Slide 1: FY11 Financial Results: Momentum and sustainable growth
For personal use only FY11 Financial Results Momentum and sustainable growth Dominic Stevens Chief Executive Officer 22 August 2011
Slide 2: Record financial metrics
Challenger Group Full Year 30 June 2011 Record financial metrics For personal use only • Performance – Normalised NPAT of $248m up 7% – Normalised EPS of 51.7 cps up strongly, increase of 14% – Statutory NPAT of $261m down 7% – Normalised cost to income ratio down to 37% (from 41%) – Final dividend
Slide 3: Sustainable profit growth
Challenger Group Full Year 30 June 2011 Sustainable profit growth For personal use only Earnings / Normalised EPS 350 60 • 5 year profit CAGR of 16% pa 300 50 • No dilutive equity issued 250 40 200 during the financial crisis cps 30 150 $m 20 • Prudent capital management 100 50 10 via on-market shar
Slide 4: Sustainable organic capital generation
Challenger Group Full Year 30 June 2011 Sustainable organic capital generation For personal use only Capital excess to regulatory requirements • Capital strength 1000 – Strong excess to regulatory 750 minimum maintained, providing buffer to variable 500 $m market conditions 250 • COE margin 0 – Cont
Slide 5: Record growth in annuities and FUM
Challenger Group Full Year 30 June 2011 Record growth in annuities and FUM For personal use only Annual Sales of Guaranteed Products (bars represent sum of the four previous quarters) • Financial performance 2,500 underpinned by growth Institutional Sales (GIR) Retail Sales (GIP/GIF/GA) 2,000 across
Slide 6: Five year scorecard
Challenger Group Full Year 30 June 2011 Five year scorecard For personal use only • Differentiated and leading business strategy – leveraged to structural market changes • Double digit system growth, Challenger growing above system • Five years of: – Consistent retail annuity sales growth – CAGR 33%
Slide 7: Operational strategy – Distribution, Product & Marketing
For personal use only Operational strategy – Distribution Product & Marketing 7
Slide 8: Distribution Product & Marketing
Challenger Group Full Year 30 June 2011 Distribution Product & Marketing For personal use only • Distribution Product & Marketing division Annuity created in January 2011 Distribution to: – align activities focused CRM and Boutique on increasing sales for Analytics Distribution Life and Funds Manage
Slide 9: Distribution, Product & Marketing
Challenger Group Full Year 30 June 2011 Distribution, Product & Marketing For personal use only Project 10,000 and Project Welcome Back – • Building on the success of increased active advisers recently completed initiatives over the last 18 months: 1,200 – Increased number of Business 1,100 Developm
Slide 10: New initiatives: Specialist distribution teams
Challenger Group Full Year 30 June 2011 New initiatives Specialist distribution teams For personal use only • Distribution teams organised into specialists in retirement incomes and Retirement Boutiques Partnerships/Aligned Distribution Incomes - Product Retail Investments and Marketing • Specialisa
Slide 11: Web Tools - Retirement Income Calculator
Challenger Group Full Year 30 June 2011 Web Tools - Retirement Income Calculator For personal use only – Online tool – Comparative for planners portfolios are via PC or added iPad (allocated pension) – Base portfolios are entered (annuity) – Market – Impact on scenarios both based on portfol
Slide 12: Building our brand
Challenger Group Full Year 30 June 2011 Building our brand For personal use only • Major national advertising campaign commenced 20 February 2011 • FTA and pay TV, newspapers, magazines, radio, cinema, online • Targeting pre/post retirees (i.e. 55+ years of age) • Early tracking shows strong prompte
Slide 13: Life product range
Challenger Group Full Year 30 June 2011 Life product range For personal use only • Life and Funds Management continue to innovate products – Aligned investment mandates – Platform annuity, no commission annuity, liquid lifetime annuity and white label solutions • Projects in progress: • RCV0 GIF ser
Slide 14: What needs to change for DLAs to work?
Challenger Group Full Year 30 June 2011 What needs to change for DLAs to work? For personal use only Provide exemptions Amend SIS Amend APRA Recognise non- from means rules so that prudential commutable test and DLAs will be standard to DLAs as risk minimum draw treated as a remove products not down
Slide 15: Why are deferred lifetime annuities important?
Challenger Group Full Year 30 June 2011 Why are deferred lifetime annuities important? For personal use only • Increased understanding of longevity risk by individuals • Deferred lifetime annuities offer pure longevity protection – Low single premium to mitigate the risk of sole reliance on the age
Slide 16: Australian wealth industry – retirement income strategy
For personal use only Australian wealth industry – retirement income strategy
Slide 17: Australian superannuation – phases of growth
Challenger Group Full Year 30 June 2011 Australian superannuation – phases of growth For personal use only 3 2 2012 onwards 1 2007 – 2012 • 20 years of baby- boomer retirement still to come • Equity bull market • Realisation – ends superannuation is 1992 – 2007 • Change in about creating an • Establ
Slide 18: Accumulation focused on growth assets
Challenger Group Full Year 30 June 2011 1. Accumulation focused on growth assets For personal use only All Ordinaries Index – 1992 - 2011 8000 7000 6000 5000 4000 3000 2000 1000 Stage 2 Phase 1 0 18
Slide 19: Australian superannuation – phases of growth
Challenger Group Full Year 30 June 2011 Australian superannuation – phases of growth For personal use only 3 2 2012 onwards 1 2007 – 2012 • 20 years of baby- boomer retirement still to come • Equity bull market • Realisation – ends superannuation is 1992 – 2007 • Change in about creating an • Establ
Slide 20: Market volatility / changing risk preferences
Challenger Group Full Year 30 June 2011 2. Market volatility / changing risk preferences For personal use only All Ordinaries Index – 1992 - 2011 8000 7000 • Unprecedented 6000 multi-year volatility • Henry Review 5000 • Cooper Review 4000 • Ripoll Review 3000 • Baby boomers begin to retire 2000 100
Slide 21: Australian superannuation – phases of growth
Challenger Group Full Year 30 June 2011 Australian superannuation – phases of growth For personal use only 3 2 2012 onwards 1 2007 – 2012 • 20 years of baby- boomer retirement still to come • Equity bull market • Realisation – ends superannuation is 1992 – 2007 • Change in about creating an • Establ
Slide 22: Baby boomers control over 60% of pension assets
Challenger Group Full Year 30 June 2011 3. Baby boomers control over 60% of pension assets For personal use only All Ordinaries Index – 1992 - 2011 8000 Total Superannuation Pool (2010^) ~A$1.4 trn 7000 6000 5000 4000 Pre-baby boomers Baby boomers (20 - 44 yrs) (45 - 65 yrs) 3000 Post-baby boomers (
Slide 23: FY11 Financial Results
For personal use only FY11 Financial Results Brian Benari Group Chief Operating Officer & Chief Financial Officer 22 August 2011
Slide 24: Group financial performance
Challenger Group Full Year 30 June 2011 Group financial performance For personal use only Financial Performance1 % Mvt 600 60% Financial FY11 FY10 FY10 to Trend 500 Performance FY11 50% 400 Assets Under $27.9bn $23.9bn 17% $m Management 300 40% 200 Normalised Net Income $494m $448m 10% 100 30% 0
Slide 25: Life financial performance
Life Funds Mgmt Full Year Ended 30 June 2011 Life financial performance For personal use only Financial Performance % Mvt 500 50% Financial FY11 FY10 FY10 to Trend Performance FY11 400 40% Average AUM – Life $7.9bn $6.4bn 23% 300 30% $m 200 20% Normalised Cash Operating $401m $338m 19% 100 10% E
Slide 26: Sustainable Life Company earnings
Life Funds Mgmt Full Year Ended 30 June 2011 Sustainable Life Company earnings For personal use only Balance Sheet P&L Investment Yield* Asset Plus normalised growth Assumptions^ Net Margin Capital Plus return on (normalised COE) free float (capital) Annuity Less Interest paid & Funding commissions
Slide 27: Sustainable Life Company earnings: Illustrative margin
Life Funds Mgmt Full Year Ended 30 June 2011 Sustainable Life Company earnings For personal use only Illustrative Margin Investment 8.5% 9.5% Yield Annuity (6.5)% (6.5)% Funding Asset Spread 2.0% 3.0% Capital 1.3% 1.3% Normalised 0.7% 0.7% Growth Net Margin 4.0% 5.0% (normalised COE) 27
Slide 28: Funds Management financial performance
Life Funds Mgmt Full Year Ended 30 June 2011 Funds Management financial performance For personal use only Financial Performance % Mvt 140 100% Financial FY11 FY10 FY10 to Trend 120 Performance FY11 80% 100 80 60% $m Average Funds Under $21.9bn $18.3bn 20% 60 40% Management 40 20% 20 Net Income $88
Slide 29: Funds Management - earnings drivers
Life Funds Mgmt Full Year Ended 30 June 2011 Funds Management - earnings drivers For personal use only Performance & Transaction fees • Earnings significantly impacted 15 by reduced performance/ transaction fees during the 10 period $m • FUM growth and performance 5 of boutique partnerships increase
Slide 30: Cost control across the Group
Challenger Group Full Year 30 June 2011 Cost control across the Group For personal use only • Cost to income ratio down Normalised cost to income ratio over time 4 percentage points to 60% 37%; within our target cost to income range of 55% 35-40% for the medium 50% Target Range of term 35 – 40% 45%
Slide 31: Capital Management
Challenger Group Full Year 30 June 2011 Capital Management For personal use only Dividends – cents per share (cps) 20 50% • Final dividend declared 40% • 9.5 cents per share, 15 30% unfranked 10 20% • Sustainable payout ratio and 5 10% dividend path maintained 0 0% • Continuing share buyback of 2009
Slide 32: Outlook
For personal use only Outlook Dominic Stevens Chief Executive Officer 22 August 2011
Slide 33: Outlook
Challenger Group Full Year 30 June 2011 Outlook For personal use only • Current global environment supportive of the key drivers of long term operating profitability • Retirees demanding greater certainty given ongoing volatility • Spreads on corporate fixed income assets widening, despite healthy d
Slide 34: Disclaimer
For personal use only Disclaimer: The material in this presentation is general background information about Challenger Limited activities and is current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon