Slide 1: 1H12 Financial Results
For personal use only 1H12 Financial Results Building on a strong retirement income platform Brian Benari Chief Executive Officer 20 February 2012
Slide 2: Sustainable financial metrics
Challenger Group Half Year 31 Dec 2011 Sustainable financial metrics For personal use only • Performance – Normalised NPAT of $127m up 5% – Statutory NPAT of $20m down 83% impacted by negative investment experience – Normalised EPS of 25.3cps flat due to early exercise of options in Oct 11 – Normali
Slide 3: Sustainable profit growth
Challenger Group Half Year 31 Dec 2011 Sustainable profit growth For personal use only Earnings / Normalised EPS • Consistent growth in Normalised NPAT 1H Normalised NPAT 2H earnings year on year 300 Basic EPS (RHS) 60 • Over 5 years EPS growth 250 50 200 40 enhanced by on-market cps $m 150 30 buyba
Slide 4: Sustainable organic capital generation
Challenger Group Half Year 31 Dec 2011 Sustainable organic capital generation For personal use only Capital excess to regulatory requirements • Capital strength 1000 – Strong excess to regulatory 750 minimum in CLC maintained, providing buffer to continued $m 500 variable market conditions 250 – Add
Slide 5: Record growth in annuities and FUM
Challenger Group Half Year 31 Dec 2011 Record growth in annuities and FUM For personal use only Annual Sales of Guaranteed Products • Financial performance (bars represent sum of the four previous quarters) underpinned by growth 2,500 Institutional Sales (GIR) Retail Sales (GIP/GIF/GA) across our co
Slide 6: Retirement income strategy
For personal use only Retirement income strategy – phase 3 6
Slide 7: Strong platform for continuation of retirement income strategy
Challenger Group Half Year 31 Dec 2011 Strong platform for continuation of retirement For personal use only income strategy • Business refocus between 2007 – 2010 has positioned us well for Phase 3 with • sale of Financial Planning and Mortgage Management • acquisition of two material Life books (fr
Slide 8: Australian superannuation – phases of growth
Challenger Group Half Year 31 Dec 2011 Australian superannuation – phases of growth For personal use only 3 2 2012 onwards 1 2007 – 2012 • 20 years of baby- boomer retirement still to come • Equity bull market • Realisation – ends superannuation is 1992 – 2007 • Change in about creating an • Establi
Slide 9: Change in demographics supportive
Challenger Group Half Year 31 Dec 2011 Change in demographics supportive For personal use only Recent data from ABS / Deloitte suggests that by 2030 Baby Boomers will represent 69% of the retirement population1 Target demographic Source: Dynamics of the Australian Superannuation System: The next 20
Slide 10: Change in demographics supportive
Challenger Group Half Year 31 Dec 2011 Change in demographics supportive For personal use only Recent data from ABS / Deloitte suggests that by 2030 Baby Boomers will represent 69% of the retirement population1 Target demographic Total Superannuation Pool (2010^) ~A$1.4 trn Baby boomers (45 - 65 yrs
Slide 11: Operational strategy – Distribution, Product & Marketing
For personal use only Operational strategy – Distribution Product & Marketing 11
Slide 12: Distribution Product & Marketing (DPM)
Challenger Group Half Year 31 Dec 2011 Distribution Product & Marketing (DPM) For personal use only Goals in establishing DPM Activities aligned to either Funds or Life to increase growth and sales Annuity Distribution Advertising/marketing and development co-ordination CRM and Boutique Analytics Di
Slide 13: Early success from advertising campaign
Challenger Group Half Year 31 Dec 2011 Early success from advertising campaign For personal use only • Adviser recognition – Challenger 1st company to come to mind as a retirement income provider (3 times greater response than second placed provider) – 48% increase in knowledge of Challenger and wha
Slide 14: Campaign results – financial advisers
Challenger Group Half Year 31 Dec 2011 Campaign results – financial advisers For personal use only Unprompted Results Thinking about Retirement Income product providers, which company first comes to mind? 42% May-10 Dec-11 15% 15% 15% 13% 11% 9% 8% 8% 8% Challenger Peer 1 Peer 2 Peer 3 Peer 4 Source
Slide 15: Campaign results - consumers
Challenger Group Half Year 31 Dec 2011 Campaign results - consumers For personal use only Which financial services or products do you think “Challenger is a leader in retirement financial Challenger is mainly involved with? products” To what extent do you agree that this (prompted awareness) stateme
Slide 16: Education and interactive tools
Challenger Group Half Year 31 Dec 2011 Education and interactive tools For personal use only Online tools for planners via PC or iPad • Market leading retirement income calculator upgraded • Launch of an online quote application in August resulted in a 90% increase in quote volumes • Application too
Slide 17: Update on key projects
Challenger Group Half Year 31 Dec 2011 Update on key projects For personal use only Increased productivity – indexed sales per BDM • Project Multiply per day – 31% increase in BDM 1.4 productivity in the last 12 months 1.3 – Number of active advisers 1.2 continues to climb 1.1 • Project Footprint 1
Slide 18: New product opportunities
Challenger Group Half Year 31 Dec 2011 New product opportunities For personal use only • Platform based guaranteed pension-style product (RCV0) series based on feedback from advisers – Evolution of the existing Guaranteed Income Fund Product (RCV100) a unique retirement cash flow management tool des
Slide 19: Funds Management
19 For personal use only Funds Management
Slide 20: Funds Management transition
Challenger Group Half Year 31 Dec 2011 Funds Management transition For personal use only Change in FUM composition over time • Total funds under management 35.0 has surpassed pre-GFC levels Boutique Aligned & Other • Strongly growing boutique 30.0 partnership FUM is replacing 25.0 reduction of histo
Slide 21: Performance driving Boutique Partnership flows
Challenger Group Half Year 31 Dec 2011 Performance driving Boutique Partnership flows For personal use only 20% Boutique performance since inception Alpha Benchmark 15% 10% 5% 0% -5% -10% 21
Slide 22: 1H12 Financial Results
For personal use only 1H12 Financial Results Andrew Tobin Chief Financial Officer 20 February 2012
Slide 23: Group financial performance
Challenger Group Half Year 31 Dec 2011 Group financial performance For personal use only Financial Performance % Mvt 300 50% Financial 1H12 1H11 1H11 – Trend 250 45% Performance 1H12 200 40% $m Assets Under $29.6bn $25.8bn 15% 150 35% Management 100 30% Normalised Net $255m $240m 6% Income 50 25
Slide 24: Life financial performance
Life Funds Mgmt Half Year Ended 31 Dec 2011 Life financial performance For personal use only Financial Performance % Mvt 250 50% Financial 1H12 1H11 1H11 – Trend Performance 1H12 200 40% Average AUM – 150 30% $m $8.6bn $7.6bn 13% Life 100 20% Normalised Cash Operating $211m $192m 10% 50 10% Earn
Slide 25: Sustainable margin
Life Funds Mgmt Half Year Ended 31 Dec 2011 Sustainable margin For personal use only 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) 25
Slide 26: Investment Experience Drivers
Life Funds Mgmt Half Year Ended 31 Dec 2011 Investment Experience Drivers For personal use only Widening of bond spreads due to negative sentiment from global markets • During the half widening of volatility – negative for Total Investment Experience for the 150 investment experience but credit spre
Slide 27: Funds Management financial performance
Life Funds Mgmt Half Year Ended 31 Dec 2011 Funds Management financial performance For personal use only Financial Performance % Mvt 40 100% Financial 1H12 1H11 1H11 – Trend Performance 1H12 30 80% 60% $m Average Funds 20 Under $26.1bn $21.1bn 24% 10 40% Management 20% 0 0% Boutique Net $15m $12
Slide 28: Funds Management - earnings drivers
Life Funds Mgmt Half Year Ended 31 Dec 2011 Funds Management - earnings drivers For personal use only FUM by business segment • Earnings on prior $18,000 corresponding period $16,000 $14,000 impacted by the reduction in $12,000 FUM from aligned investments $10,000 $8,000 of historical retail product
Slide 29: Cost control across the Group
Challenger Group Half Year 31 Dec 2011 Cost control across the Group For personal use only Normalised cost to income ratio over time • Cost to income ratio 55% maintained within our target range of 35-40% 50% Target • Ratio continues to 45% Range of stabilise in the mid-point 35 – 40% of the range a
Slide 30: Capital Management
Challenger Group Half Year 31 Dec 2011 Capital Management Dividends – cents per share (cps) For personal use only • Interim dividend declared of 7.5 cents 12 50% per share, unfranked 10 40% • Sustainable payout ratio of ~30% of 8 30% normalised NPAT and dividend path 6 20% maintained 4 10% • On-goin
Slide 31: Outlook
For personal use only Outlook Brian Benari Chief Executive Officer 20 February 2012
Slide 32: Outlook
Challenger Group Half Year 31 Dec 2011 Outlook For personal use only • Focus on retirement income sector unchanged • Macro environment remains supportive of the key drivers of long term operating profitability for our business • Retirees demanding greater income certainty and product simplicity • Do
Slide 33: 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 the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon