Challenger Limited · ASX:CGF
Challenger — Citi Conference 2011
15 slides from Challenger's conference presentation, 2011
Slide 1: Challenger – capturing growth in the retirement income market
Challenger – capturing growth in the retirement income market Brian Benari Group Chief Financial Officer & Group Chief Operating Officer
Slide 2: Macro drivers of annuity sales growth: superannuation fund growth
Macro drivers of annuity sales growth Growth in underlying superannuation funds 4,000 3,500 3,000 2,500 $m 2,000 1,500 1,000 500 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2 Source: Rainmaker Superannuation FUM Projections 2011-2021 (Dec 2010).
Slide 3: Macro drivers of annuity sales growth: ageing population
Macro drivers of annuity sales growth Ageing population Australian population growth 2008 - 2028 3
Slide 4: Macro drivers of annuity sales growth: defensive asset allocation
Macro drivers of annuity sales growth Under allocation to defensive assets in Australia relative to OECD 100% 80% 60% 40% 20% 0% 4 1Source: OECD Global Pension Statistics (2009 data) July 2010, Issue 7
Slide 5: Annuities – as part of a retirees portfolio
Annuities – as part of a retirees portfolio • defensive asset in portfolio short • short-term cash vehicle term • education expenses • defensive asset in portfolio medium • cash flow management in SMSF‟s term • aged care strategies • „bedrock‟ of a retiree‟s income long • explicit inflation and long
Slide 6: New product opportunities
New product opportunities • Guarantee projects in progress: • RCV0 GIF series based on feedback from advisers – Evolution of the existing RCV100 GIF product for investment management platforms – Greater flexibility for customers who use platforms • Deferred lifetime annuities (DLAs) – Require minor
Slide 7: Deferred lifetime annuities
Deferred lifetime annuities • 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 pension – A premium of ~$25k today: • will double the age pension in real terms f
Slide 8: Trends evident - 1Q12 annuity sales accelerating
Trends evident - 1Q12 annuity sales accelerating Annual Sales of Guaranteed Products • Record 1Q12 retail annuity (bars represent sum of the four previous quarters) sales of $509m – up 48% 2,250 Retail Sales (GIP/GIF/GA) Institutional Sales (GIR) on pcp and 13% on prior 2,000 quarter 1,750 • Total L
Slide 9: New growth supported by organic capital generation
New growth supported by organic capital generation • Capital strength Capital excess to regulatory requirements – Strong excess to regulatory 1000 minimum maintained 750 – Excess capital buffers impacts of variable market conditions 500 $m – Cash earnings accreting resulting in 250 steady organic ca
Slide 10: Sustainable margin
Sustainable margin 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) 10
Slide 11: Normalised growth assumptions
Normalised growth assumptions • Life cash operating earnings Cumulative Investment Experience (IE) - Consolidated Life comprise: – Cash spread earnings (e.g. fixed 1,000 income coupons, lease cash 800 flows) 600 – Normalised growth assumptions 400 (medium term capital growth $'m 200 expectations thr
Slide 12: Normalised growth assumptions
Normalised growth assumptions Cumulative Investment Experience - Consolidated Life • Since 2003 property and fixed (Excluding CIF impact) income assets (representing 1,000 91% of assets) performed 800 inline with medium term capital growth expectations 600 • Infrastructure and 400 $'m equity/alterna
Slide 13: Growth in boutique FUM
Growth in boutique FUM • Strong performance Boutique Partnerships Funds Under Management continuing across ten 20.0 boutique partnerships Fixed Income Equity & Other • FUM up 19% in the last 12 17.5 months – due to strong net 15.0 inflows offset by some negative market 12.5 movement in the last $ bn
Slide 14: Summary
Summary • Boutique FUM pipeline growing - underpinned by strong performance • Structural wealth management and demographic trends continue • Awareness of the need for less risk in retirement has gained significant momentum • Need for longevity protection in retirement resonating with consumers, indu
Slide 15: Disclaimer
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 as advice to investors