Slide 1: FY12 Financial Results: Continuing to deliver
For personal use only FY12 Financial Results Continuing to deliver
Slide 2: Outline
Outline Outline Full Year 30 June 2012 For personal use only Business performance Vision and strategy Outlook Brian Benari Managing Director & Chief Executive Officer Financial results Capital management Andrew Tobin Chief Financial Officer 2
Slide 3: Highlights
For personal use only Highlights
Slide 4: Highlights
Highlights Full Year 30 June 2012 Highlights For personal use only 1 Strong operating performance all guidance metrics met or exceeded 2 Clarity on LAGIC transition impact and timing of transition now known 3 High quality investment portfolio generating sustainable cash flows 4 Focused vision and st
Slide 5: Strong operating performance: FY12 exceeds guidance
Highlights Full Year 30 June 2012 Strong operating performance FY12 exceeds guidance For personal use only • Performance − Normalised NPAT1 up 20% to $297m − Statutory NPAT of $149m − Normalised EPS up 11% to 57.5 cps − FY dividend up 9% to 18.0 cps • Growth - Life − Retail net book growth of $583m
Slide 6: History of accreting earnings with flat expense base
Highlights Full Year 30 June 2012 Strong operating performance History of accreting earnings with flat expense base For personal use only • Since 2008: Normalised NPAT and EPS 350 70 − normalised NPAT up 36% 300 60 to $297m 50 40 $m cps 250 − normalised EPS up 55% 30 to 57.5cps 200 20 10 • Expense b
Slide 7: Life retail annuity sales continue to build
Highlights Full Year 30 June 2012 Strong operating performance Life retail annuity sales continue to build For personal use only • Since 2008: Annual sales of guaranteed products 1 (bars represent sum of two previous half years) − retail annuity sales have 2,000 grown by 26% CAGR 1,500 $m − Life AUM
Slide 8: Stellar FM net flows and FUM growth
Highlights Full Year 30 June 2012 Strong operating performance Stellar FM net flows and FUM growth For personal use only • Significant positive net flows Funds Management – net flows 3,000 for 6 consecutive halves in 2,000 a difficult market 1,000 • Strong growth in FUM from $m - Jun 08 Dec 08 Jun 0
Slide 9: APRA proposed transition arrangements
Highlights Full Year 30 June 2012 Clarity on LAGIC transition APRA proposed transition arrangements For personal use only • LAGIC to be implemented 1 January 2013 • Results in increased regulatory capital of $110m - $125m per annum for 3 years, with the first increase effective 1 January 2014 – orga
Slide 10: Challenger's response to LAGIC
Highlights Full Year 30 June 2012 Clarity on LAGIC transition Challenger’s response to LAGIC For personal use only • Pro-forma regulatory capital will increase by circa 10% Life normalised RoE (pre tax) per annum for 3 years from 30% 1 January 2014 25% 18% • Portfolio optimisation target 20% opportu
Slide 11: High quality investment portfolio generating sustainable cash flows
Highlights Full Year 30 June 2012 High quality investment portfolio Generating sustainable cash flows For personal use only Assets backing the portfolio - $9.8bn • High quality asset portfolio weighted to fixed income and generating Equity and Infrastructure other 6% 2% sustainable cash flows Proper
Slide 12: Risk management critical to the investment process
Highlights Full Year 30 June 2012 High quality investment portfolio Risk management critical to the investment process For personal use only • Assets and liabilities cash flow Asset and liability matching matched and marked to market Assets • Fixed income and cash, property and infrastructure are us
Slide 13: Competitive advantage in attractive markets
Vision and strategy Full Year 30 June 2012 Market opportunity Competitive advantage in attractive markets For personal use only Life Funds Management • Supportive • Growth underpinned by demographics mandated super system Market opportunity • Changing consumer risk • Contributions increasing prefere
Slide 14: Vision and Strategy
Vision and strategy Full Year 30 June 2012 Vision and Strategy For personal use only Our Vision To provide Australians with financial security in retirement Our Strategy Our Strategy Our Strategy Increase the Australian Be recognised as the Be an active investment retirement savings pool leader in r
Slide 15: Recognised as the leader in retirement incomes
Vision and strategy Full Year 30 June 2012 Recognised as the leader in retirement incomes Strategy executed by …. For personal use only Thought leadership Award winning product innovation • Adviser education via • Guaranteed Pension retirement workshops Fund • Dedicated research • Care Annuity capab
Slide 16: Increase retirement savings in secure products
Vision and strategy Full Year 30 June 2012 Increase retirement savings in secure products Strategy executed by …. For personal use only Increasing regular annuity writers Increasing long term annuity sales 7 6 5 Index: 2009 = 1 4 3 2 1 0 Feb 11 Apr 11 Jun 11 Aug 11 Oct 11 Dec 11 Feb 12 Apr 12 Jun 12
Slide 17: Fund Manager with superior returns
Vision and strategy Full Year 30 June 2012 Fund Manager with superior returns Strategy executed by …. For personal use only Ongoing boutique performance Strong growth in difficult markets Investment performance since inception 6 20% Alpha Benchmark 4 15% 10% 2 5% $bn - (2) (5%) (4) (10%) Market net
Slide 18: Highlights
Highlights Full Year 30 June 2012 Highlights For personal use only 1 Strong operating performance all guidance metrics met or exceeded 2 Clarity on LAGIC transition impact and timing of transition now known 3 High quality investment portfolio generating sustainable cash flows 4 Focused vision and st
Slide 19: FY12 Financial Results
For personal use only FY12 Financial Results Andrew Tobin Chief Financial Officer 20 August 2012
Slide 20: Group financial performance
Financial results Full Year 30 June 2012 Group financial performance Strong normalised NPAT and EPS growth For personal use only Total Assets and Funds Under Management Financial 40 FY12 FY11 Change Trend performance 30 Assets Under $33.4bn $27.9bn 20% Management $bn 20 Net income $528m $494m 7% 10
Slide 21: Life financial performance
Financial results Full Year 30 June 2012 Life financial performance Upgraded guidance exceeded with significant AUM growth For personal use only Average AUM and normalised COE Financial 10 500 FY12 FY11 Change Trend performance 8 400 6 300 AUM (average) $9.0bn $7.9bn 14% $bn $m 4 200 Normalised Cash
Slide 22: COE margin reflects lower asset and capital returns
Financial results Full Year 30 June 2012 Life financial performance COE margin reflects lower asset and capital returns For personal use only 5.5% 5.0% 5.1% 0.1% (0.1%) 4.9% (0.3%) 0.1% 4.5% 4.0% FY11 COE Lower returns Lower annuity Lower fees Lower FY12 COE margin on assets costs & commissions norm
Slide 23: NIM run-off slowing and earnings impact mitigated
Financial results Full Year 30 June 2012 Life financial performance NIM run-off slowing and earnings impact mitigated by capital For personal use only reinvestment • CLC purchased the net interest margin (“NIM”) on $11bn of term funded residential mortgages from Group for Underlying mortgage run-off
Slide 24: Net book growth increasing following investment in DPM
Financial results Full Year 30 June 2012 Life financial performance Net book growth increasing following investment in DPM For personal use only • Strong organic sales Retail annuity net book growth with 26% CAGR 2,500 583 675 800 2,000 468 600 since 2008 1,500 400 1,000 Closed book 200 • 500 $m - $
Slide 25: Investment experience driven by fixed income and property
Financial results Full Year 30 June 2012 Life financial performance Investment experience driven by fixed income and property For personal use only Investment experience (pre tax) Australian iTraxx index 75 300 FY12 actual Normalised growth expectations 50 25 200 - $m Fixed income Equity Infrastruct
Slide 26: Funds Management financial performance
Financial results Full Year 30 June 2012 Funds Management financial performance Strong AUM growth and increased EBIT For personal use only Financial FUM – average and spot FY12 FY11 Change Trend Performance 40 30 FUM (average) $27.7bn $21.9bn 27% $bn 20 Fidante Partners $32m $30m 10% 10 net income 2
Slide 27: Margins driven by FUM composition
Financial results Full Year 30 June 2012 Funds Management financial performance Margins driven by FUM composition For personal use only • Challenger’s share of Fidante Net income margin 80 Partners earnings (bps) has been 70 60 relatively stable with net income 50 reflecting: bps 40 30 20 – improved
Slide 28: Strong Life surplus and organic capital generation
Capital management Full Year 30 June 2012 Capital management Strong Life surplus and organic capital generation For personal use only Illustrative purposes only – assumes no positive or negative investment experience1 Pro forma 18 months to 31 December 2013 Pro forma 12 months to 31 December 2014 1,
Slide 29: Strong capital position for LAGIC and accreting dividends
Capital management Full Year 30 June 2012 Capital management Strong capital position for LAGIC and accreting dividends For personal use only • Strongly capitalised and well positioned Excess capital to regulatory requirements plus Group cash for implementation of LAGIC with 1,000 $813m1 of CLC exces
Slide 30: Outlook
For personal use only Outlook Brian Benari Chief Executive Officer 20 February 2012
Slide 31: Demographics and business model support ongoing growth
Outlook Full Year 30 June 2012 Outlook Demographics and business model support ongoing growth For personal use only • Overall demographic trends coupled with a growing awareness of the financial risks in retirement will continue to propel our retirement incomes business • Fidante Partners business m
Slide 32: 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 this presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon