Challenger Limited · ASX:CGF
Challenger — Challenger Financial Services Group — Merrill Lynch Emerging Companies Conference - Sydney 2009
19 slides from Challenger's conference presentation, Jun 18, 2009
Slide 1: Merrill Lynch Emerging Companies Conference - Sydney
For personal use only Challenger Financial Services Group Limited Merrill Lynch Emerging Companies Conference - Sydney Dominic Stevens – Chief Executive Officer 18 June 2009 1
Slide 2: Agenda
Agenda For personal use only • Performance and financial flexibility update • Business line focus • Opportunities and challenges • Outlook 2
Slide 3: Performance & financial flexibility update
Performance & financial flexibility update For personal use only • 1H09 robust financial performance in tough markets – Normalised NPAT of $106m – up 4% – Strong operating cash flow of $89m – up 5% – Statutory NPAT of $(108m) impacted by negative investment experience of $(214m) – Increased guidance
Slide 4: Early positioning in GFC to weather the storm
Early positioning in GFC to weather the storm For personal use only CGF ASX200 Diversified Financials Index 140 Capital base increased early in the cycle Capital (~40% or Cash & liquids intensity 120 reduced via $672m) increased up to Focus on ~$900m asset sales / asset expense following base / 100
Slide 5: Normalised EBIT continuing to grow
Normalised EBIT continuing to grow For personal use only Life M o rtgage M anagement Funds M anagement 200 175 150 125 $m 100 75 50 25 0 1H06 2H06 1H07 2H07 1H08 2H08 1H09 5
Slide 6: Expense control
Expense control For personal use only Cost to income ratio 60% • Expense base centralised 55% under single CFO/COO role 50% 45% • Strong focus on expense 40% control – full run-rate of 35% expense savings not yet 30% evident, benefit expected to 1H07 2H07 1H08 2H08 1H09 increase in 2H09 Expected exp
Slide 7: Five year total return – selected financials
For personal use only 7 AM P AU W -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% BC Equ AU ity CB Eq A ui AU ty G E q S ui U ty M S Q E q G u AU ity AX Eq A u AU ity M E O C qu AU ity SG Eq B Source: Bloomberg – 3 June 2009 ui AU ty CG Eq F u AU it y AN Eq Z u AU ity CS G Eq N u VX ity BO Eq Q ui AU t
Slide 8: Challenger businesses – Life
Challenger businesses For personal use only Percentage of Business EBIT Challenger Life Company Limited – an prudentially regulated entity managing a portfolio Life of assets delivering long term guaranteed income streams to annuitants and predictable over-the- cycle returns to shareholders 59% Mark
Slide 9: Challenger businesses – Life: current focus
Challenger businesses For personal use only Percentage of Business EBIT Challenger Life Company Limited – an prudentially regulated entity managing a portfolio Life of assets delivering long term guaranteed income streams to annuitants and predictable over-the- cycle returns to shareholders 59% Mark
Slide 10: Challenger businesses – Mortgage Management
Challenger businesses For personal use only Percentage of Divisional EBIT White label funding provider delivering Mortgage competitive lending products to branded distributors and distribution through ownership Management of broker aggregation platforms 34% $18.8bn mortgages under mgmt Broker aggreg
Slide 11: Challenger businesses – Mortgage Management: current focus
Challenger businesses For personal use only Percentage of Divisional EBIT White label funding provider delivering Mortgage competitive lending products to branded distributors and distribution through ownership Management of broker aggregation platforms 34% $18.8bn mortgage under mgmt $73.2bn mortga
Slide 12: Challenger businesses – Funds Management
Challenger businesses For personal use only Percentage of Divisional EBIT A fiduciary funds management operation 7% manufacturing and distributing quality Funds Management investment products – for both institutional and retail clients Internal investment management, external alliances & boutique $1
Slide 13: Challenger businesses – Funds Management: current focus
Challenger businesses For personal use only Percentage of Divisional EBIT A fiduciary funds management operation 7% manufacturing and distributing quality Funds Management investment products – for both institutional and retail clients Internal teams, external alliances & $16.8bn of AUM at 31 March
Slide 14: Life – annuity franchise
Life – annuity franchise For personal use only • Henry Review into retirement Growth portfolio for retirement? income streams drawing 150 Annuity balance attention to annuity products Allocated Pension balance (15.8% return for next 18 years) 100 Allocated Pension Balance (10% return for next 18 yea
Slide 15: Life – assets performing as expected
Cash bonds Life – assets performing as expected following derivatives but For personal use only on a delayed basis Life fixed income portfolio by S&P equivalent rating Cash bond spreads beginning to contract 600 100% CBA Spectrum 5-year Single 90% 500 Maintained A to Swap 80% BBB strong liquidity iT
Slide 16: Mortgages – national strategic footprint
Mortgages – national strategic footprint For personal use only ~44% of new • Broker platforms - key loans originated via Borrower Brokers strategic distribution business operating Distribution ‐ Retail Brokers across Australia in 40% of Brokers mortgage sector accredited with Challenger Distribution
Slide 17: Funds Management opportunities
Funds Management opportunities For personal use only • Australian market an attractive long Super- term opportunity annuation money – 4th largest asset management continues to market in the world grow – Compulsory superannuation Maximise The markets – Current flight away from managed leverage of wil
Slide 18: Outlook
Outlook For personal use only • Last 18 months has changed the financial services landscape – Higher risk premiums on assets – Value of long term funding or capital has increased – Survivors are emerging – Policy focus on competition and responsible investing for retirement income streams increasing
Slide 19: Disclaimer
For personal use only Disclaimer: The material in this presentation is general background information about Challenger Financial Services Group 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 t