Overview Providing our customers with financial security for retirement Vision and strategy 10:00 – 10:10 Richard Howes – Managing Director and Chief Executive Officer 10:10 – 10:40 Distribution, Product and Marketing Angela Murphy – Chief Executive, Distribution, Product and Marketing Life 10:40 – 11:10 Chris Plater – Chief Executive, Life 11:10 – 11:20 Break Funds Management 11:20 – 11:50 Ian Saines – Chief Executive, Funds Management Financial outlook, wrap up and Q&A session 11.50 – 12:30 Richard Howes – Managing Director and Chief Executive Officer 2019 Investor Day – Overview 2
Vision and strategy Richard Howes Managing Director and Chief Executive Officer
Vision and strategy A clear plan for sustainable long-term growth 2019 Investor Day – Vision and strategy 4
Priorities to drive long-term growth Fundamentals remain strong Industry trends Priorities Long-term structural tailwinds • Engage, educate and deepen customer connections • World class accumulation super system • Improve adviser experience • Ageing demographics • Thought leadership to build industry support • Retirement phase developing • Strengthen relationships with profit-for-member funds Near-term headwinds • Build on FM product offering • Financial advice market disruption • Continue leading operating and people practices • Increased market volatility • Maintain financial discipline and strong capital position • Profit-for-member funds internalising FUM 2019 Investor Day – Vision and strategy 5
Expanding strategic relationship with MS&AD Diversifying and increasing access to Japanese market MS Primary annuity relationship • Currently Australian dollar product reinsurance 41,733 employees ~A$27bn market cap • commenced November 2016 5 business domains Total assets ~A$280bn (as at 30 September 2018) 1 • Expanding reinsurance to include US dollar product Japanese general insurer 1 #1 market share • expected to commence 1 July 2019 2 • at least ¥50 billion (~A$660 million) in total A$ and US$ sales per year for minimum of five years 3 Japanese life insurer • provides reliable and diversified sales contribution 2 #7 market share Leading foreign currency annuity provider MS&AD strategic relationship • Intention to increase Challenger ownership above 15% 4 International operations 3 operations in 45 countries 4 • Representative to join Challenger Board #1 ASEAN general insurer • Growth opportunities for both companies 2019 Investor Day – Vision and strategy 1. Challenger Life has entered into a new agreement with MS Primary to commence reinsuring the US dollar version of the 20-year term product. Challenger will provide a guaranteed interest rate and assume the investment risk in relation to those policies issued by MS Primary and reinsured by Challenger. 2. Subject to necessary approvals including regulatory, compliance and contractual requirements. 6 3. Subject to review in the event of a material adverse change for either MS Primary or Challenger Life and based on exchange rate as at 7 June 2019. 4. Subject to necessary regulatory approvals, including the Australian Prudential Regulation Authority and Treasurer’s approval under the Finance Sector (Shareholdings) Act.
World class accumulation system Significant retirement savings but not delivering retirees financial comfort World class Significant Not delivering retirees accumulation system retirement savings financial comfort 7 National Seniors Australia survey (April 2019) Contribution rate 1 in 4 super dollars Financial comfort not increasing to 12% 1 supporting retirement 4 defined by a $ figure 4 th largest global Wealth at retirement 53% worry about pension market 2 $350k to $500k 5 outliving their savings Assets to double ~$67bn transferring to Risk appetite conflicts over next 10 years 3 retirement each year 6 with risk taking 2019 Investor Day – Vision and strategy 1. Increases to 10% on 1 July 2021 and increases by 0.5% p.a. until reaching 12% on 1 July 2025. 5. Average household wealth includes superannuation and non- 2. Willis Towers Watson Global Pension Study 2018. superannuation assets and excludes the family home. 3. Rice Warner superannuation projections. 6. Australian Taxation Office. 7 4. Based on APRA and ATO data. 7. https://nationalseniors.com.au/research/retirement/feeling-financially- comfortablequestion
Key growth driver Key growth driver Making annuities mainstream in retirement Making annuities mainstream in retirement Next phase – Driving growth Next phase – Driving growth Today – Strong foundations Today – Strong foundations Recognised retirement Established operating Recognised retirement Established operating income leader platform income leader platform • Scalable platform • Product innovator Scalable platform Product innovator • Investment capability • Strong distribution Investment capability Strong distribution • Strong risk culture • Leading brand Leading brand Strong risk culture • Rated #1 by advisers Rated #1 by advisers • Highly engaged team Highly engaged team • Thought leadership Thought leadership • Capital strength Capital strength 2019 Investor Day – Vision and strategy 2019 Investor Day – Vision and strategy 8 8
Distribution, Product and Marketing Angela Murphy Chief Executive, Distribution, Product and Marketing
Responding to disruption and driving growth Making annuities mainstream in retirement Continued focus on strategic initiatives Expanding distribution channels including access to more IFAs Partnering with profit-for-member funds Maintaining thought leadership Active response to current operating environment Significant financial advice market disruption Implementing targeted initiatives to mitigate advice disruption Supporting introduction of new means test rules New investment to drive ambitious growth Significantly enhancing brand, education and engagement to build customer demand Improving adviser experience to increase allocation to annuities 2019 Investor Day – Distribution, Product and Marketing 10
Significant financial advice market disruption Impacting Challenger annuity sales • Challenger sales impacted by lower Quarterly annuity sales by channel ($m) adviser productivity Growth rate compared to pcp Domestic +21% -12% -7% Japan -53% -58% -49% • Major hubs more impacted than $1,192m IFAs – Q219 and Q319 domestic $1,171m $1,097m 8% 15% annuity sales $970m 19% 8% 1 on pcp • major hub sales -25% $761m 2 on pcp $662m • IFA sales +26% 64% 14% 60% 54% 8% 58% • Impact of advice market disruption 53% 61% increasing in Q419 38% 28% 25% 23% 39% 25% • Fundamental need for financial Q118 Q119 Q218 Q219 Q318 Q319 advice remains Domestic - IFAs Domestic - Major hubs Japan - MS Primary 2019 Investor Day – Distribution, Product and Marketing 1. Major hubs include AMP, IOOF and wealth management operations of major Australian banks. Comparison shown is combined Q219 and Q319 annuity sales compared to the prior period. 2. IFA include dealer groups outside of the major hubs. 11
Key growth driver Key growth driver Making annuities mainstream in retirement Making annuities mainstream in retirement Next phase – Driving growth Next phase – Driving growth Key growth driver • Build bottom-up customer demand Today – Strong foundations Today – Strong foundations • Deeper integration with advice process Recognised retirement Established operating Recognised retirement Established operating • Enhance product offering income leader platform income leader platform • Partner with profit-for- • Scalable platform • Product innovator Scalable platform Product innovator member funds • Investment capability • Strong distribution Investment capability Strong distribution • Strong risk culture • Leading brand Leading brand Strong risk culture • Rated #1 by advisers Rated #1 by advisers • Highly engaged team Highly engaged team • Thought leadership Thought leadership • Capital strength Capital strength 2019 Investor Day – Vision and strategy 2019 Investor Day – Distribution, Product and Marketing 8 12
Short term priorities Mitigate advice market disruption and support move to new means test rules • Mitigate adviser disruption • New means test rules support lifetime income streams, including deferred • continue growth through building lifetime annuities new cohorts of IFA advisers using annuities • commence 1 July 2019 • track and support annuity • support advisers to identify and advocates as they move across communicate customer benefits advice licensees • transition lifetime sales from Regular 1 of • Leverage new platform relationships Income to Flexible Income (54% providing IFA access advisers only write Regular Income) Launched May 2019 Launched June 2019 2019 Investor Day – Distribution, Product and Marketing 1. For the 12 months to 31 May 2019. 13
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