36 re 15 36 Intgrect paid & selling cost (64) 61) (60) (62) Net
Slide 40: Asset Management balance sheet
APPENDIX 20 Asset Management Asset Management 31 December 2006 Asset Manauement Balance Siicet Sraillions (og ete 2006 a i Dec 2005 HG Stat A Stat HC A Cash 862 862 ~ 349 34g - 396 396 . Debt investments 955 959 (4) 728 726 2 900 892 8 Equity and other investmenis 73 68 5 50 53 (3) 104 82 22 infrast
Slide 41: Financial Planning results
APPENDIX 21 Financial Planning Financial Planning 31 December 2006 LPlanning Resulis $millions 1H 07 24 06 1HOG 2H 05 1H 08" income Net Total Investment Income 0.0 0 6 0 is) Fees received 87.4 80 75 69 63 Fees & commissions paid {63.3} (59) (55) (49) (44) Acquisition cost amortisation 9.0 en! en) ee
Slide 42: Corporate statutory results
APPENDIX 22 Corporate Corporate 31 Decernber 2006 | Corpormle Sialulony Besulls $millions 1H 07 2H 06 1H 06 2H 05 1H 05 income Net income Expenses Employee expenses (13.3) (4) ) (8) (8) Other expenses’ vommd 4D) oo ococoued 19) Se <c) nO 0 POI 2) Total expenses smd 728) 30; (12) AP)... (21) EBIT (15
Slide 43: Group assets, loans and funds under management
APPENDIX 23 Group assets, Loans & Funds under Management chatienger Group 31 December 2008 ‘Smiffions 1H 07 2H 06 1H 6, 2H 05 THOS. Asset Management Assets managed for the Life company Property’ 916 1515. 1422 4,329 989 Debt investments (including hybrids) & cash 4,729 1,088 1,284 4124 4.667 infrast
Slide 44: Operating efficiency
: soe APPENDIX 24 Operating efficiency Challenger Group 31 Decernber 2006 120.0 5 + 70% 100.0 | 7 80% + 50% 30.0 4 £ + 40% s = 60.04 E + 30% wn 40.0 4 + 20% 20.0 | | 0% 0.0 0% 1H 05 2H 05 1H 06 2H 06 1H 07 [=== Base employee expenses lama Increase in salary & wages (7 Increase in variable compensati
Slide 45: Glossary
Glossary FM Funds Management division Financial Planning division Net rental income (AM ory) Gross rental income less trust expenses, financing costs directly associated with property, less managernent fees and erfermance fees Realised gains (AM only} The net profit/doss) on disposal of investment p
Slide 46: Glossary
Glossary Fees & commissions paid MM — trailing expenses paid to mortgage originators. Accounted for on an accruals basis with cash flow closely aligned to accounting treatment. FM — upfront and trailing expenses paid to financial pianners and advisers FP — commission represents Financial planners sh
Slide 47: Glossary
Glossary Other expense Uniess disclosed otherwise, all non employee expenses. Net Assets An approximation of the net capital utilisation in each division. Net Assets (and FONA targets) are reset as at 1 July in each financial year. Policy liabilities Policy liatilities are the liabilities held in re
Slide 48: Disclaimer
Fe A EAN A ENTE TE TT TERT AEA a Zn ae Sinn a aaa ACETATE LAA 7 oon a Disclaimer: The material in this presentation is general backgrourid information about Challenger Financial Services Group activities and is current at the date of the presentation. Ht is information given in summary form and does