Challenger Limited · ASX:CGF
Challenger — Investor Day (February 2016)
50 slides from Challenger's investor day presentation, Feb 11, 2016
Slide 1: Market Release: 2015 Investor Day
MARKET RELEASE 2015 INVESTOR DAY 15 June 2015, Sydney – Challenger Limited’s (ASX: CGF) investor day commences at 10am today and will be held at The Museum of Sydney, corner of Bridge and Phillip Streets, Sydney. The presentation material is attached. The investor day will be webcast live and a tele
Slide 2: Challenger Limited Investor day
Challenger Limited Investor day 15 June 2015
Slide 3: Introduction
Introduction Investor day Brian Benari Managing Director and Chief Executive Officer
Slide 4: Outline
Outline Providing Australians with financial security in retirement Retirement income strategic thought leadership Jeremy Cooper – Chairman, Retirement Income Distribution Product and Marketing Paul Rogan – Chief Executive, Distribution Product and Marketing Life Richard Howes – Chief Executive, Lif
Slide 5: Retirement income strategic thought leadership
Retirement income strategic thought leadership Investor day Jeremy Cooper Chairman, Retirement Income
Slide 6: Key points
Key points Retirement income thought leadership stepping up a gear 1 Leader in retirement incomes … … and related thought leadership 2 Regulatory reforms Status update 3 Influencing regulatory debate Turning CIPRs into practice 4 Retirement income philosophies Yin and Yang – two schools of thought I
Slide 7: Leader in retirement incomes
Leader in retirement incomes … … and related strategic thought leadership • Our strategic thought leadership is assisting funds and advisers implement robust retirement income strategies • Retirement is different! – industry turning to this view – super funds starting to focus on retirement solution
Slide 8: Regulatory reforms
Regulatory reforms Status update • Coalition has rejected further ‘comprehensive review’ of retirement income system1 • Awaiting Government response to FSI final report • Treasury review of retirement income stream regulation ‒ Deferred Lifetime Annuities (DLAs) 2015 Intergenerational Report extract
Slide 9: Influencing regulatory debate
Influencing regulatory debate Turning CIPRs into practice Joint FSI submission with Mercer CIPRs - Multi component solution to managing retirement risks • Focused on CIPR implementation • CIPRs to support primary objective of super – provision of retirement income • CIPRs required to address key ret
Slide 10: Retirement income philosophies
Retirement income philosophies Yin & Yang – probability based investing & safety-first planning • Guiding super funds thinking on retirement ‒ separating accumulation from drawdown ‒ difficulties in retirement income planning ‒ role different products play ‒ income bucketing • Progress from talking
Slide 11: Retirement income philosophies
Retirement income philosophies Yin & Yang – two schools of thought Probability-based Probability-based Safety-first Safe withdrawal rates Goals segmented All goals targeted Variable spending at once according to what the retiree seeks Income buckets Funded ratio management Everything is There are a
Slide 12: Key points
Key points Retirement income thought leadership stepping up a gear 1 Leader in retirement incomes … … and related thought leadership 2 Regulatory reforms Status update 3 Influencing regulatory debate Turning CIPRs into practice 4 Retirement income philosophies Yin and Yang – two schools of thought I
Slide 13: Distribution Product and Marketing
Distribution Product and Marketing Investor day Paul Rogan Chief Executive, Distribution Product and Marketing
Slide 14: Key points
Key points DPM capability is a core strength 1 Retirement income layering strategies becoming prevalent Securing essential income needs in retirement 2 Annuities on platforms initiative positions us in the mainstream Connecting to wealth and super administration players with scale 3 Continuing to in
Slide 15: Growing prevalence of income layering
Growing prevalence of income layering Annuities securing essential income needs in retirement Investor day – Distribution Product and Marketing (DPM) 14
Slide 16: Retirement Income portfolio construction
Retirement Income portfolio construction “Partial annuitisation with a modest allocation might be as close as we can come to the product silver bullet”1 Comparing products – Actual ÷ Desired Income2 Customer: 67 year male Wealth: $400,000 Desired Income: $43,000 Partial annuitisation 88 improves pro
Slide 17: Annuities on Platform - CFS
Annuities on Platform - CFS Soon to launch with the leading retail platform provider • Colonial First State’s (CFS) FirstChoice platform is Australia’s most widely used platform1 – CBA aligned dealerships – Prominent non-aligned advice dealerships • CFS is the largest provider of account- based pens
Slide 18: Annuities on Platform - VicSuper
Annuities on Platform - VicSuper Successfully integrated with first major super fund • Formally launched in June • ‘Guaranteed Income for Life’ product built to VicSuper specifications • ‘CIPR’ ready • Income layering and the need for secure essential income integrated into VicSuper advice processes
Slide 19: Annuities on Platform - Link Group / AAS
Annuities on Platform - Link Group / AAS Integrating with the scale player in super fund admin AAS + Superpartners • Link Group / AAS acquired Superpartners in 2014 • Link Group / AAS leads the market in not-for-profit superannuation outsourced administration • Leverages the VicSuper and CFS develop
Slide 20: Annuities in a low rate environment
Annuities in a low rate environment It’s all about securing essential income … not rates Challenger annuity sales trends • Interest rates in Australia and the US 1,600 7.0 have been in decline for some time 6.0 1,200 5.0 • Over last 5 years Challenger’s sales $m 800 4.0 Years / % trajectory has expe
Slide 21: Retirement product innovation
Retirement product innovation New features produce higher income in low rate environment Guaranteed Income for Life Pension • Developed collaboratively with VicSuper • Developed a lifetime pension to meet members’ needs for higher incomes by trading off liquidity and death benefits given integration
Slide 22: Accurium – SMSF Retirement Specialist
Accurium – SMSF Retirement Specialist Repositioning for accountant licensing reforms • Integrated and rebranded1 • Reposition as SMSF Retirement Specialist – SMSF Retirement Insights: 1. Retirement adequacy 2. How long will SMSF trustees live? – SMSF Retirement Healthcheck: – Launched Feb 2015 – Pla
Slide 23: Brand update - customers
Brand update - customers Brand continues to strengthen • ‘Retirement on Paper’ campaign continues to exceed expectations – 66% brand awareness1 – Comparable with major financial services brands • New campaign in development • Recent consumer research – Universal fear of outliving savings – Concern o
Slide 24: Brand update - advisers
Brand update - advisers Recognised leader in retirement incomes Challenger – a leader in retirement incomes1 • Brand strength 97% 85% 85% 89% – Retirement incomes leadership hits 97% 64% – Brand recall, familiarity continue to rise 62% 58% 58% 58% 71% – 44%2 of advisers reporting annuity reverse enq
Slide 25: Funds Management
Funds Management Strong FUM growth driven by product and footprint breadth Fund flows ($m) Increase in FUM over 2 years1 $20.9bn (55%) 8,000 2 Net flows over 2 years $13.1bn 7,000 3 FUM market ranking 7th 6,000 5,000 Distribution Footprint 4,000 "Buy" Fund IMAs Clients Institutional ratings structur
Slide 26: Key points
Key points DPM capability is a core strength 1 Retirement income layering strategies becoming prevalent Securing essential income needs in retirement 2 Annuities on platforms initiative positions us in the mainstream Connecting to wealth and super administration players with scale 3 Continuing to in
Slide 27: Life
Life Investor day Richard Howes Chief Executive, Life
Slide 28: Key points
Key points Evolving investment portfolio … maintaining 18% RoE target 1 Portfolio/risk management Assets and liabilities cash flow matched with risks managed 2 Property portfolio evolution Active portfolio remix ongoing 3 Fixed income origination Direct origination supporting overall margins 4 Life
Slide 29: Portfolio/risk management
Portfolio/risk management Assets and liabilities cash flow matched with risks managed Assets and liabilities cash flow matched ($m) • Asset allocation reflects 4,000 ‒ annuity maturity profile ‒ 3,000 relative value ‒ 18% RoE (pre tax) target 2,000 • Portfolio property evolution 1,000 ‒ Q3 15 - 24%
Slide 30: Property portfolio evolution
Property portfolio evolution Active portfolio remix ongoing • Recent increase in property weight Property portfolio overview 100% – expect to remain around current levels 75% • Change in portfolio composition – focus moving from single to multi-tenant properties 50% • Increase in retail reflects 25%
Slide 31: Fixed income origination
Fixed income origination Direct origination supporting overall margins • Direct origination capability in place for over 10 years 4 types of fixed income origination 1. Senior secured bilateral loans • Stringent investment processes with separate internal credit team 2. Asset Backed Securities (ABS)
Slide 32: Fixed income origination: Senior secured bilateral loans
Fixed income origination Senior secured bilateral loans - $0.5bn portfolio Senior secured bilateral loan activity over past 12 months Significant market position Deal activity ► Executed <20% of deals reviewed • One of Australia’s largest senior secured All in margin ► 4.58% bilateral non-bank lende
Slide 33: Fixed income origination: Asset Backed Securities
Fixed income origination Asset Backed Securities (ABS) - $0.8bn portfolio • Challenger uniquely positioned to source 1 Case study – ABS private placement attractive returns in domestic ABS Customer ► Non-bank originator – previously Australia’s largest securitiser Structure ► Rated securitisation •
Slide 34: Fixed income origination: Commercial Real Estate lending
Fixed income origination Commercial Real Estate (CRE) lending - $0.6bn portfolio Over past 5 years – Overview invested >$1bn across >20 CRE loans • Post-GFC major banks have dominated Life CRE collateral portfolio CRE lending markets Office Retail • Challenger has specialised expertise and Industria
Slide 35: Fixed income asset origination: Specialised Finance
Fixed income asset origination Specialised Finance - $0.3bn portfolio Targeting opportunities not serviced well by banks Case study1 – equipment finance Civil construction • Niche products and markets • Exit/sale by foreign participants creates further ► Major ASX-listed civil engineering firm ► Ban
Slide 36: Life Risk
Life Risk RoE accretive … providing income and capital diversification Disciplined approach to Life Risk opportunity Participating Maintaining Controlled Expertise in established transaction risk markets discipline appetite Supported by Life Risk core life 24 deals reviewed Life is an APRA-
Slide 37: Life Risk
Life Risk Business diversification and RoE enhancement Life Risk transactions completed1 Transactions PV of future Insurance risk FY15 COE Weighted average Markets executed profits ($m) capital ($m) contribution ($m) life (years) UK longevity reinsurance 3 158 59 7 16.9 Australian group 1 3 2 1 2.5
Slide 38: Key points
Key points Evolving investment portfolio … maintaining 18% RoE target 1 Portfolio/risk management Assets and liabilities cash flow matched with risks managed 2 Property portfolio evolution Active portfolio remix ongoing 3 Fixed income origination Direct origination supporting overall margins 4 Life
Slide 39: Funds Management
Funds Management Investor day Ian Saines Chief Executive, Funds Management
Slide 40: Key points
Key points A quality platform with opportunities for continued growth 1 Funds Management Significant manager capacity supports future growth 2 Fidante Partners Successful boutique model driving business growth 3 Challenger Investment Partners Meeting demand for alternative assets and absolute return
Slide 41: Significant manager capability and capacity
Significant manager capability and capacity A scalable and diversified asset management business Fidante Partners • Australia’s leading multi-boutique business Funds Management FUM and capacity by manager1 • Multiple brands (14) and strategies 20 FUM • Capacity available in sought-after asset Remain
Slide 42: Fidante Partners
Fidante Partners Australia’s leading multi-boutique fund manager • Superannuation savings to • Allows managers to focus double within a decade on what they do best - generating alpha • Expansion in appetite Systemic for global equities and Modern • Develop new strategies themes alternatives business
Slide 43: Challenger Investment Partners
Challenger Investment Partners Proven track record in asset origination and performance • Privatisation of CDI • Proven origination and • Creation of Whitehelm investment performance • Closure of HMF Fixed income • Significant market position Consolidation and real and clean-up estate completed spec
Slide 44: Funds Management
Funds Management Provide clients with relevant investment solutions exhibiting consistently superior performance Industry context Fidante Partners Continued Scale required Demand for growth in to combat fee global Develop existing and add new boutiques system FUM squeeze product Add to global pr
Slide 45: Key points
Key points A quality platform with opportunities for continued growth 1 Funds Management Significant manager capacity supports future growth 2 Fidante Partners Successful boutique model driving business growth 3 Challenger Investment Partners Meeting demand for alternative assets and absolute return
Slide 46: FY15 Life guidance update & Wrap up
FY15 Life guidance update & Wrap up Investor day Brian Benari Managing Director and Chief Executive Officer
Slide 47: FY15 Life guidance update
FY15 Life guidance update Active approach driving RoE and margin Favouring RoE and COE margin • Pro-active decision not to roll-over some maturing annuities in Q4 15 • FY15 Life COE – • expect to be up by 12%-13% on FY14 • at upper end of guidance range ($535m to $545m) • FY16 Life COE impact – neut
Slide 48: Wrap up
Wrap up Providing Australians with financial security in retirement 1 Retirement income strategic thought leadership Stepping up a gear 2 Distribution Product and Marketing (DPM) DPM capability is a core strength 3 Life Evolving investment portfolio … maintaining 18% RoE target 4 Funds Management A
Slide 49: Q&A session
Q&A session Investor day challenger @
Slide 50: Important note
Important note This presentation was prepared for the purpose of a briefing to equity analysts and certain wholesale investors on 15 June 2015. The material in this presentation is general background information about Challenger Limited activities and is current at the date of this presentation. It