Challenger Limited · ASX:CGF
Challenger — Investor Day (May 2017)
52 slides from Challenger's investor day presentation, May 23, 2017
Slide 1: Challenger Limited Investor Day
For personal use only Challenger Limited Investor Day 23 May 2017
Slide 2: Investor proposition
For personal use only Investor proposition Investor Day Brian Benari Managing Director and Chief Executive Officer
Slide 3: Outline
Outline Providing our customers with financial security for retirement For personal use only 10:00 – 10:10 Investor proposition Brian Benari – Managing Director and Chief Executive Officer 10:10 – 10:30 Retirement income policy update Jeremy Cooper – Chairman, Retirement Income 10:30 – 10:50 Life Ch
Slide 4: Investor proposition: Market leader with competitive advantage
Investor proposition Market leader with competitive advantage For personal use only PROVIDING OUR CUSTOMERS WITH FINANCIAL SECURITY FOR RETIREMENT FOCUSED TALENTED RECOGNISED MARKET STRATEGY PEOPLE CAPABILITY LEADER FM – boutique and Highly engaged staff with Recognised consumer FM growing t
Slide 5: Strong employee engagement
Strong employee engagement Underpinning sustainable business performance For personal use only Challenger outperforms best-in class global benchmark Employee engagement score (undertaken by Willis Towers Watson) 88% 5% 13% 2016 2017 score score 88% 88% Challenger Global High Australian Performing Na
Slide 6: Retirement income policy update
For personal use only Retirement income policy update Investor Day Jeremy Cooper Chairman, Retirement Income
Slide 7: Key points: Regulatory reforms underway
Key points Regulatory reforms underway to enhance retirement phase For personal use only 1 Retirement income reforms well underway Clear focus on generating sustainable income streams Moving from consultation to implementation phase 2 CIPRs (MyRetirement) Framework designed to address risks retirees
Slide 8: CIPRs (MyRetirement): Framework designed to address risks retirees face
CIPRs (MyRetirement) Framework designed to address risks retirees face For personal use only 1 Extract from Government discussion paper – Objectives of proposed CIPR framework Investor Day – Retirement income policy update 1. Government discussion paper available at https://consult.treasury.gov.au.
Slide 9: CIPRs: Principles-based minimum product features
CIPRs (MyRetirement) Principles-based minimum product features For personal use only Consistent with Financial System Inquiry recommendation Proposed there would be a limited number 1 of principles-based CIPR requirements Extract from Government discussion paper 1 Provide minimum level of income tha
Slide 10: CIPR structure emphasises role of 3rd party products
CIPRs (MyRetirement) CIPR structure emphasises role of 3rd party products For personal use only 1 Stylistic representation of CIPR structure - from Government discussion paper • Flexible structure to accommodate existing retail and industry arrangements • Trustee to design, administer and offer CIPR
Slide 11: How a CIPR would work in practice
CIPR (MyRetirement) How a CIPR would work in practice For personal use only CIPR product CIPR framework • provide broadly constant stream of income • include soft-default mechanism to ease throughout retirement decision making for individuals • mass-customised composite product-designed • provide sa
Slide 12: Key points: Regulatory reforms underway
Key points Regulatory reforms underway to enhance retirement phase For personal use only 1 Retirement income reforms well underway Clear focus on generating sustainable income streams Moving from consultation to implementation phase 2 CIPRs (MyRetirement) Framework designed to address risks retirees
Slide 13: Life
For personal use only Life Investor Day Chris Plater Chief Executive, Life
Slide 14: Key points: High quality investment portfolio meeting 18% ROE
Key points High quality investment portfolio meeting 18% ROE For personal use only 1 Asset allocation framework Consistently applied with strong risk management 2 Asset and liability matching Sales mix drives book profile 3 Return On Equity All product categories meet 18% ROE target (pre-tax) 4 Rela
Slide 15: Asset allocation framework
Asset allocation framework Consistently applied with strong risk management For personal use only • Fundamental principle - assets and liabilities cash flow matched Asset and No change to risk management liability • Managed by dedicated team • Strong governance framework matching • Liability maturit
Slide 16: Life investment portfolio overview
Life investment portfolio overview Driven by asset allocation framework For personal use only Life investment portfolio – last 10 years 100% 4% 4% 12% 7% 6% 6% 5% 5% 4% • Life investment portfolio driven 2% 3% 3% 7% 3% 8% 90% 19% 18% 3% 8% by asset allocation framework 4% 16% 16% 18% 20% 80% 5% 3% 2
Slide 17: Asset and liability matching
Asset and Asset and liability matching liability matching (ALM) Asset and liabilities matched and duration extending Capital & Risk Management For personal use only Relative ROE value Asset and liability cash flow matching – 31 March 2017 • Assets and liabilities 7,000 remain cash flow matched 6,000
Slide 18: Sales mix drives book profile
Asset and Asset and liability matching liability matching (ALM) Sales mix drives book profile Capital & Risk Management For personal use only Relative ROE value Sales Liability Annuity sales mix moving to long term Extending liability maturity profile GIR sales mix moving to short term GIR as portio
Slide 19: Return On Equity: All product categories meeting 18% target
Return On Equity (ROE) Asset and liability matching (ALM) All product categories meeting 18% ROE target Capital & Risk Management For personal use only Relative ROE value Product Domestic Japanese Institutional category annuities annuities Guaranteed Index Return (GIR) Product Amortising fixed term
Slide 20: Relative value: Becoming more neutral across asset classes
Asset and Relative value liability matching (ALM) Becoming more neutral across asset classes Capital & Risk Management For personal use only Relative ROE value Fixed income • Earning asset risk premium and illiquidity premium (in addition to credit risk premium) Asset risk premium – fixed income and
Slide 21: Life investment portfolio: Portfolio in good shape
Life investment portfolio overview Portfolio in good shape and meeting return target For personal use only Life investment portfolio $15.0bn – 31 March 2017 Fixed income and cash Property • Investment grade typically Infrastructure • Portfolio remix largely completed 4% 75% – 80% (March 2017 75%) Eq
Slide 22: Key points: High quality investment portfolio meeting 18% ROE
Key points High quality investment portfolio meeting 18% ROE For personal use only 1 Asset allocation framework Consistently applied with strong risk management 2 Asset and liability matching Sales mix drives book profile 3 Return On Equity All product categories meet 18% ROE target (pre-tax) 4 Rela
Slide 23: Distribution, Product and Marketing
For personal use only Distribution, Product and Marketing Investor Day Richard Howes Chief Executive Distribution, Product and Marketing
Slide 24: Key points: Independent product provider with competitive advantage
Key points Independent product provider with competitive advantage For personal use only 1 Wealth industry sales process End-to-end integration requires multiple capabilities 2 Consumer and adviser brand Sales success underpinned by strong brand recognition 3 Product High quality and award winning p
Slide 25: Wealth industry sales process
Wealth industry sales process End-to-end integration requires multiple capabilities For personal use only CONSUMER AND ADVISER BRAND RESEARCH HOUSES / SUPER PRODUCT ADVISER SALES ASSET CONSULTANTS TRUSTEES Advice Established partner across complex advice system Deep relationships Technical capabilit
Slide 26: Sales success underpinned by strong brand recognition
Wealth industry sales process Sales success underpinned by strong brand recognition For personal use only CONSUMER AND ADVISER BRAND RESEARCH HOUSES / SUPER PRODUCT ASSET CONSULTANTS ADVISER SALES TRUSTEES 1,2 Multiple campaigns Leading retirement income brand Brand attracting new partners Advisers
Slide 27: High quality and award winning products
Wealth industry sales process High quality and award winning products For personal use only CONSUMER AND ADVISER BRAND RESEARCH HOUSES / SUPER PRODUCT ASSET CONSULTANTS ADVISER SALES TRUSTEES 1 CarePlus Track record of product innovation launched Next wave of innovation 4,500 Industry funds on platf
Slide 28: Deep relationships with gate keepers
Wealth industry sales process Deep relationships with gate keepers For personal use only CONSUMER AND ADVISER BRAND RESEARCH HOUSES / SUPER PRODUCT ASSET CONSULTANTS ADVISER SALES TRUSTEES ‒ Strong and recognised technical capability ‒ Public policy moving toward longevity solutions ‒ Work to includ
Slide 29: Advice: The link between product and customers
Advice The link between product and customers For personal use only CONSUMER AND ADVISER BRAND RESEARCH HOUSES / SUPER PRODUCT ASSET CONSULTANTS ADVISER SALES TRUSTEES CLIENT ADVICE IMPLEMENTATION ENGAGEMENT FORMULATION Investor Day – Distribution, Product and Marketing 29
Slide 30: Advice: Multi-dimensional and supported by complex machinery
Advice Multi-dimensional and supported by complex machinery For personal use only CLIENT ADVISER IMPLEMENTATION ENGAGEMENT CLIENT FORMULATION ADVICE IMPLEMENTATION ENGAGEMENT FORMULATION Research / Licensee/ Investment Platforms Dealer Group Governance Investor Day – Distribution, Product and Market
Slide 31: Challenger rated No.1 by advisers
Licensee / Dealer Group Challenger rated No.1 by advisers For personal use only Challenger – capability highly rated by advisers1 Challenger Para – planning Challenger rated #1 in industry 2 highest industry net promoter score1 nd Overall adviser Challenger +50% satisfaction Licensee/ Image and repu
Slide 32: Para-planning process supported by market leading tools
Licensee / Dealer Group Para-planning process supported by market leading tools For personal use only Challenger’s Retirement Illustrator1 • Scenario modelling to demonstrates benefit of partial annuitisation Para – planning • Supports income layering approach • Allows comparison of income and capit
Slide 33: Trusted partner in adviser education
Licensee / Dealer Group Trusted partner in adviser education For personal use only Supporting advisers through multiple channels Para – planning 13,000 Licensee/ ADVISERONLINE Dealer Group LOGINS 16,000 ADVISERS RECEIVING CHALLENGER Adviser education TECH NEWS Relationships with leading universities
Slide 34: Thought leadership influencing industry practice
Research / Investment Governance Thought leadership influencing industry practice For personal use only Income layering – addressing retiree needs Model portfolio APL Research / Investment Governance Compliance and Governance Dedicated retirement income research capability Investor Day – Distributio
Slide 35: Products well represented across APLs and model portfolios
Research / Investment Governance Products well represented across APLs and model portfolios For personal use only ON APLs OF Model Over ALL MAJOR HUBS portfolio 1 650 APLs CHALLENGER AND FIDANTE APL Research / Investment Governance In 190 Compliance model and Governance portfolios CHALLENGER AND FID
Slide 36: Platforms: Broadening access to Challenger annuities
Platforms Broadening access to Challenger annuities For personal use only 1 • Platforms provide access to 1/3rd of superannuation FUM • Platforms provide access to 2/3rd of advisers2 • Annuities on platform – very positive adviser feedback • Advisers more likely to use annuities via platforms Platfo
Slide 37: Advice process: Multi-dimensional and supported by complex machinery
Advice process Multi-dimensional and supported by complex machinery For personal use only CLIENT ADVICE IMPLEMENTATION ENGAGEMENT FORMULATION Model APL portfolio Para – planning Research/ Licensee / Investment Platforms Dealer Group Governance Compliance Adviser and education Governance Technology I
Slide 38: Challenger: Independent product provider with competitive advantage
Challenger Independent product provider with competitive advantage For personal use only ‒ Dedicated retirement income focus ‒ Australia's #1 retirement income brand ‒ Significant market position RESEARCH HOUSES / CONSUMER AND ADVISER BRAND Advice RESEARCH HOUSES / SUPER PRODUCT ADVISER SALES ASSET
Slide 39: Funds Management
For personal use only Funds Management Investor Day Ian Saines Chief Executive, Funds Management
Slide 40: Key points: Leading model building on successful track record
Key points Leading model building on successful track record For personal use only 1 Funds Management overview Fastest growing Australian active fund manager Leading model has driven persistent growth 2 Managers diversified across life cycle stages Provides diversification of earnings Providing futu
Slide 41: Fastest growing Australian active fund manager
Funds Management 1 Fastest growing Australian active fund manager For personal use only Leading model with strong Challenger FUM growth compared to market2 track record of success 300 1 Benefiting from system growth 250 ‒ super savings to double over 10 years Sale of Kapstream 2 Leading business mod
Slide 42: Managers diversified across life cycle stages
Managers diversified across life cycle stages Providing future capacity and growth prospects For personal use only Established Growth • High profitability • Significant operating Incubation • Growing profitability leverage • Boutique brand • Maintain investment recognition track record • Break-even
Slide 43: Fidante Partners boutique principals
Fidante Partners boutique principals Panel discussion For personal use only Ardea Investment Mgt WaveStone Capital Lennox Capital Partners Ben Alexander Catherine Allfrey James Dougherty Principal, Portfolio Manager Principal, Portfolio Manager Principal, Portfolio Manager Co-founded Ardea Investmen
Slide 44: Ardea Investment Management
Ardea Investment Management Absolute return, multi-strategy, fixed income manager For personal use only Capturing inefficiencies in the fixed Historical performance2 (%) income market Real Outcome Plus (Mar 2013) • Established 2008 Inception p.a. Real Outcome 1 • FUM $7.5 billion across a number of
Slide 45: WaveStone Capital
WaveStone Capital Active, high conviction investment manager For personal use only Investing in quality growth companies with sustainable competitive advantage Historical performance3 (%) • Commenced partnership with Australian Share Fund (Feb 2014) Fidante in 2008 Inception p.a. Dynamic Australian
Slide 46: Lennox Capital Partners
Lennox Capital Partners Specialist Australian small companies manager For personal use only Active fundamental investment approach Macquarie Australian Small Companies Fund historical performance1 (%) • Established March 2017 1 year • Founding principals previously Total Fund Returns managed the Mac
Slide 47: Fidante Partners Europe
Fidante Partners Europe Investing to replicate successful model offshore For personal use only Extending global distribution and product footprint • Strong demand from Australian clients for global product • Alternatives is a rapidly growing investment category • Fidante model highly regarded by ass
Slide 48: Key points: Leading model building on successful track record
Key points Leading model building on successful track record For personal use only 1 Funds Management overview Fastest growing Australian active fund manager Leading model has driven persistent growth 2 Managers diversified across life cycle stages Provides diversification of earnings Provides futur
Slide 49: Wrap up and Q&A session
For personal use only Wrap up and Q&A session Investor Day Brian Benari Managing Director and Chief Executive Officer
Slide 50: Wrap up: Financial security in retirement
Wrap up Providing our customers with financial security in retirement For personal use only 1 Retirement income policy update Regulatory reforms underway to enhance retirement phase 3 Life High quality investment portfolio meeting 18% ROE (pre-tax) 2 Distribution, Product and Marketing Independent p
Slide 51: Q&A session
For personal use only Q&A session Investor Day
Slide 52: Important note
For personal use only Important note This presentation was prepared for the purpose of a briefing to equity analysts and certain wholesale investors on 23 May 2017. The material in this presentation is general background information about Challenger Limited activities and is current at the date of t