Strategies for growth

Transcription

1 Strategies for growth UBS Australian Financial Services Conference - Sydney Brian Benari Group Chief Operating Officer & Group Chief Financial Officer 24 June 2010

2 Agenda How has the Challenger business changed through h the GFC and what have we learnt? How is the business positioned to capture future opportunities and growth? 2

3 Simplified business structure and strategy In the last two years the Challenger business model evolved Financial Planning business sold Fiduciary i operations merged Finance, administration and operations functions brought together as a single function Mortgage Management Distribution operations sold to National Australia Bank Repaid all holding company borrowings and de-levered Capital returned to shareholders (via on-market buyback) and reinvested in growing our business Re-focused and simplified structure t and strategy t Leading provider of retirement income products Successful investment manager with leading boutique franchise 3

4 Core group competencies Origination Origination of guaranteed income products and fiduciary FUM Simple, secure products that deliver good value Investment Management Managing assets to maximise i returns, benefiting policy holders, fiduciary investors and shareholders People Depth and stability Strong risk management culture 4

5 Stress testing the business model GFC tested capital and risk models on a global basis Simultaneous shocks across capital, market risk factors and treasury management Identifies strengths and weaknesses Working through these scenarios successfully builds experience and underpins confidence in your people, practices and structure Robust capital allocation framework validated 5

6 Strategy now aligned to structural trends Potential positive tailwinds from regulatory reviews Changing consumer risk appetite creating demand for guaranteed capital and income streams 6 Underlying demographic changes creating a growth market for retirement products Product and distribution initiatives expanding access to superannuation pool

7 Ageing population driving FUM growth Australian population growth

8 Expanded product and distribution Guaranteed Income Plan (GIP) Established annuity product fixed rate and term certain Channel IFAs Investor Base Retail Personal / SMSFs Long Term Growth Guaranteed Income Fund (GIF) New unitised version of the annuity product designed for investment platforms IFAs / Platforms Retail Personal / SMSFs Changing demographic, risk appetite and asset allocations Guaranteed Index Returns (GIR) Guaranteed returns over a designated index / benchmark Institutional Investors & Asset Consultants Corporate / Retail Employer 8

9 Increasing awareness and reach National roadshow post budget in May Seven state capitals over one week ~1,250 attendees 9

10 Tools to support growth - annuity simulator Technology to support retirement planning / portfolio construction 10

11 Innovation new lifetime products Lifetime annuity protects against risks but without sacrificing return or flexibility Protects against longevity and inflation i Guaranteed return at an attractive rate Guaranteed withdrawal right Overall pricing will reflect all three risk factors Expect to launch in the next quarter (by Sep 2010) Henry Review positive on stimulating longevity market further particularly l if impediments in the deferred annuity market were removed 11

12 Product innovation GIR New product introduced in 1H10 to provide institutional clients with guaranteed index returns ~$600m written since Dec 09 Another $650m of GIR to fund before financial year end Continued strength in organic sales of GIP - FY10 expected to be ~$900m following strong flow between March and June Expect greater traction on GIF sales in 1H11 Total sales for FY10 expected to be ~$2.15bn $m $m Six Monthly Sales of Guaranteed Product 1,250 1, , ,000 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Rolling Annual Sales of Guaranteed Products (bars represent sum of the four previous quarters) 1,500 1, Dec 09 Forecast Jun 10 Forecast Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun GIP/GIF Sales GIR Sales

13 Growing FUM via boutique partnerships Boutique partnerships expanded to eight, including new additions Model supports growth in FUM and therefore operational leverage Boutique Partnerships FUM 5,000 4,500 4,000 3,500 3,000 Provides stronger 2,500 alignment and reduces capacity constraints 2,000 Creation of Bentham Asset 1,500 Management and Merlon 1,000 Capital Partners in Q4 will add an additional $2.2bn to 500 boutique FUM 0 $m Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar

14 Established and diverse franchise Business Investment Date Asset Class Investment Thesis Sep 2005 Oct 2005 Sep 2006 Feb 2007 Nov 2008 Nov 2008 May 2010 Jun 2010 International equities Aus equities (small cap) Aus equities (Mid/large cap) Global fixed income Aus inflation linked bonds Aus equities (Long/short) Aus equities (Income) Global Credit Concentrated, non-index approach to building portfolios of listed global companies Style neutral manager that seek to invest in small companies that have been undervalued ed on a cash flow return on investment basis Bottom up stock with a growth at reasonable price approach Seek out value across sectors and geographies, g identifying strategies priced for the best return potential Long term fundamentally driven value investor with a focus on liquidity and diversification Active, high conviction manager investing across the entire spectrum of the Australian share market Equity income manager that offers defensive funds with benefits including tax-effective income, lower volatility and capital growth Active manager that seeks to add value by actively allocating between different credit sectors 14

15 Summary Streamlined and simpler Investment t Management business model Leading and differentiated models in both retirement income and boutique funds management Continued focus on product development and organic origination Expect total sales of guaranteed products to be ~$2.15bn in FY10 Boutique FUM has grown to $4.5bn Mar-10, with another $2.2bn 2bn by Jun-10 from Merlon Capital Partners and Bentham Asset Management Validated risk management skills and prudent management of capital COE guidance of $325m FY10 for Life re-affirmed 15

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