Slide 1: Financial Results 2024
challenger &3 Financial Results 2024 13 August 2024
Slide 2: Acknowledgement of country
Acknowledgement of country Challenger acknowledges the Traditional Owners of Country throughout Australia and we pay our respects to Elders past and present. We recognise the continuing connection that Aboriginal and Torres Strait Islander peoples have to this land and acknowledge their unique and r
Slide 3: Overview
1 Business and strategy update Nick Hamilton – Managing Director and Chief Executive Officer Overview 2 Financial results and outlook Alex Bell – Chief Financial Officer 3 Key priorities Nick Hamilton – Managing Director and Chief Executive Officer
Slide 4: Business and strategy update
1 Business and strategy update Nick Hamilton
Slide 5: Key points
01 02 Business model supporting Stronger financial sustainable long-term performance – earnings, growth ROE and dividend growth Key points 03 04 Strongly capitalised, less Growth opportunities capital intensive and more driven by market tailwinds resilient model with a leading position and clear str
Slide 6: Challenger purpose and strategy
Challenger purpose and strategy Providing customers with financial security for a better retirement OUR STRATEGIC PILLARS Retirement Investment Talented team leader excellence and capability Broaden customer access Superior outcomes and Outstanding skills and across multiple channels financial resil
Slide 7: FY24 strategic achievements
FY24 strategic achievements Delivering on our strategy Retirement Investment Talented team leader excellence and capability Developed innovative retirement Expanded private market and >120 employee L&D sessions income partnerships alternatives offerings Transitioned technology services to Launched b
Slide 8: Successfully executing strategy
Successfully executing strategy Generating long-term sustainable growth • Scalable platform • Leading retirement brand • Cost disciplined Scalable Retirement • Pre- and post-retirement products platform and leader • Technology efficiencies efficiency • Diversified sales channels Stronger financial •
Slide 9: Strong financial performance
Strong financial performance Above guidance range with record long duration sales AUM Normalised ROE1,2 Dividend $127bn 15.6% 26.5cps Normalised NPBT1 ▲21% ▲290 bps ▲10% Pre-tax Payout ratio 44% $608m (target 30% to 50%) Statutory NPAT Life sales CLC PCA ratio ▲17% Above guidance range $555m to $605
Slide 10: Financial results and outlook
2 Financial results and outlook Alex Bell
Slide 11: Group snapshot
Group snapshot Profit growth supported by Life earnings and cost optimisation FY24 Change NORMALISED NPBT1 NORMALISED EPS Net income $927m 10% $608M +17% 60.9CPS +14% Expenses ($314m) (1%) Average investment assets ($bn) EBIT $613m 17% Cash Operating Earnings margin (%) Interest & borrowing ($5m) 25
Slide 12: Delivering higher sustainable ROE
Delivering higher sustainable ROE On track to achieve ROE target in FY25 N O R M AL I S E D G R O U P R O E ( P R E - TAX ) 2H24 16.1% +300 BPS PCP ROE DRIVERS FY24 15.6% +290bps 16.3% FY24 16.2% • Strong Life performance – benefiting from longer 15.6% 16.1% -120bps duration sales and strong asset o
Slide 13: Capturing scale benefits
Capturing scale benefits Platform with high operating leverage Lowering cost to income target in FY25 T O TAL E X P E N S E S 1 C O S T T O I N C O M E TAR G E T $314M -1% 33.8% -390 BPS Costs -1% Income +10% $318m $314m 41.2% 39.3% 38.7% 38.5% 37.7% 36.9% Current target 35% to 37% 34.6% $159m $155m
Slide 14: Capital management
Capital management Balance sheet resilience and capital flexibility Lower PCA requirement L I F E P R E S C R I B E D C AP I TAL AM O U N T ( P C A) R AT I O 1 , 2 LIFE PCA REQUIREMENT ($M) PCA ratio 1.67x +0.17x in 2H24 16.1% Capital intensity 10.8% -110bps in 2H24 • PCA includes asset risk charge,
Slide 15: Life performance
Life performance Sales remix strategy supporting stronger returns FY24 Change AVERAGE AUM +4% LIFE EBIT +17% COE MARGIN +30 BPS ROE +340 BPS Normalised Cash Operating Earnings (COE) $750m 15% Average Averageinvestment investment assets ($bn) assets ($bn) EBIT ($m) Expenses ($116m) 3% Cash Operating
Slide 16: Life sales
Life sales Book quality improving through longer duration and more valuable sales L I F E S AL E S ( $ M ) ANNUITY NEW BUSINESS ($2.8bn)1 ANNUITY REINVESTMENTS ($1.7bn) • New business tenor 8.5 years2 • FY24 maturity rate4 26% Index Plus new business tenor • 88% new business annuity sales 2+ years (
Slide 17: Life
Life Sales remix strategy supporting stronger returns G R O W I N G L O N G E R D U R AT I O N L O W E R M AT U R I T Y R AT E AN D L O N G E R D U R AT I O N S U P P O R T I N G M O R E VAL U AB L E S AL E S S U S TAI N AB L E B O O K G R O W T H H I G H E R M AR G I N S AN D R E T U R N S 33% 15.6
Slide 18: Life COE margin
Life COE margin Longer duration sales supporting margin expansion C O E 1 M AR G I N F Y 2 4 C O E 1 M AR G I N ( % ) + 3 0 B P S Higher yields across all asset classes 3.20% Higher interest Product cash margin +18bps rates 3.04% 0.85% 0.01% 0.03% 0.18% 2.88% 3.12% (0.71%) (0.06%) 2.82% 2.76% Higher
Slide 19: Life investment portfolio
Life investment portfolio Diversified balance sheet providing financial resilience No material change to asset allocation expected L I F E AU M 1 ( $ B N ) $23.5bn $24.7bn $22.2bn 2% 1% 13% Fixed Income Property Alternatives Equity & 4% 6% 10% Infrastructure 13% 11% 15% 11%, -2pp 74%, -2pp 13%, +3pp
Slide 20: Asset experience
Asset experience Strong credit performance offset by commercial office revaluations AS S E T E X P E R I E N C E PROPERTY PORTFOLIO Asset experience (pre-tax) -$119m Valuation changes since 30 June 20222 1H23 2H23 1H24 2H24 • Tighter credit spreads Fixed Income 290 • Low credit defaults1 • In-line w
Slide 21: Liability experience
Liability experience Driven by new business strain and changes in valuation of Life Risk liabilities L I AB I L I T Y E X P E R I E N C E AAS B 1 7 I M PAC T O N L I F E R I S K B U S I N E S S - $ 1 5 0 M UK Life Risk business • Participating in well-established longevity risk transfer market since
Slide 22: Funds Management performance
Funds Management performance Earnings and ROE reflect change in business mix FY24 Change AVERAGE FUM FM EBIT FUM-based income & transaction fees $167m (4%) $106.1BN +12% $55M -11% Fidante $89bn +20% Net income -3% Performance fees $7m 45% CIM $17bn -17%1 Expenses +2% Net income $174m (3%) 18.4 18.8
Slide 23: Funds Management
Funds Management FUM benefiting from strong institutional flows and market movements F U N D S U N D E R M AN AG E M E N T ( $ B N ) N E T F L O W S – Q U AR T E R LY ( $ B N ) Equity inflows driven by 5.2 lower-margin institutional mandates Total FM net flows $10.0bn 3.5 10.0 117.4 2.3 14.5 98.5 (1
Slide 24: FY25 guidance and targets
FY25 guidance and targets Strong growth and on track to achieve normalised ROE target N O R M AL I S E D E AR N I N G S G U I D AN C E T H R O U G H T H E C Y C L E TAR G E T S FY24 NPAT $640m to $700m Normalised ROE Cost to income ratio FY25 NPBT Midpoint 10% higher than FY24 RBA cash rate +12% 32%
Slide 25: Key priorities
3 Key priorities Nick Hamilton
Slide 26: Benefiting from long-term drivers
Benefiting from long-term drivers Australians are living longer and demand for financial security is increasing AGEING DEMAND FOR R E G U L AT O R Y P O P U L AT I O N FINANCIAL SECURITY SUPPORT Government 2.5m 72% focus Australians set to retire Australian retirees would be much • Retirement Income
Slide 27: Strategy to capture future growth opportunities
Strategy to capture future growth opportunities Scalable and dynamic platforms LONG TERM • Diversified channels MEDIUM TERM (Retail, Superannuation funds, Offshore) • Wealth platform integrations SHORT TERM • Embed retirement solutions • Broaden loan origination into advice technology • Deliver cust
Slide 28: Key points
01 02 Business model supporting Stronger financial sustainable long-term performance – earnings, growth ROE and dividend growth Key points 03 04 Strongly capitalised, less Growth opportunities capital intensive and more driven by market tailwinds resilient model with a leading position and clear str
Slide 29: Important note
IMPORTANT NOTE The material in this presentation is general background information about Challenger Limited group’s This document may contain certain ‘forward-looking statements’. The words ‘forecast’, ‘expect’, ‘guidance’, activities and is current at the date of this presentation. It is informatio