Challenger Limited · ASX:CGF
Challenger — Investor Day (June 2016)
50 slides from Challenger's investor day presentation, Jun 2, 2016
Slide 1: Challenger 2016 Investor Day
2016 Challenger Investor Limited Day For personal use only Challenger 2016 Investor Day 2 June 2016, Sydney – Challenger Limited (ASX:CGF) today holds its 2016 Investor Day featuring presentations on Challenger’s strategy from key executives. Challenger’s 2016 Investor Day commences at 10.30am today
Slide 2: Challenger Limited Investor Day 2 June 2016
Challenger Limited For personal use only Investor Day 2 June 2016
Slide 3: Outline
Outline Providing Australians with financial security for retirement For personal use only Overview and outlook Brian Benari – Managing Director and Chief Executive Officer Funds Management Ian Saines – Chief Executive, Funds Management Life Chris Plater – Principal Executive Officer and Chief Inves
Slide 4: Overview and outlook
For personal use only Overview and outlook Investor Day Brian Benari Managing Director and Chief Executive Officer
Slide 5: Investor proposition
Investor proposition Market leader with competitive advantage For personal use only PROVIDING AUSTRALIANS WITH FINANCIAL SECURITY FOR RETIREMENT FOCUSED RECOGNISED TALENTED MARKET STRATEGY CAPABILITY PEOPLE LEADER FM – boutique and Recognised consumer Highly engaged staff with FM growing twi
Slide 6: Retirement income market drivers
Retirement income market drivers Market leader well positioned in high growth market For personal use only Super funds partnering with Life companies Over 700 Australians turning 65 every day Industry moving ahead of regulation Older and 20-year cycle of retiring ‘Baby-Boomers’ Market healthier reti
Slide 7: Funds Management
For personal use only Funds Management Investor Day Ian Saines Chief Executive, Funds Management
Slide 8: Key points: Continuing to build competitive advantage
Key points Continuing to build competitive advantage For personal use only 1 Funds Management Track record of growing FUM and adding boutiques 2 Fidante Partners Investing to enhance long term competitive advantage 3 Fidante Partners Europe Dexion acquisition fulfilling strategic rationale 4 Challen
Slide 9: Track record of growing FUM and adding boutiques
Funds Management Track record of growing FUM and adding boutiques For personal use only FUM ($bn)1 60 • Funds Management FUM Challenger Investment Partners of $55bn, up from $19bn 50 Fidante Partners 5 years ago1 ‒ annual growth 30% p.a. 40 ‒ market growth 14% p.a.2 30 • Fidante Partners ‒ 15 boutiq
Slide 10: Continued growth supported by available capacity and superior net flows
Funds Management Continued growth supported by available capacity and For personal use only superior net flows Manager capacity ($bn) Rolling 12 month organic net flows vs peers1 ($bn) 25 7 Available capacity Challenger Funds Management FUM 6 Peer average 20 5 15 4 3 10 2 5 1 Equity Fixed Alternativ
Slide 11: Fidante Partners: Investing to enhance long term competitive advantage
Fidante Partners Investing to enhance long term competitive advantage For personal use only Equity Distribution Partnership Administration Services • Expanding boutique product offering • Expanded institutional and • Recognised, institutional-grade retail distribution teams support infrastructure
Slide 12: Fidante Partners: Replicating a successful model in Europe
Fidante Partners Replicating a successful and proven model in Europe For personal use only S STRATEGIC Extend global distribution and product footprint PRIORITY ‒ Demand from clients for offshore product increasing ‒ Fidante Partners model highly regarded by asset consultants and investors with prov
Slide 13: Fidante Partners Europe: Dexion acquisition
Fidante Partners Europe Dexion acquisition fulfilling strategic rationale For personal use only Listed Closed-End Investment Companies Multi-boutique platform ‒ Provides liquidity and mark-to-market benefits for ‒ 3 alternative asset boutiques alternative asset investors ‒ Distribution and administr
Slide 14: Challenger Investment Partners
Challenger Investment Partners Continuing to leverage capability and expand client base For personal use only Demand Challenger Supply Investment Partners • Negative global interest rates driving • Proven fixed income and property originator foreign investors (e.g. Japanese) to seek • Successful co-
Slide 15: Challenger Investment Partners: Third party client case studies
Challenger Investment Partners Third party client case studies For personal use only Fixed income – Relative Value Debt Strategy Property – Retail Property mandate • Major Australian superannuation fund mandates • Offshore sovereign wealth fund • FUM of $1.2bn with 48% co-invested with Life • FUM of
Slide 16: Key points: Continue to build competitive advantages
Key points Continue to build competitive advantages For personal use only 1 Funds Management Track record of growing FUM and adding boutiques 2 Fidante Partners Investing to enhance long term competitive advantage 3 Fidante Partners Europe Dexion acquisition fulfilling strategic rationale 4 Challeng
Slide 17: Life
For personal use only Life Investor Day Chris Plater Principal Executive Officer ＆ Chief Investment Officer, Life
Slide 18: Key points: High quality investment portfolio meeting 18% ROE target
Key points High quality investment portfolio meeting 18% ROE target For personal use only 1 Investment team and structure Stable and highly experienced teams providing competitive advantage 2 Governance & risk management framework Entrenched risk management culture with Board oversight Credit risk m
Slide 19: Investment team and structure
Investment team and structure Stable and highly experienced teams For personal use only Chief Investment Officer Chris Plater 22 years experience Life Asset Asset & Liability Investment Investment Group Risk Allocation Management Management teams Credit Senior Portfolio Senior Portfolio Senior Portf
Slide 20: Governance & risk management framework
Governance & risk management framework Entrenched risk management culture with Board oversight For personal use only • Risk appetite differentiates between risks that provide an economic return and those that do not • Risk management is entrenched in corporate culture • Board Risk Committee and Audi
Slide 21: Credit risk management central to investment process
Governance & risk management framework Credit risk management central to investment process For personal use only Risk appetite includes Board approved risk limits – country, sector and counterparty Credit risk Equity and infrastructure risk Property risk Life insurance risk Credit risk mana
Slide 22: Credit risk benchmarking
Governance & risk management framework Credit risk benchmarking For personal use only Credit risk benchmarking Higher credit quality than major Australian banks1 100% • Higher fixed income credit quality than major Australian banks • Challenger selective on credits as not 75% relationship driven 79%
Slide 23: Asset allocation driven by duration and relative value
Asset allocation & portfolio construction Asset allocation driven by duration and relative value For personal use only • Strict portfolio construction framework employed Life investment asset allocation framework Asset and • Investment decisions based on risk-adjusted returns liability matching • As
Slide 24: Assets and liabilities matched and unwanted risks mitigated
Asset allocation & portfolio construction Assets and liabilities matched and unwanted risks mitigated For personal use only • Assets deliver contracted cash flows to match Assets and liabilities cash flow matched ($m) contracted liabilities • Risk appetite does not tolerate duration mismatch Assets
Slide 25: Asset allocation driven by duration and relative value
Asset allocation & portfolio construction Asset allocation driven by duration and relative value For personal use only • Life extracts risk premium with Asset risk premium – fixed income and property1 change in base interest rates 12% reflected in annuity pricing 10% • Despite low return environment
Slide 26: Key points: High quality investment portfolio meeting 18% ROE target
Key points High quality investment portfolio meeting 18% ROE target For personal use only 1 Investment team and structure Stable and highly experienced teams providing competitive advantage 2 Governance & risk management framework Entrenched risk management culture with Board oversight Credit risk m
Slide 27: Retirement income policy update
For personal use only Retirement income policy update Investor Day Jeremy Cooper Chairman, Retirement Income
Slide 28: Key points: Regulatory reforms underway
Key points Regulatory reforms underway to enhance retirement phase For personal use only 1 2016-2017 Federal Budget All positive or no material impact for Challenger 2 Retirement Income Streams review Green light for new lifetime income products, including DLAs Pathway to Comprehensive Income Produc
Slide 29: 2016-17 Budget super changes
2016-17 Budget super changes All positive or no material impact for Challenger For personal use only Topical Budget changes to super Positive retirement income reforms • Objective of super confirmed – retirement income • Green light for new lifetime income products, including Deferred Lifetime Annui
Slide 30: Retirement Income Streams review
Retirement Income Streams review Green light for new lifetime income products For personal use only Treasury’s Retirement Income Streams review Federal Budget 2016-17 Extract from budget papers1 • Final report issued with 2016-17 Federal Budget Key points • Government will remove barriers to innovat
Slide 31: Pathway to Comprehensive Income Products (CIPRs)
Retirement Income Streams review Pathway to Comprehensive Income Products (CIPRs) For personal use only • New retirement income product category to permit new range of lifetime income products, including DLAs • Products meeting existing rules continue • New category will provide “as much flexibility
Slide 32: Regulatory tailwinds
Regulatory tailwinds Regulatory reforms underway to enhance retirement phase For personal use only FSI CIPRs 1. Superannuation objective to 1. Government supports be enshrined in law CIPRs - to help guide 2. Remove impediments to members at retirement longevity product development 2. Trustees pre-se
Slide 33: Key points: Regulatory reforms underway
Key points Regulatory reforms underway to enhance retirement phase For personal use only 1 2016-2017 Federal Budget All positive or no material impact for Challenger 2 Retirement Income Streams review Green light for new lifetime income products, including DLAs Pathway to Comprehensive Income Produc
Slide 34: Distribution, Marketing and Research
For personal use only Distribution, Marketing and Research Investor Day Paul Rogan Chief Executive Distribution, Marketing and Research
Slide 35: Key points: Entrenching our retirement income leadership
Key points Entrenching our retirement income leadership position For personal use only 1 Challenger’s retirement brand journey Australia’s leading retirement income brand 2 Annuities on platforms initiative enhances distribution footprint Showcasing our digital innovation partners 3 Entrenching our
Slide 36: Challenger's retirement brand journey
Challenger’s retirement brand journey Brand strengthening with consumers1, leading with advisers2 For personal use only Brand strength 2011 100% ‘Real Stories’ 80% 60% 40% 2013 20% ‘On Paper’ 2010 2011 2013 2016 2016 Consumers Advisers ‘Lifestyle ‘Prompted ‘Leaders in Expectancy’ brand retirement aw
Slide 37: Lifestyle expectancy campaign
Lifestyle expectancy campaign Responding to the fear of outliving savings For personal use only • Compares having a comfortable lifestyle vs. one where you run out of savings – 6 out of 10 retirees are worried they may outlive their savings1 • Continues thematic on key retirement risks: market volat
Slide 38: Distribution capability: No.1 in overall adviser satisfaction
Distribution capability Challenger No.1 in overall adviser satisfaction For personal use only Wealth Insights Fund Manager Service Wealth Insights Fund Manager Service Level Report 2016 1 Level Report 2016 8.8 8.4 • High profile industry survey 8.0 7.6 – over 850 financial advisers 7.2 6.8 – how cli
Slide 39: Annuities on platforms
Annuities on platforms Driving lifetime annuity sales growth For personal use only New platform opportunities provide access to Strong growth in lifetime annuity sales 1 1/3 of super industry 250 Care Annuity / CarePlus Liquid Lifetime 200 Launched Technology build August 2015 completed May 2016 150
Slide 40: Annuities on platforms: Panel session
Annuities on platforms Panel session: Showcasing our digital innovation partners For personal use only Peter Chun Michael Dundon General Manager, Product & Investments Chief Executive Officer Colonial First State VicSuper Shannon Goard Paul Rogan – Moderator Head of Product & Northern Client Partner
Slide 41: Annuities on platforms - Industry Funds
Annuities on platforms - Industry Funds Distribution enhanced through new platform opportunities For personal use only launched June 2015 25 VicSuper annuity volumes $2.0 M 20 $1.5 M • Australia’s first “CIPR” - backed by Challenger 15 $1.0 M 10 • VicSuper members retirement concerns: $0.5 M 5 – inf
Slide 42: Annuities on platforms - Industry Funds
Annuities on platforms - Industry Funds Distribution enhanced through new platform opportunities For personal use only Australian superannuation administration providers1 now live (by core administration service expense 2014) Total outsourced administration: 42% 1 • Administers 30% of the ‘profit fo
Slide 43: Annuities on platforms - CFS
Annuities on platforms - CFS Distribution enhanced through new platform opportunities For personal use only launched August 2015 CFS Platform – Challenger annuity volumes ($m) • Improves client and adviser experience 1 • Significant increase in volumes – up ~100% • Attracting new advisers with ~50%
Slide 44: Annuities on platforms - CFS
Annuities on platforms - CFS Distribution enhanced through new platform opportunities For personal use only • CFS platforms used by ~50% of advice firms 1 • Annuities initiative awarded for digital innovation • CFS retirement income models – Supported by independent actuarial research2 – Layering an
Slide 45: Entrenching our leadership position
Entrenching our leadership position Distribution competitive advantages driving growth For personal use only Australia’s leading retirement income brand Brand Meeting the goals and Innovative Applying world’s best managing the risks of retirement via partial product Research practice to the Australi
Slide 46: Key points: Entrenching our retirement income leadership
Key points Entrenching our retirement income leadership position For personal use only 1 Challenger’s retirement brand journey Australia’s leading retirement income brand 2 Annuities on platforms initiative enhances distribution footprint Showcasing our digital innovation partners 3 Entrenching our
Slide 47: 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 48: Wrap up
Wrap up Providing Australians with financial security in retirement For personal use only 1 Funds Management Continue to build competitive advantages 2 Life High quality investment portfolio meeting 18% ROE target 3 Retirement income policy update Regulatory reforms underway to enhance retirement ph
Slide 49: Q&A session
For personal use only Q&A session Investor Day
Slide 50: 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 2 June 2016. The material in this presentation is general background information about Challenger Limited activities and is current at the date of t