Challenger Limited · ASX:CGF
Challenger — Challenger Financial Services Group — ABN AMRO Diversified Financials Conference (May 2006)
27 slides from Challenger's conference presentation, May 30, 2006
Slide 1: Slide 1
Slide 2: Challenger Financial Services Group - ABN AMRO Diversified Financials Conference
<2 challenger Financial Services Group Challenger Financial Services Group Limited ABN AMRO Diversified Financials Conference Michael Tilley Chief Executive Officer 30 May 2006
Slide 3: Challenger Overview
& challenger Challenger OV PBT in from AUM, FUM and MUM CHALLENGER ASSET MANAGEMENT CONTRIBUTES 11 % CHALLENGER WHOLESALE FINANCE CONTRIBUTES 34% Asset management fees Mortgage management CHALLENGER ANNUITIES CONTRIBUTES 44 % Investment & Rental income Residential lending Profit on disposal of asset
Slide 4: Agenda
<2 challenger Financial Services Group Overview 3 Challenger Life 9 Challenger Wholesale Finance 16 Challenger Wealth Management 19 Update since 31 Dec 2005 24 Outlook 25
Slide 5: Business objectives
<2 challenger Financial Services Group Business obj « Grow funds under management, assets under management and mortgages under management, above relevant market rate - > 12% per annum ° Capture productivity dividend from scaleable processes and systems « Improve distribution relationships * 18% retu
Slide 6: Key success drivers
<2 challenger Financial Services Group Key success di e Above system growth in each market « Performance of our funds ¢ Cost and efficiency of our back-office processes and systems * Maintain top decile service capability e Attracting and employing the best quality people
Slide 7: Total shareholder return
50% 40% 30% 20% 10% 0% -10% - 20% - 30% -40% Total shareho 28% 21% “SEchallenger ed 52% TSR over the last 5 years 41% -32% Per cent per annum -5% 2003 2004 2005
Slide 8: PE Multiple
> challenger PE Multiple y rated as a growth stock 17.3 FYO4 FYOS 8 & Challenger P/E Market Weighted PE
Slide 9: Challenger Life: Asset Management & Annuities
<2 challenger Financial Services Group Challenger Life Asset Management & Annuities
Slide 10: Challenger Life: Balance Sheet, PBT and Asset Allocation
| Challenger At Balance Sheet ~ PBT 16 1H05 2H05 1H06 GPBT & realised gains Realised gains ae @» challenger Asset Allocation 100% 80% | 60% 4 40% 1 20% 4 0% 2004 2005 Dec-05 Mar-06 @ Property B Fixed interest @ Infrastructure Cash & other assets Infrastructure allocation includes commitments for fut
Slide 11: Challenger Asset Management
Challenger Ass Off balance sheet FUM &2 challenger a a a g e m e Nn C EOS Hhencial senices Group Asset management revenue 30 700 + 257 600 4 500 5 20 4 400 5 E & 300 4 w15 4 200 + 104 100 4 0 T 54 Jun 04 Jun 05 Dec 05 @ Property Syndicates @ Challenger Infrastructure Fund oO 1 @ Challenger Wine Trus
Slide 12: People and Partners
&2 challenger : Financial Services Group People Pariners Key partners where needed d from industry @ Veadivonal Fund
Slide 13: Infrastructure global opportunities - Europe
> challenger Challenger A Infrast global opportunities - Europe Electricity + Generation + Transmission vw Vw v x x oe + Distribution « Retail Gas « Processing / Supply « Storage v v v x v Vv + Transport Vv + Distribution « Retail Water & Sewerage + Storage « Processing / Treatment vo |x «x v « Tran
Slide 14: Infrastructure global opportunities - Other
age ment @ e challenger global opportunities - Other Challenger As Infrast Electricity « Generation Y v + Transmission x v xxx x « Distribution « Retail Gas « Processing / Supply * Storage v ¥v| vo |e xxl] x « Transport « Distribution « Retail Water & Sewerage « Storage Ww A * Processing / Treatment
Slide 15: Challenger Asset Management Opportunities
| se €2 challenger anagement chavens' Challenger A Opp: Credit Relative Value Seeded and operating Business Plan develaped Global Infrastructure Fund (unlisted) Asset origination process commenced Fund of Funds — MEIF, USPF acquired — Deutsche Annington and Terra Firma Capital Partners Il agreed — O
Slide 16: Challenger Wholesale Finance
<2 challenger Financial Services Group ~~ Challenger Wholesale Finance
Slide 17: Challenger Wholesale Finance
17 ae @» challenger hallenger Wholesale Finance Loan'Book Size ($bn) Margin (as % of average portfolio) 80 75 FA oF 60 61 ° eg 8 20 0+ T : + 1 dun-04 Dec-04 dun-05 Dec-05 Residential © Commercial jun 04 Dec04 = un 05 Dec 05) Mar 06 ~~ Residential e~ Commercial 50 CWF CAGR ($m) Jun 04 Bee 04 Jun 65 B
Slide 18: Challenger Wholesale Finance
ae @» challenger Challenger W ale Finance 18
Slide 19: Challenger Wealth Management: Funds Management
<2 challenger Financial Services Group ~~ Challenger Wealth Management Funds Management
Slide 20: Funds Under Management
aT £2 challenger ana g emen Cc ar cnaliens' Funds Under Management 11.9 11.9 10.6 10.6 Organic "03-'06 CAGR 39% FYO3 FYO4 FYOS HYOS Fy03 FYO4 FYOS HYO6 Retail Binsto SHMT @ Other @ HSBC acquisition : PBT and Cost to Income Ratio $ 8 6 4 2 4. oO -2 -4 -6 FYO4 FYO5 HYO6 Cost to Income 20
Slide 21: Peer comparison
ae @» challenger PPT AuW| NAB PMN IOOF -0.50% -0.40% -0.30% -0.20% -0.10% 0.00% 0.10% 0.20% 0.30% 0.40% Source: Plan for Life, Credit Suisse estimates 2005 21
Slide 22: Challenger Fund Management Model
€&2 challenger Challenger F. Nagement =e Model 22
Slide 23: Challenger Fund Management Model
&@ challenger Challenger Fu agement & ssc Risk RB Base Fees High Medium Low-Medium Performance Fees None Low (5 -15%) High (20%+) Alpha Generation 0-2% 2-5% 5% + Revenue Streams Stable Slightly Volatile Volatile Business Risk Low Medium Medium-High Capital . Requirement Low Low Low/Medium ASF Select
Slide 24: Update since Dec 2005 results
24 | &@ challenger CANS Francia Senices Braap ec 2005 results Businesses performing well Neutral impact from proposed changes announced with Federal Budget: — Expect to announce alternative funding arrangements by 30 June —- avg historic cost of annuitant funding at 6.3% - Alternative funding costs
Slide 25: On track for 2006
25 <2 challenger Financial Services Group On track for 2006 Target asset allocation of approximately 30 property/ 30 infrastructure/ 30 fixed income/ 10 other by December Expect natural market growth > than 12% in funds under management (FUM) assets under management (AUM) and mortgages under managem
Slide 26: Income streams
@e challenger ‘income streams come vs asset management based income Strong Income Growth - Driven by Repeatable Low Capital Intensity Earnings - "Fee Based" earnings now 56% of total - from 38% in December 2003 Realised gains now 16% of earnings - from 45% in June 2004 140 120 mmm 63% 109 annualised
Slide 27: Disclaimer
ae @e challenger Disclaimer The material in this presentation is general background information about Challenger group 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 as advic
Challenger Financial Services Group — ABN AMRO Diversified Financials Conference (May 2006) on 6ix