Full Year 2026 Challenger Ltd Earnings Call

August 18, 2026

Mark Chen: Good morning, everyone, and thank you for joining us in person and online to Challenger's 2026 full year results briefing. I am Mark Chen, Challenger's General Manager of Investor Relations. We are pleased to be coming to you today from 5 Martin Place in Sydney. Before we begin, I would like to acknowledge the Gadigal of the Eora Nation, the traditional custodians of the land on which we are hosting this event today, and pay my respects to elders both past and present. Today's presentation will be delivered by our Chief Executive Officer, Nick Hamilton, and Chief Financial Officer, Alex Bell. It will then be followed by a Q&A session. You can ask a question either in person, via the online portal, or telephone. As you will see from today, FY26 was an important year for Challenger, and it reflects the benefits of the strategy we have been executing.

Mark Chen: Good morning, everyone, and thank you for joining us in person and online to Challenger's 2026 Full Year Results Briefing. I am Mark Chen, Challenger's General Manager of Investor Relations. We are pleased to be coming to you today from 5 Martin Place in Sydney. Before we begin, I would like to acknowledge the Gadigal of the Eora Nation, the traditional custodians of the land on which we are hosting this event today, and pay my respects to elders both past and present. Today's presentation will be delivered by our Chief Executive Officer, Nick Hamilton, and Chief Financial Officer, Alex Bell. It will then be followed by a Q&A session. You can ask a question either in person, via the online portal, or telephone. As you will see from today, FY 2026 was an important year for Challenger, and it reflects the benefits of the strategy we have been executing.

Speaker #1: We're pleased to be coming to you today from Five Mountain Place in Sydney. Before we begin, I would like to acknowledge the Gadigal of the Eora Nation, the traditional custodians of the land on which we're hosting this event today, and pay my respects to elders both past and present.

Speaker #1: Today's presentation will be delivered by our Chief Executive Officer, Nick Hamilton, and Chief Financial Officer, Alex Bell. It will then be followed by a Q&A session. You can ask a question either in person, via the online portal, or by telephone.

Speaker #1: As you'll see from today, FY26 was an important year for Challenger, and it reflects the benefits of the strategy we've been executing. We have delivered strong earnings and record annuity sales.

Mark Chen: We have delivered strong earnings and record annuity sales, strengthened our leadership in retirement income through new partnerships, expanded funding and reinsurance capabilities through product innovation, and strengthened the foundations for future growth. Combined with APRA's new capital standards and strong capital position, we have been able to return excess capital to shareholders through a higher ordinary dividend, special dividend, and an expanded share buyback. We enter into 2027 with strong momentum, a clear strategy, and multiple growth opportunities to support long-term value creation for shareholders. With that, I will just pass to Nick to take you through the results.

Speaker #1: We strengthened our leadership in retirement income through new partnerships. We expanded funding and reinsurance capabilities through product innovation, and strengthened the foundations for future growth. Combined with APRA's new capital standards and strong capital position, we've been able to return excess capital to shareholders through a higher ordinary dividend, special dividend, and an expanded share buyback.

Speaker #1: We enter into 2027 with strong momentum, a clear strategy, and multiple growth opportunities to support long-term value creation for shareholders. With that, I'll pass to Nick to take you through the results.

Speaker #2: Thank you, Mark, and good morning, everyone. Thank you for joining us in person and online. For Challenger, the FY26 result marks an important point in the evolution of our business.

Nick Hamilton: Thank you, Mark, and good morning, everyone, and thank you for joining us in person and online. For Challenger, the FY26 result marks an important point in the evolution of our business. At our core, we are a provider of income into and through retirement. Our purpose, financial security for a better retirement, is as contemporary today as any time in our history. Today's result demonstrates the huge leap we have made this past year to unlock retirement and our business model. We have seen two interrelated dynamics that have brought us to this point. The first is the increasing realization that retirement is fundamentally different from the journey of saving for retirement. Our super savings system success is unquestioned and has delivered great compounding of regular savings. Retirement, however, is not saving, nor is it uniform. It is about income, and it is very personal.

Nick Hamilton: Thank you, Mark, and good morning, everyone, and thank you for joining us in person and online. For Challenger, the FY 2026 result marks an important point in the evolution of our business. At our core, we are a provider of income into and through retirement. Our purpose, financial security for a better retirement, is as contemporary today as any time in our history. Today's result demonstrates the huge leap we have made this past year to unlock retirement and our business model. We have seen two interrelated dynamics that have brought us to this point. The first is the increasing realization that retirement is fundamentally different from the journey of saving for retirement. Our super savings system success is unquestioned and has delivered great compounding of regular savings. Retirement, however, is not saving, nor is it uniform. It is about income, and it is very personal.

Speaker #2: At our core, we are a provider of income into and through retirement. Our purpose—financial security for a better retirement—is as contemporary today as at any time in our history.

Speaker #2: Today's result demonstrates the huge leap we have made this past year to unlock retirement and our business model. We have seen two interrelated dynamics that have brought us to this point.

Speaker #2: The first is the increasing realization that retirement is fundamentally different from the journey of saving for retirement. Our super saving system's success is unquestioned and has delivered great compounding of regular savings.

Speaker #2: Retirement, however, is not saving, nor is it uniform. It is about income, and it is very personal. We know from our annual Challenger Retirement Happiness Index that quality of life in retirement is underpinned by good physical and mental health, and that is supported by financial confidence.

Nick Hamilton: We know from our annual Challenger Retirement Happiness Index, the quality of life in retirement is underpinned by good physical and mental health, and that is supported by financial confidence. Australia has low levels of financial literacy, and advice has been legislated to the affluent. As a population, we underestimate the cost of longevity and the impact of market risk and inflation risk in retirement. Closing the advice gap is critical to solving this. The coming years will see the intersection of retirement plans and retirement advice being delivered at scale, and it needs to, as 2.5 million more Australians retire over the decade ahead. Lifetime income as an embedded building block of retirement plans is where Challenger has a distinct role to play. Our announcements this year of the three large retirement partnerships is just the start. The second shift is Challenger's fundamentally more resilient business model.

Speaker #2: Australia has low levels of financial literacy. Advice has been legislated for the affluent. As a population, we underestimate the cost of longevity, as well as the impact of market risk and inflation risk in retirement.

Speaker #2: Closing the advice gap is critical to solving this. The coming years will see the intersection of retirement plans and retirement advice being delivered at scale.

Speaker #2: And it needs to, as 2.5 million more Australians retire over the decade ahead. Lifetime income, as an embedded building block of retirement plans, is where Challenger has a distinct role to play.

Speaker #2: Our announcements this year of the three large retirement partnerships are just the start. The second shift is Challenger's fundamentally more resilient business model—one that can now support policyholder and investor outcomes together.

Nick Hamilton: One that can now support policyholder and investor outcomes together. They are not competing priorities. A stronger, more resilient Challenger serves both. The new capital standards that we strongly advocated for are now in place, and they have permanently improved the economics of our business. Today's result has been the culmination of much hard work by the team over these past years. Financial strength, capital flexibility, and growth are now, more than ever, core to our story and will deliver strong economic outcomes for our customers and our shareholders over the long term. The opportunity that we see in aging demographics, demand for income, and longevity protection is a story that has decades to run. With APRA's new capital standards now in effect, 2026 is the final year we will report under the normalized framework.

Speaker #2: They're not competing priorities. A stronger, more resilient Challenger serves both. The new capital standards that we strongly advocated for are now in place, and they have permanently improved the economics of our business.

Speaker #2: Today's result has been the culmination of much hard work by the team over these past years. Financial strength, capital flexibility, and growth are now more than ever core to our story, and will deliver strong economic outcomes for our customers and our shareholders over the long term.

Speaker #2: The opportunity that we see in aging demographics, demand for income, and longevity protection is a story that has decades to run. With APRA's new capital standards now in effect, 2026 is the final year we will report under the normalised framework.

Speaker #2: Like the capital standard reforms, the new reporting framework will align us with global peers and give investors clear insights into our financial performance, strength, and flexibility.

Nick Hamilton: Like the capital standard reforms, the new reporting framework will align us with global peers and give investors clear insights into our financial performance, strength, and flexibility. Looking at the headline numbers. Normalized EPS increased 3% year-on-year, a strong result as we remain disciplined in managing the balance sheet through the tight credit spread environment. Normalized ROE remained above target for the second consecutive year. We achieved statutory earnings of AUD 506 million, which was a very strong outcome, driven by positive asset and liability experience. Heading into the new capital standards, we remain extremely well capitalized following the repayment of over half of our hybrid capital, commencement of the buyback program, and announced upsizing today. Our pro forma PCA under the new capital standards is now 1.5 times.

Speaker #2: Looking at the headline numbers, normalized EPS increased 3% year on year—a strong result as we remain disciplined in managing the balance sheet through the tight credit spread environment.

Speaker #2: Normalized ROE remained above target for the second consecutive year. We achieved statutory earnings of $506 million, which was a very strong outcome driven by positive asset and liability experience.

Speaker #2: Heading into the new capital standards, we remain extremely well capitalized following the repayment of over half of our hybrid capital, the commencement of the buyback program, and the announced upsizing today.

Speaker #2: Our pro forma PCA under the new capital standards is now 1.5 times. Our full-year ordinary dividend of $3.15 per share is up 7%. And we have also announced a fully franked special dividend of $1.50 per share, utilizing our franking balance.

Nick Hamilton: Our full-year ordinary dividend of AUD 0.315 per share is up 7%, and we have also announced a fully frank special dividend of AUD 0.015 per share, utilizing our franking balance. Today, I am more confident than ever in the business that Challenger has become. Our business model directly supports our purpose and our growth ambitions, delivering income for individuals, solutions for institutions, and strategic ventures that support our strategy. A key priority of our strategy has been to build multi-channel distribution. It diversifies and accelerates our growth, both balance sheet liabilities and Challenger third-party funds. The multi-channel strategy leverages our core competencies, credit origination, portfolio structuring, and insurance and capital management. The new business growth we are prioritizing is longer tenure, more valuable business. This year, we have unlocked four important channels. We secured three material retirement partnerships with Insignia, BT, and CFS.

Speaker #2: Today, I am more confident than ever in the business that Challenger has become. Our business model directly supports our purpose and our growth ambitions, delivering income for individuals, solutions for institutions, and strategic ventures that support our strategy.

Speaker #2: A key priority of our strategy has been to build multi-channel distribution. This diversifies and accelerates our growth, both in balance sheet liabilities and Challenger third-party funds.

Speaker #2: The multi-channel strategy leverages our core competencies: credit origination, portfolio structuring and insurance, and capital management. The new business growth we are prioritizing is longer tenor, more valuable business.

Speaker #2: This year, we have unlocked four important channels. We secured three material retirement partnerships with Insignia, BT, and CFS. These partnerships alone unlock access to more than 2 million customers and half a trillion dollars in assets.

Nick Hamilton: These partnerships alone unlock access to more than 2 million customers and half a trillion in assets. The schedule of partner product launches over the coming year will build a platform of growth that will keep accelerating for decades to come. We launched our inaugural ASX-listed LiFTS note, a seven-year credit note designed to meet demand for yield from the broker and advise wealth channels. Our first note was more than three times oversubscribed, and we closed it at AUD 350 million. We have planned for multiple new issuances in the near period ahead. We launched a very exciting institutional term annuity backed note, issuing our inaugural CABN of AUD 750 million from an order book that was more than AUD 1.75 billion. Designed around the US FABNs, a $500 billion market, the note opens a large growth channel here and abroad.

Speaker #2: The schedule of partner product launches over the coming year will build a platform of growth that will keep accelerating for decades to come. We launched our inaugural ASX-listed Liftsnote, a seven-year credit note designed to meet demand for yield from the broker and advised wealth channels.

Speaker #2: Our first note was more than three times oversubscribed, and we closed at $350 million. We have planned for multiple new issuances in the near period ahead.

Speaker #2: We launched a very exciting institutional term annuity back note, issuing our inaugural CABN of $750 million from an order book that was more than $1.75 billion.

Speaker #2: Designed around the U.S. FABNs, a $500 billion market, the note opens a large growth channel here and abroad. A significant benefit is the 3-, 5-, and 7-year plus tenor demand for note issuance.

Nick Hamilton: A significant benefit being the three, five, and seven-year plus tenor demand for note issuance. We announced the expansion of our offshore reinsurance platform, Calix Re, which builds upon a highly successful 10-year partnership with MS&AD Primary. Now licensed and rated, Calix Re will open up the Asian annuity market. Challenger's market position and financial strength will support growth as we go live over the coming period. Combined with our existing businesses, these channels give us a platform for growth. Going forward, we will refer to strategic ventures that directly support our strategy and growth opportunity. Today, these fall into two categories. The first will be our substantial minority interest in the merged Fidante Channel Capital business. We look forward to being an engaged and supportive long-term holder of what is an exciting pure-play asset management platform that is well-positioned with many structural growth drivers.

Speaker #2: We announced the expansion of our offshore reinsurance platform, Calyx Re, which builds upon our highly successful 10-year partnership with MS Primary. Now licensed and rated, Calyx will open up the Asian annuity market.

Speaker #2: Challenger's market position and financial strength will support growth as we go live over the coming period. Combined with our existing businesses, these channels give us a platform for growth.

Speaker #2: Going forward, we'll refer to strategic ventures that directly support our strategy and growth opportunities. Today, these fall into two categories. The first will be our substantial minority interest in the merged Vedante Channel Capital business.

Speaker #2: We look forward to being an engaged and supportive long-term holder of what is an exciting, pure-play asset management platform that is well positioned with many structural growth drivers.

Speaker #2: Vedante and Channel combined house many of the best investment managers across active public and private markets, paired with two highly successful, complementary distribution platforms.

Nick Hamilton: Fidante and Channel Capital combined houses many of the best investment managers across active public and private markets, paired with two highly successful complementary distribution platforms. The second is our investment in advice technology. Australia has two significant advice challenges. Closing the advice gap by delivering quality, affordable advice at scale, and building advice solutions designed to meet retirement needs rather than the predominance of accumulation advice design. Ignition Advice and IFM Investors are advice technology companies aligned to that opportunity. Ignition Advice has been announced as a partner to some of Australia's largest super funds to provide advice technology infrastructure. For Challenger, these strategic equity investments are enabling two very exciting growth companies that are great prospects for how the advice market will evolve in the years ahead. The operating environment continues to present a balance of opportunities and constraints, starting with investment markets.

Speaker #2: The second is our investment in advice technology. Australia has two significant advice challenges: closing the advice gap by delivering quality, affordable advice at scale, and building advice solutions designed to meet retirement needs, rather than the predominance of accumulation advice design.

Speaker #2: Ignition and IF are advice technology companies, aligned to that opportunity. Ignition has been announced as a partner to some of Australia's largest super funds to provide advice technology infrastructure.

Speaker #2: For Challenger, these strategic equity investments are enabling to very exciting growth companies that are great prospects for how the advice market will evolve in the years ahead.

Speaker #2: The operating environment continues to present a balance of opportunities and constraints, starting with investment markets. For Challenger, we're seeing the continued benefit from a high-rate environment, supporting more attractive headline annuity rates than we've seen for many years.

Nick Hamilton: For Challenger, we are seeing the continued benefit from a higher rate environment, supporting the more attractive headline annuity rates than seen for many years. This will benefit the structural take-up of income over growth assets in the years ahead. We continue to see tight credit spreads against historical averages. We are remaining patient and disciplined in how we deploy capital. In the current market, we are being deliberate about not chasing yield where it means we reduce the quality of the book. In the short term, that discipline has moderated investment yield, but it is the right decision, and it preserves financial resilience and ensures we have the capacity to act when attractive market opportunities emerge. You will hear from Alex Bell about the financial resilience the new capital standards have delivered.

Speaker #2: This will benefit the structural take-up of income over growth assets in the years ahead. We continue to see tight credit spreads against historical averages.

Speaker #2: We are remaining patient and disciplined in how we deploy capital. In the current market, we're being deliberate about not chasing yield where it means we reduce the quality of the book.

Speaker #2: In the short term, that discipline is moderated investment yield, but it is the right decision and it preserves financial resilience and ensures we have the capacity to act when attractive market opportunities emerge.

Speaker #2: You'll hear from Alex about the financial resilience the new capital standards have delivered. The new standards have also allowed us to reassess our overall capital management strategy.

Nick Hamilton: The new standards have also allowed us to reassess our overall capital management strategy, repaying one tranche of the AT1, commencing and today upsizing the buyback program. We have used the capital standard changes to adopt more conservative risk appetite in our internal models, which further strengthens our capital resilience and provides flexibility. The third call-out is the underlying demand for income. This trend is well understood, and its significance should not be underestimated. We expect strong and sustainable system growth for decades, and Challenger is directly aligned to these trends through income solutions for individuals and institutions in both guaranteed and non-guaranteed form. This year has been particularly encouraging as we successfully launched or brought two new innovative income solutions to market. Both were extremely well-received, and we have more ideas in development and expect to introduce further products in the year ahead.

Speaker #2: We have repaid one tranche of the AT1, and today we are upsizing the buyback program. We have used the capital standard changes to adopt a more conservative risk appetite in our internal models.

Speaker #2: Which further strengthens our capital resilience and provides flexibility. The third call-out is the underlying demand for income. This trend is well understood, and its significance should not be underestimated.

Speaker #2: We expect strong and sustainable system growth for decades, and Challenger is directly aligned to these trends through income solutions for individuals and institutions, in both guaranteed and non-guaranteed forms.

Speaker #2: This year has been particularly encouraging, as we successfully launched or brought two new, innovative income solutions to market. Both were extremely well received, and we have more ideas in development. We expect to introduce further products in the year ahead.

Speaker #2: Our mission has been to build a multi-channel strategy that leverages our core capabilities. This past year has seen some of the biggest players start to design retirement propositions, and Challenger will partner to deliver these.

Nick Hamilton: Our mission has been to build a multichannel strategy that leverages our core capabilities. This past year has seen some of the biggest players start to design retirement propositions, and Challenger will partner to deliver these. It was a strong year for longer-dated three-year-plus annuity sales, which grew to AUD 3.2 billion, with retail lifetime sales and our reinsurance sales both hitting record levels. Historically, our growth has been constrained by the volume of longer tenor annuity sales we could write and the capital to support that growth. As FY26 demonstrates, these constraints have really started being removed. As we accelerate our growth, we are also accelerating our asset origination. We have very strong momentum, with our investment teams originating more than AUD 10 billion this past year and actively exploring and unlocking multiple pathways to further grow that organically.

Nick Hamilton: Our mission has been to build a multichannel strategy that leverages our core capabilities. This past year has seen some of the biggest players start to design retirement propositions, and Challenger will partner to deliver these. It was a strong year for longer-dated three-year-plus annuity sales, which grew to AUD 3.2 billion, with retail lifetime sales and our reinsurance sales both hitting record levels. Historically, our growth has been constrained by the volume of longer tenor annuity sales we could write and the capital to support that growth. As FY 2026 demonstrates, these constraints have really started being removed. As we accelerate our growth, we are also accelerating our asset origination. We have very strong momentum, with our investment teams originating more than AUD 10 billion this past year and actively exploring and unlocking multiple pathways to further grow that organically.

Speaker #2: It was a strong year for longer-dated, three-year-plus annuity sales, which grew to $3.2 billion, with retail lifetime sales and our reinsurance sales both hitting record levels.

Speaker #2: Historically, our growth has been constrained by the volume of longer tenor annuity sales we could write, and the capital to support that growth. As FY26 demonstrates, these constraints have really started being removed.

Speaker #2: As we accelerate our growth, we're also accelerating our asset origination. We have very strong momentum, with our investment teams originating more than $10 billion this past year and actively exploring and unlocking multiple pathways to further grow that organically.

Speaker #2: The deals we announced with banks and non-banks throughout the year are only a start, as we deepen and broaden these activities. Challenger is unique in the Australian market because of our reliability and consistency as a funding partner.

Nick Hamilton: The deals we announced with banks and non-banks through the year are only a start as we deepen and broaden these activities. Challenger is unique in the Australian market because of our reliability and consistency as a funding partner. We anticipate growing appetite under the new capital standards for longer dated investment grade rated and unrated private and public credit, which unlocks a far larger investment universe which supports our growth. We are setting our sights on material growth. From today's AUD 31 billion assets under management, which represents the combined balance sheet and asset management platform excluding Fidante, we are targeting AUD 50 billion by 2030. Today, we are in a position to confidently lay out how our strategy will turbocharge our growth. The levers for that growth are now in our control.

Speaker #2: We anticipate growing appetite under the new capital standards for longer-dated investment-grade rated and unrated private and public credit, which unlocks a far larger investment universe and supports our growth.

Speaker #2: We are setting our sights on material growth. From today's $31 billion in assets under management—which represents the combined balance sheet and asset management platform, excluding Vedante—we are targeting $50 billion by 2030.

Speaker #2: Today, we are in a position to confidently lay out how our strategy will turbocharge our growth. The levers for that growth are now in our control.

Speaker #2: We have capital to support growth. We have financial resilience, and we have demand across multiple distribution channels for our products and solutions. Let me now hand over to Alex.

Nick Hamilton: We have capital to support growth, we have financial resilience, and we have demand across multiple distribution channels for our products and solutions. Let me now hand to Alex Bell, who will take us through the financial result, capital strength, and guidance under the new reporting framework.

Speaker #2: He'll take us through the financial results, capital strength, and guidance under the new reporting framework.

Speaker #1: Thank you, Nick. And good morning, everyone. It's a pleasure to be here today to take you through our FY26 financial results and outlook. A year ago, I spoke about a business that was evolving.

Alex Bell: Thank you, Nick, and good morning, everyone. It is a pleasure to be here today to take you through our FY26 financial results and outlook. A year ago, I spoke about a business that was evolving, becoming more efficient, more focused, and more confident. 12 months on, that evolution has turned into momentum. We have grown earnings, we have grown annuity sales, and we have delivered returns above our target, all while strengthening the balance sheet and returning more capital to you as shareholders. We have done all of that in an environment that has not been easy. Credit spreads have stayed near cyclical lows all year. The discipline we have shown by not reaching for risk and holding capital ready to deploy is exactly what has allowed us to deliver a result that is both strong today and built to last.

Alex Bell: Thank you, Nick, and good morning, everyone. It is a pleasure to be here today to take you through our FY 2026 financial results and outlook. A year ago, I spoke about a business that was evolving, becoming more efficient, more focused, and more confident. 12 months on, that evolution has turned into momentum. We have grown earnings, we have grown annuity sales, and we have delivered returns above our target, all while strengthening the balance sheet and returning more capital to you as shareholders. We have done all of that in an environment that has not been easy. Credit spreads have stayed near cyclical lows all year. The discipline we have shown by not reaching for risk and holding capital ready to deploy is exactly what has allowed us to deliver a result that is both strong today and built to last.

Speaker #1: Becoming more efficient, more focused, and more confident. Twelve months on, that evolution has turned into momentum. We've grown earnings, we've grown annuity sales, and we've delivered returns above our target, all while strengthening the balance sheet and returning more capital to you as shareholders.

Speaker #1: And we've done all of that in an environment that has not been easy. Credit spreads have stayed near cyclical lows all year. But the discipline we've shown by not reaching for risk, and holding capital ready to deploy, is exactly what has allowed us to deliver a result that is both strong today and built to last.

Speaker #1: Today, I will take a bit of extra time to ensure that we provide additional insight on the impacts from both APRA's new capital standards and our new reporting framework.

Alex Bell: Today, I will take a bit of extra time to ensure that we provide additional insight on the impacts from both Australian Prudential Regulation Authority's new capital standards and our new reporting framework. Bear with me. Let me take you through it. We will start with the headline numbers, and they tell a consistent story. We have delivered normalized NPAT of AUD 468 million, and normalized EPS of AUD 0.681, both up 3% and just above the midpoint of the guidance that we updated to market in April. Importantly, our normalized ROE of 11.6% continues to outperform our through the cycle target for a second year in a row. Pleasingly, our statutory NPAT of AUD 506 million was up 163% on last year, driven by positive asset experience and some unwind of the non-economic AASB 17 mismatch, which we wore in previous periods.

Speaker #1: So bear with me. Let me take you through it. We'll start with the headline numbers, and they tell a consistent story. We've delivered normalised net profit after tax of $468 million and normalised earnings per share of 68.1 cents, both up 3% and just above the midpoint of the guidance that we updated to market in April.

Speaker #1: Importantly, our normalised return on equity of 11.6% continues to outperform our through-the-cycle target for a second year in a row. Pleasingly, our statutory impact of $506 million was up 163% on last year, driven by positive asset experience and some unwind of the non-economic AASB 17 mismatch, which we wore in previous periods.

Speaker #1: And we're sharing that result with shareholders. The Board has declared a fully franked, full-year dividend of 31.5 cents, up 7%, plus a special dividend of 1.5 cents.

Alex Bell: We are sharing that result with shareholders. The board has declared a fully franked full-year dividend of AUD 0.315, up 7%, plus a special dividend of AUD 0.015. Behind all of this sits a strongly capitalized balance sheet with a PCA ratio of 1.38 times or a pro forma of 1.5 times under the new capital standards. Two things drove the result in a favorable way, growing income and holding the line on costs. Group net income rose to AUD 995 million. Despite tight credit spreads, Life cash operating earnings grew 2%, supported by higher average investment assets. Funds management fee income grew 1%, helped by higher non-fund income. The real discipline shows up on the expense side. Total expenses were held to just AUD 319 million.

Speaker #1: Behind all of this sits a strongly capitalised balance sheet with a PCA ratio of 1.38 times, or a pro forma of 1.5 times under the new capital standards.

Speaker #1: Two things drove the result in a favourable way: growing income and holding the line on costs. Group net income rose to $995 million. Despite tight credit spreads, Life cash operating earnings grew 2%, supported by higher average investment assets.

Speaker #1: And funds management fee income grew 1%, helped by higher non-fund income. But the real discipline shows up on the expense side. Total expenses were held to just $319 million.

Speaker #1: Inflationary pressures on technology from software licensing and higher data costs in investment operations were largely offset by realised efficiencies in our operating model. The result is a cost-to-income ratio of 32.1%, an improvement of 20 basis points, and right at the bottom of our 32% to 34% target range.

Alex Bell: Inflationary pressures on technology from software licensing and higher data costs in investment operations were largely offset by realized efficiencies in our operating model. The result is a cost-to-income ratio of 32.1%, an improvement of 20 basis points, and right at the bottom of our 32% to 34% target range. This is a scalable platform, one that lets us grow the business without growing the cost base at the same pace. As Nick Hamilton mentioned earlier, this slide gets to the heart of the environment that we have been navigating in FY26. As the chart on the bottom right shows, credit spreads have stayed range bound and historically tight for a number of years, making every retained basis point of margin earned through discipline. Our H2 cash operating earnings margin was 3.17%, up 22 basis points on the H1.

Alex Bell: Inflationary pressures on technology from software licensing and higher data costs in investment operations were largely offset by realized efficiencies in our operating model. The result is a cost-to-income ratio of 32.1%, an improvement of 20 basis points, and right at the bottom of our 32% to 34% target range. This is a scalable platform, one that lets us grow the business without growing the cost base at the same pace. As Nick Hamilton mentioned earlier, this slide gets to the heart of the environment that we have been navigating in FY 2026. As the chart on the bottom right shows, credit spreads have stayed range bound and historically tight for a number of years, making every retained basis point of margin earned through discipline. Our H2 cash operating earnings margin was 3.17%, up 22 basis points on the H1.

Speaker #1: This is a scalable platform—one that lets us grow the business without outgrowing the cost base at the same pace. As Nick mentioned earlier, this slide gets to the heart of the environment that we've been navigating in FY26.

Speaker #1: As the chart on the bottom right shows, credit spreads have stayed range-bound and historically tight for a number of years, making every retained basis point of margin earned through discipline.

Speaker #1: Our second-half cash operating earnings margin was 3.17%, up 22 basis points on the first half. That increase was driven by higher yields and distributions from non-fixed income assets, partially offset by higher interest payments from a growing annuity book.

Alex Bell: That increase was driven by higher yields and distributions from non-fixed income assets, partially offset by higher interest payments from a growing annuity book. In aggregate, the total return for FY26 exceeded the COE investment yield in the normalized result. Performance of every non-fixed income asset class also exceeded the prior year, which is evidence of our investment capability translating into real value on the balance sheet. If earnings are the outcome, sales are the leading indicator, and this is where our momentum is clearest. Total life sales grew 12% to AUD 9.6 billion, driving annuity book growth of 10.7%. This is the strongest book growth we have seen in years, and it matters because a bigger book underpins tomorrow's earnings and our ability to deploy capital efficiently. The quality of that growth is just as important as the quantity.

Alex Bell: That increase was driven by higher yields and distributions from non-fixed income assets, partially offset by higher interest payments from a growing annuity book. In aggregate, the total return for FY 2026 exceeded the COE investment yield in the normalized result. Performance of every non-fixed income asset class also exceeded the prior year, which is evidence of our investment capability translating into real value on the balance sheet. If earnings are the outcome, sales are the leading indicator, and this is where our momentum is clearest. Total life sales grew 12% to AUD 9.6 billion, driving annuity book growth of 10.7%. This is the strongest book growth we have seen in years, and it matters because a bigger book underpins tomorrow's earnings and our ability to deploy capital efficiently. The quality of that growth is just as important as the quantity.

Speaker #1: In aggregate, the total return for FY26 exceeded the COE investment yield in the normalised result. The performance of every non-fixed income asset class also exceeded the prior year, which is evidence of our investment capability translating into real value on the balance sheet.

Speaker #1: If earnings are the outcome, then sales are the leading indicator. And this is where our momentum is clearest. Total live sales grew 12% to $9.6 billion, driving annuity book growth of 10.7%.

Speaker #1: This is the strongest book growth we've seen in years, and it matters because a bigger book underpins tomorrow's earnings and our ability to deploy capital efficiently.

Speaker #1: The quality of that growth is just as important as the quantity. Long-dated sales—three years and beyond—grew 14%, and offshore reinsurance sales through our partnership with MS Primary reached a record $1.2 billion.

Alex Bell: Long-dated sales, three years and beyond, grew 14%, and offshore reinsurance sales through our partnership with MS&AD Primary reached a record AUD 1.2 billion. This enriches a liability book that is both larger and better diversified. Third-party assets managed by our investment team in funds and mandates grew 10% to AUD 4.1 billion, with positive net flows of AUD 0.4 billion, demonstrating confidence from external investors in our credit and income capabilities. Turning to the balance sheet, investment assets grew 4% to AUD 26.6 billion. Our asset allocation remains deliberately stable and high quality. Fixed income continues to anchor the portfolio with an increase in investment-grade asset-backed securities. What I would like you to take away from this slide is that our asset allocation not only delivers strong adjusted returns, but it acts as a store of capital.

Speaker #1: This enriches a liability growth—a liability book that is both larger and better diversified. Third-party assets managed by our investment team in funds and mandates grew 10% to $4.1 billion.

Speaker #1: With positive net flows of $0.4 billion, demonstrating confidence from external investors in our credit and income capabilities. Turning to the balance sheet, investment assets grew 4% to $26.6 billion.

Speaker #1: Our asset allocation remains deliberately stable and high quality. Fixed income continues to anchor the portfolio, with an increase in investment-grade asset-backed securities. What I'd like you to take away from this slide is that our asset allocation not only delivers strong risk-adjusted returns, but it acts as a store of capital.

Speaker #1: The right-hand side shows how the composition of our investment assets contrasts with the associated allocation of PCA. Our non-fixed income assets—so, property, alternatives, equity, and infrastructure—make up a quarter of the balance sheet.

Alex Bell: The right-hand side shows how the composition of our investment assets contrasts with the associated allocation of PCA. Our non-fixed income assets, property, alternatives, equity, and infrastructure, make up a quarter of the balance sheet but consume more than two-thirds of our prescribed capital. This gives us a powerful and flexible lever to release capital and deploy it into opportunities and growth as they arise. Now to a topic I know is front of mind for many of you, the new capital standards that took effect on 1 July. I wanted to build on our disclosure at Investor Day to talk about the two key takeaways when it comes to the new capital standards. The first is resilience and the second is growth. Let us look at resilience first. The headline is that under the new standards, our balance sheet is materially more resilient to market shocks.

Speaker #1: But it consumes more than two-thirds of our prescribed capital. This gives us a powerful and flexible lever to release capital and deploy it into opportunities and growth as they arise.

Speaker #1: Now to a topic I know is front of mind for many of you: the new capital standards that took effect on the 1st of July.

Speaker #1: I wanted to build on our disclosure at Investor Day to talk about the two key takeaways when it comes to the new capital standards.

Speaker #1: The first is resilience, and the second is growth. Let's look at resilience first. The headline is that, under the new standards, our balance sheet is materially more resilient to market shocks.

Speaker #1: In this illustrative COVID-like stress scenario, the PCA falls just 5 points under the new standards, compared with 25 points under the old regime. We're moving our balance sheet from being directionally pro-cyclical to positioning ourselves to capture the opportunity when spreads widen.

Alex Bell: In this illustrative COVID-like stress, the PCA falls just five points under the new standards, compared with 25 points under the old regime. Moving our balance sheet from being directionally pro-cyclical to positioning us to capture the opportunity when spreads widen. Reflecting this dynamic, as well as a more conservative risk appetite, we have revised our target PCA range to 1.15 to 1.35 times. I want to be clear what this means. This is a representation of strength, not a deterioration. The lower range is possible precisely because the new standards make our capital position more stable, and our risk appetite is more conservative, with a preference to operate towards the top of our range to preserve flexibility. Now let us look at the second item. Capital strength for Challenger now represents a growth engine rather than just a defense line.

Speaker #1: Reflecting this dynamic, as well as a more conservative risk appetite, we've revised our target PCA range to 1.15 to 1.35 times. And I want to be clear what this means.

Speaker #1: This is a representation of strength, not a deterioration. The lower range is possible precisely because the new standards make our capital position more stable.

Speaker #1: And our risk appetite is more conservative, with a preference to operate towards the top of our range to preserve flexibility. Now, let's look at the second item: capital strength for Challenger now represents a growth engine, rather than just a defence line.

Speaker #1: I wanted to leave you with a real sense of how material this could be. This slide is just an example, but it puts some illustrative numbers around our capacity to grow.

Alex Bell: I wanted to leave you with a real sense of how material this could be. This slide is just an example, but it puts some illustrative numbers around our capacity to grow. Sitting where we are today, the middle column shows that we could support life book growth of 30%, or roughly AUD 7 billion, with almost no change to asset allocation. This would see us operating at the top of our new PCA range and with that more conservative risk appetite that I mentioned. Given time to remix asset allocation, the third column then shows that this growth capacity increases to almost 80% book growth, or roughly AUD 18 billion from where we are today. As the book grows and our asset mix shifts towards fixed income, capital intensity falls even further, and we are still at the top of our PCA range.

Speaker #1: Sitting where we are today, the middle column shows that we could support life book growth of 30%, or roughly $7 billion, with almost no change to asset allocation.

Speaker #1: This would see us operating at the top of our new PCA range, and with that more conservative risk appetite that I mentioned. Given time to remix asset allocation, the third column then shows that this growth capacity increases to almost 80% book growth, or roughly $18 billion from where we are today.

Speaker #1: As the book grows and our asset mix shifts towards fixed income, capital intensity falls even further, and we're still at the top of our PCA range.

Speaker #1: In both scenarios, subject to finalising the asset allocation strategies for the cash flow matching and non-cash flow matching pools, we continue to meet or exceed our medium-term operating ROE range.

Alex Bell: In both scenarios, subject to finalizing the asset allocation strategies for the cash flow matching and non-cash flow matching pools, we continue to meet or exceed our medium-term operating ROE range. Even further capacity is created as time passes and we generate retained earnings, and this can be used for more growth or further share buybacks subject to our capital allocation framework. A word of caution, this is not a sales forecast. It is an illustration of our balance sheet capacity under the new standards and how we are positioned to support growth without needing to raise fresh equity. Switching gears. One of our most significant strategic steps this year was announcing the merger of our multi-affiliate business, Fidante, with Channel Capital.

Speaker #1: Even further capacity is created as time passes and we generate retained earnings. This can be used for more growth, or for further share buybacks, subject to our capital allocation framework.

Speaker #1: A word of caution: this is not a sales forecast. It is an illustration of our balance sheet capacity under the new standards, and how we are positioned to support growth without needing to raise fresh equity.

Speaker #1: Switching gears, one of our most significant strategic steps this year was announcing the merger of our multi-affiliate business, Vedante, with Channel Capital. This creates a more focused Challenger, centred squarely on the retirement opportunity, while positioning Vedante for its next chapter of growth as part of a larger, more diversified funds management platform.

Alex Bell: This creates a more focused Challenger, centered squarely on the retirement opportunity while positioning Fidante for its next chapter of growth as part of a larger, more diversified funds management platform. On completion, which is expected in Q2 of the FY27 financial year, we will hold a 45% equity stake in the combined business. The economics are attractive. On an FY26 pro forma basis, the merged entity generates capital-light fee income of around AUD 170 million, with more than 85% in recurring income streams with strong retention characteristics. Subject to completion accounts, we expect to recognize an accounting pre-tax gain on sale of around AUD 100 million in FY27. This represents the difference between the fair value of our investment in the merged entity, net of deferred consideration, and the historical cost that we hold it on the balance sheet today.

Alex Bell: This creates a more focused Challenger, centered squarely on the retirement opportunity while positioning Fidante for its next chapter of growth as part of a larger, more diversified funds management platform. On completion, which is expected in Q2 of the FY27 financial year, we will hold a 45% equity stake in the combined business. The economics are attractive. On an FY 2026 pro forma basis, the merged entity generates capital-light fee income of around AUD 170 million, with more than 85% in recurring income streams with strong retention characteristics. Subject to completion accounts, we expect to recognize an accounting pre-tax gain on sale of around AUD 100 million in FY27. This represents the difference between the fair value of our investment in the merged entity, net of deferred consideration, and the historical cost that we hold it on the balance sheet today.

Speaker #1: On completion, which is expected in Q2 of the FY27 financial year, we will hold a 45% equity stake in the combined business. The economics are attractive.

Speaker #1: On an FY26 pro forma basis, the merged entity generates capital-like fee income of around $170 million, with more than 85% in recurring income streams with strong retention characteristics.

Speaker #1: Subject to completion accounts, we expect to recognise an accounting pre-tax gain on sale of around $100 million in FY27. This represents the difference between the fair value of our investment in the merged entity, net of deferred consideration, and the historical cost that we hold it at on the balance sheet today.

Speaker #1: The transaction partially crystallises value that has been created within Vedante, while allowing Challenger to retain significant exposure to the future growth of the business through our 45% ownership stake.

Alex Bell: The transaction partially crystallizes value that has been created within Fidante while allowing Challenger to retain significant exposure to the future growth of the business through our 45% ownership stake. This slide is a familiar one and brings our capital allocation framework to life, and it also provides proof points for how we have delivered against each component. From an organic growth perspective, we have funded high-quality life book growth of 9.2% and continue to invest in new solutions like our LiFTS platform, new partnerships, and our customer technology uplift. We have declared full-year ordinary dividends of AUD 0.315 per share, as well as a AUD 0.015 special dividend to recognize the positive asset experience in the period. In February, we commenced a AUD 150 million buyback, which is around 60% complete. Today, we are announcing a further AUD 300 million upsizing to a total program of AUD 450 million, subject to APRA approval.

Speaker #1: This slide is a familiar one and brings our capital allocation framework to life, and it also provides proof points for how we've delivered against each component.

Speaker #1: From an organic growth perspective, we have funded high-quality Life Book growth of 9.2% and continue to invest in new solutions like our Lifts platform, new partnerships, and our customer technology uplift.

Speaker #1: We've declared full-year ordinary dividends of 31.5 cents per share, as well as a 1.5 cent special dividend to recognise the positive asset experience in the period.

Alex Bell: We have declared full-year ordinary dividends of AUD 0.315 per share, as well as a AUD 0.015 special dividend to recognize the positive asset experience in the period. In February, we commenced a AUD 150 million buyback, which is around 60% complete. Today, we are announcing a further AUD 300 million upsizing to a total program of AUD 450 million, subject to APRA approval.

Speaker #1: In February, we commenced a $150 million buyback, which is around 60% complete, and today we are announcing a further $300 million upsizing to a total programme of $450 million, subject to our approval.

Speaker #1: During the year, we also redeemed $385 million of Challenger Capital Notes to optimise the capital structure. And finally, from an inorganic growth perspective, we have focused on adjacencies.

Alex Bell: During the year, we also redeemed AUD 385 million of Challenger Capital Notes to optimize the capital structure. Finally, from an inorganic growth perspective, we have focused on adjacencies. A targeted minority investment in Fulcrum to enhance the Fidante stable and a small stake in the early stage Ignition Advice tech business. Together, these actions demonstrate a disciplined approach to capital allocation, funding growth, returning capital where appropriate, and investing selectively in strategic adjacencies. In November, S&P upgraded both major Challenger ratings, CLC to A+ from A, and Challenger Limited to A- from BBB+. These are the strongest in the company's history. S&P specifically cited our market leadership position in Australian annuities, improved regulatory settings, strong retirement trends, and excellent capital adequacy and resilience through market and credit stress.

Speaker #1: A targeted minority investment in Fulcrum to enhance the Vedante stable, and a small stake in the early-stage, if advised, tech business. Together, these actions demonstrate a disciplined approach to capital allocation.

Speaker #1: Funding growth, returning capital where appropriate, and investing selectively in strategic adjacencies. In November, S&P upgraded both major Challenger ratings: CLC to A+ from A, and Challenger Limited to A- from BBB+.

Speaker #1: These are the strongest in the company's history. S&P specifically cited our market leadership position in Australia and annuities, improved regulatory settings, strong retirement trends, and excellent capital adequacy and resilience through market and credit stress.

Speaker #1: This is important because it reflects a fundamental reassessment of Challenger's credit profile, and it confirms that our capital position, risk management framework, and earnings outlook are stronger than they were previously assessed to be.

Alex Bell: This is important because it reflects a fundamental reassessment of Challenger's credit profile. It confirms that our capital position, risk management framework, and earnings outlook are stronger than they were previously assessed to be. Now for a few minutes on our new framework for management reporting. The normalized COE framework has served Challenger well since 2008, but the business has evolved a great deal since then. Periods of market dislocation created permanent differences between our normalized and statutory profit, as well as a less responsive illiquidity premium under the old capital standards and the management actions that were necessary to shore up that reported capital position. No management reporting framework is perfect, but we have been stress testing this one internally for six months. We are confident that it reflects a clearer representation of the building blocks of shareholder value.

Speaker #1: And now, for a few minutes, I'd like to discuss our new framework for management reporting. The normalised COE framework has served Challenger well since 2008, but the business has evolved a great deal since then.

Speaker #1: Periods of market dislocation created permanent differences between our normalised and statutory profit, as well as a less responsive illiquidity premium under the old capital standards, and the management actions that were necessary to shore up that reported capital position.

Speaker #1: No management reporting framework is perfect, but we've been stress-testing this one internally for six months, and we're confident that it reflects a clearer representation of the building blocks of shareholder value.

Speaker #1: The key message is that this does not change the economics of the business in any way, nor does it change our audited statutory profit.

Alex Bell: The key message is that this does not change the economics of the business in any way, nor does it change our audited statutory profit. It just changes the way we present our earnings so that recurring spread and fee income are separated from less predictable investment returns. There are three simple building blocks. Firstly, spread income. This is expected to be relatively stable, steadily growing, and less capital intensive. It represents our investment yield, less the attributed cost of funding. Secondly, fee-related income. This is a high growth, capital light, and compounding income stream from our asset management capability, life risk income, and our share of profits from Fidante, and ultimately from the new merged entity with Channel Capital. The third building block is investment returns. This will be the actual mark-to-market movements on all our assets and liabilities, as well as less predictable returns from non-fixed income assets.

Speaker #1: It just changes the way we present our earnings, so that recurring spread and fee income are separated from less predictable investment returns. There are three simple building blocks.

Speaker #1: Firstly, spread income. This is expected to be relatively stable, steadily growing, and less capital intensive. It represents our investment yield, less the attributed cost of funding.

Speaker #1: Secondly, fee-related income. This is a high-growth, capital-light, and compounding income stream from our asset management capability, life risk income, and our share of profits from Vedanta, and ultimately from the new merged entity with Channel Capital.

Speaker #1: The third building block is investment returns. This will be the actual mark-to-market movements on all our assets and liabilities, as well as less predictable returns from non-fixed income assets.

Speaker #1: No more normalised growth, or assumption-based return accruals. We expect investment returns to contribute positively through the cycle and create real value from our investment excellence.

Alex Bell: No more normalized growth or assumption-based return accruals. We expect investment returns to contribute positively through the cycle and create real value from our investment excellence. Together, spread and fee income, less our operating expenses, form core earnings. When you add investment returns, you get operating profit. The only things below the operating profit line will be net new business strain, the AASB 17 accounting mismatch on life risk, and any significant non-recurring items. Let us take a look at what this means for earnings guidance in FY27. Under the new framework, we are guiding to FY27 core EPS of AUD 0.45 to AUD 0.49 per share. The midpoint represents 6% growth on our equivalent FY26 core EPS of AUD 0.442. This guidance reflects a couple of new moving parts.

Alex Bell: No more normalized growth or assumption-based return accruals. We expect investment returns to contribute positively through the cycle and create real value from our investment excellence. Together, spread and fee income, less our operating expenses, form core earnings. When you add investment returns, you get operating profit. The only things below the operating profit line will be net new business strain, the AASB 17 accounting mismatch on life risk, and any significant non-recurring items. Let us take a look at what this means for earnings guidance in FY27. Under the new framework, we are guiding to FY27 core EPS of AUD 0.45 to AUD 0.49 per share. The midpoint represents 6% growth on our equivalent FY 2026 core EPS of AUD 0.442. This guidance reflects a couple of new moving parts.

Speaker #1: Together, spread and fee income—less our operating expenses—form core earnings. And when you add investment returns, you get operating profit. The only things below the operating profit line will be net new business strain, the SSB17 accounting mismatch on life risk, and any significant non-recurring items.

Speaker #1: So let's take a look at what this means for earnings guidance in FY27. Under the new framework, we're guiding to FY27 core EPS of $0.45 to $0.49 per share.

Speaker #1: The midpoint represents 6% growth on our equivalent FY26 core EPS of 44.2 cents. This guidance reflects a couple of new moving parts. The Vedante and Channel merger, which is expected to complete in Q2, is a drag on core earnings relative to prior years, as the initial gain on sale and future earn-out payments will be reported in investment returns, rather than in core earnings.

Alex Bell: The Fidante and Channel merger, which is expected to complete in Q2, is a drag on core earnings relative to prior years as the initial gain on sale and future earn-out payments will be reported in investment returns rather than in core earnings. We also anticipate an impact of approximately AUD 8 million post-tax of operating costs and timing of earnings ramp-up to establish our new offshore reinsurance platform, Calix Re. The FY27 results will only be reported under the new framework. Last week we provided the market with comparatives for three years of results to assist with any conversion. Remember, of course, that our audited statutory profit is entirely unchanged. I know a change in framework can raise the question, but how do we compare apples to apples? This chart on the right helps to walk you carefully from the old measure to the new.

Speaker #1: We also anticipate an impact of approximately $8 million post-tax in operating costs, and from the timing of the earnings ramp-up to establish our new offshore reinsurance platform, Calyx Re.

Speaker #1: The FY27 results will only be reported under the new framework, and so last week we provided the market with comparatives for three years of results to assist with any conversion.

Speaker #1: Remember, of course, that our audited statutory profit is entirely unchanged. I know a change in framework can raise the question: how do we compare apples to apples?

Speaker #1: So, the chart on the right helps to walk you carefully from the old measure to the new. We start with FY26 normalised EPS of 68.1 cents.

Alex Bell: We start with FY26 normalized EPS of AUD 0.681. We then remove the normalized accruals for income and capital growth and the less predictable yield and distributions on non-fixed income assets that will now sit in investment returns rather than core earnings. This gives an FY26 core EPS equivalent of AUD 0.442 per share on a like-for-like basis. In order to bridge to FY27, we then add underlying growth from capital deployment and those two material items of Calix Re and the Fidante Channel merger to reach the midpoint of our FY27 core EPS guidance at AUD 0.47. We are not providing equivalent FY27 guidance under the old NCOE framework, and the results for our FY27 actuals will all be on the new basis only. However, for illustrative purposes, applying the same adjustments at the start of the walk would imply normalized EPS of AUD 0.71 per share.

Alex Bell: We start with FY 2026 normalized EPS of AUD 0.681. We then remove the normalized accruals for income and capital growth and the less predictable yield and distributions on non-fixed income assets that will now sit in investment returns rather than core earnings. This gives an FY 2026 core EPS equivalent of AUD 0.442 per share on a like-for-like basis. In order to bridge to FY27, we then add underlying growth from capital deployment and those two material items of Calix Re and the Fidante Channel merger to reach the midpoint of our FY27 core EPS guidance at AUD 0.47. We are not providing equivalent FY27 guidance under the old NCOE framework, and the results for our FY27 actuals will all be on the new basis only. However, for illustrative purposes, applying the same adjustments at the start of the walk would imply normalized EPS of AUD 0.71 per share.

Speaker #1: And we then remove the normalised accruals for income and capital growth, and the less predictable yield and distributions on non-fixed income assets that will now sit in investment returns rather than core earnings.

Speaker #1: This gives an FY26 core EPS equivalent of 44.2 cents per share on a like-for-like basis. In order to bridge to FY27, we then add underlying growth from capital deployment, and those two material items of Calyx Re and the Vedante Channel merger, to reach the midpoint of our FY27 core EPS guidance at 47 cents.

Speaker #1: We are not providing equivalent FY27 guidance under the old NCOE framework, and the results for our FY27 actuals will all be on the new basis only.

Speaker #1: However, for illustrative purposes, applying the same adjustments at the start of the walk would imply normalised EPS of $0.71 per share. The key message is not a change in earnings power—it's the same business viewed through an economically clearer lens.

Alex Bell: The key message is not a change in earnings power. It is the same business viewed through an economically clearer lens. But if we step back from any single year, we are now introducing more medium-term through the cycle targets. We aim to compound operating EPS growth at 8% to 10% over a three to five-year period. Our operating ROE target will be a range of 12% to 14% after tax, which creates some headroom for modest cash rate movements without having to move the ROE target period on period. For dividends, philosophy is broadly unchanged. We are targeting a dividend payout ratio of 65% to 75% of core EPS, where the midpoint is equivalent to about 46% of normalized EPS on the old basis.

Speaker #1: But if we step back from any single year, we are now introducing more medium-term, through-the-cycle targets. We aim to compound operating EPS growth at 8 to 10 percent over a three- to five-year period.

Speaker #1: Our operating ROE target will be a range of 12% to 14% after tax, which creates some headroom for modest cash rate movements without having to move the ROE target period on period.

Speaker #1: For dividends, Philadelphia is broadly unchanged. We're targeting a dividend payout ratio of 65 to 75 percent of core EPS, where the midpoint is equivalent to about 46 percent of normalised EPS on the old basis.

Speaker #1: The new dividend payout ratio is equivalent to keeping the top end of the old range unchanged, which was 50 percent of normalised EPS, and narrowing the bottom end of the range from 30 percent to 43 percent of normalised EPS.

Alex Bell: The new dividend payout ratio is equivalent to keeping the top end of the old range unchanged, which was 50% of normalized EPS, and narrowing the bottom end of the range from 30% to 43% of normalized EPS. Finally, our target PCA ratio for CLC will be a range of 1.15 to 1.35 times APRA's minimum requirement. The lower and narrowed range reflects the capital resilience introduced by the new capital standards, our more conservative risk appetite, and redemption of one tranche of the capital notes earlier in the year. These aspirational targets are grounded in the structural tailwinds behind our business. An aging population, a retirement system opening up, and rising demand for guaranteed income. We are building a platform to convert that demand into sustainable compounding growth. So let me bring it all together with the compelling investment case for Challenger today.

Speaker #1: And finally, our target PCA ratio for CLC will be a range of 1.15 to 1.35 times APRA's minimum requirement. The lower and narrowed range reflects the capital resilience introduced by the new capital standards, our more conservative risk appetite, and the redemption of one tranche of the capital notes earlier in the year.

Speaker #1: These aspirational targets are grounded in the structural tailwinds behind our business: an aging population, a retirement system opening up, and rising demand for guaranteed income.

Speaker #1: We're building a platform to convert that demand into sustainable, compounding growth. So, let me bring it all together with the compelling investment case for Challenger today.

Speaker #1: It starts with the structural growth in retirement and our market leadership position. More Australians are entering retirement, and Challenger is the leading retirement income brand and annuity provider.

Alex Bell: It starts with the structural growth in retirement and our market leadership position. More Australians are entering retirement, and Challenger is the leading retirement income brand and annuity provider. Next, we have an asset origination advantage with proprietary access to attractive fixed income and private assets with earnings upside when credit spreads widen from current tight levels. Our capital strength is now shored up to not only support resilience through market cycles, but also meaningful book growth that is less capital intensive. Investments into our distribution moats and operational effectiveness create scalable platform leverage, and as our asset mix evolves, we will deliver more consistent and stronger returns on equity over time. Challenger offers investors a combination of structural growth, differentiated origination capabilities, and capital strengths. In closing, in FY26, we had a year where our strategy turned into real, tangible momentum. We grew earnings and delivered returns above target.

Alex Bell: It starts with the structural growth in retirement and our market leadership position. More Australians are entering retirement, and Challenger is the leading retirement income brand and annuity provider. Next, we have an asset origination advantage with proprietary access to attractive fixed income and private assets with earnings upside when credit spreads widen from current tight levels. Our capital strength is now shored up to not only support resilience through market cycles, but also meaningful book growth that is less capital intensive. Investments into our distribution moats and operational effectiveness create scalable platform leverage, and as our asset mix evolves, we will deliver more consistent and stronger returns on equity over time. Challenger offers investors a combination of structural growth, differentiated origination capabilities, and capital strengths. In closing, in FY 2026, we had a year where our strategy turned into real, tangible momentum. We grew earnings and delivered returns above target.

Speaker #1: Next, we have an asset origination advantage, with proprietary access to attractive fixed income and private assets, and earnings upside when credit spreads widen from current tight levels.

Speaker #1: Our capital strength is now shored up to not only support resilience through market cycles, but also meaningful book growth that is less capital intensive.

Speaker #1: Investments into our distribution moat and operational effectiveness create scalable platform leverage. As our asset mix evolves, we will deliver more consistent and stronger returns on equity over time.

Speaker #1: Challenger offers investors a combination of structural growth, differentiated origination capabilities, and capital strength. In closing, in FY26, we had a year where our strategy turned into real, tangible momentum.

Speaker #1: We grew earnings and delivered returns above target. We wrote record annuity sales and grew the book at pace. We strengthened the balance sheet, embraced a more resilient capital framework, and have returned capital to shareholders.

Alex Bell: We wrote record annuity sales and grew the book at pace. We strengthened the balance sheet, embraced a more resilient capital framework, and have returned capital to shareholders. We enter FY27 with confidence. Thank you, and I will now hand back to Nick, and I look forward to taking your questions.

Speaker #1: We enter FY27 with confidence. Thank you, and I'll now hand back to Nick. I look forward to taking your questions. Thank you, Alex.

Nick Hamilton: Thank you, Alex. Turning now very quickly to the FY27 priorities, which build on the update we provided at Investor Day in May. We have a clear strategy and a strong platform. Our focus now is disciplined execution. On retirement leader, we are delivering on our multichannel distribution strategy, including ramping up the retirement partnerships, operationalization of Calix Re, issuances across the LiFTS in the CABN programs, and the next phase of our customer technology uplift. On investment excellence, we have an exciting program of work in the year ahead, evolving the investment program under the new capital standards, accelerating origination to support growth across CLC and Calix, and delivering the Fidante Channel Capital merger post their regulatory approvals. Finally, on our people and capability, the Fidante merger sharpens Challenger's focus on retirement income while retaining exposure to a pure-play asset management business with greater scale.

Speaker #1: And so, turning now very quickly to the FY27 priorities, which build on the update we provided at Investor Day in May. We have a clear strategy and a strong platform.

Speaker #1: Our focus now is disciplined execution. On Retirement Leader, we are delivering on our multi-channel distribution strategy, including ramping up the retirement partnerships, operationalization of Calyx Re, issuance across the LIFS and the CABN programs, and the next phase of our customer technology uplift.

Speaker #1: On investment excellence, we have an exciting program of work in the year ahead: evolving the investment program under the new capital standards, accelerating origination to support growth across CLC and Calyx, and delivering the Vedante Channel Capital merger, post their regulatory approval. For our people and capability, the Vedante merger sharpens Challenger's focus on retirement income while retaining exposure to a pure-play asset management business with greater scale.

Speaker #1: As the industry turns its attention from accumulation to retirement outcomes, we're putting more of a spotlight on the decades of advocacy and research we've undertaken with the announced launch of the Challenger Institute for Lifetime Income.

Nick Hamilton: As the industry turns its attention from accumulation to retirement outcomes, we are putting more of a spotlight on the decades of advocacy and research we have been undertaking with the announced launch of the Challenger Institute for Lifetime Income. We will continue to build a simpler, more integrated operating platform that improves efficiency and supports growth. What we are focused on today is the significant moment that Challenger is now in. Thank you to the people at Challenger who have continued to show dedication and focus on delivering for our customers and for our strategy. Thank you for your continued support and engagement with Challenger, and Alex and I will now be very pleased to take your questions.

Speaker #1: And we will continue to build a simpler, more integrated operating platform that improves efficiency and supports growth. What we're focused on today is the significant moment that Challenger is now in.

Speaker #1: Thank you to the people at Challenger who have continued to show dedication and focus on delivering for our customers and for our strategy. Thank you for your continued support and engagement with Challenger. Alex and I will now be very pleased to take your questions.

Speaker #2: Just as a reminder, we'll look to wrap up the session by 11:30. I know I'm misdoing the presentation at that time. As a matter of process, we'll take questions first in the room.

Mark Chen: Just as a reminder, we will look to wrap up the session by 11:30 AM. I know HUB24 is doing their presentation at that time. As a matter of process, we will take questions first in the room, and then we will cut to the telephone and if there is any questions online as well. So when asking a question, can you please introduce yourself, and try to ask all your questions all at once. Let us begin. Let us start off with Sid, and then we will go to Kieren and Nigel.

Speaker #2: And then we'll cut to the telephone. And if there are any questions online as well. When asking a question, could you please introduce yourself and try to ask all your questions at once?

Speaker #2: Let's begin by starting off with Sid, and then we'll go to Kieran and Nigel.

Speaker #3: Hi, this is Alex. Hi.

[Analyst] (JPMorgan): Hi. Is that Hi. Can you hear me?

Speaker #4: Can you hear me? Okay. So, that permission from JPMorgan—a couple of questions, if I can, firstly. I had a question around the 8 to 10 percent, 3- to 5-year EPS growth target.

Mark Chen: Yep.

[Analyst] (JPMorgan): All right. So that information from JPMorgan. Couple of questions, if I can. Firstly, I had a question around the 8% to 10%, 3 to 5-year EPS growth target. I just wanted to understand what is included in those assumptions. In particular, firstly, what is the base year? Basically, are your EPS hurdles actually matching that guidance? Maybe if you could just talk about the ROE expansion that should come from going into fixed income. How much of that are you seeking to give back within those assumptions? Where would you be in the PCA? If you could just help us understand that, and the asset allocation. Just what underlies those assumptions?

Speaker #4: I just wanted to understand what is included in those assumptions. In particular, firstly, what is the base year? Basically, are your EPS hurdles actually matching that guidance?

Speaker #4: And maybe, if you could just talk about the ROE expansion that should come from going into fixed income, how much of that are you seeking to give back within those assumptions?

Speaker #4: Where would you be in the PCA? If you could just help us understand that, and the asset allocation. Just what underlies those assumptions?

Speaker #1: Yeah, thanks, Sid. So, maybe just to open it up and let Alex just think about the specifics. I mean, one of the things that we're conscious of, clearly, with this result is we're putting out some new medium-term guidance.

Nick Hamilton: Yeah. Thanks, Sid. So maybe just to open it up, and Alex, just think about the specifics. One of the things that we are conscious of clearly with this result is we are putting out some new medium-term guidance, and we are in a year where we are transitioning the business, both in terms of how we think about the balance sheet, but also the business between the Challenger Life Company, Calix, and the fee business. So all of that is being considered in the 8% to 10%. As a principle, we think core earnings grows clearly quicker as a percentage rate than the operating earnings. On the ROE expansion, your point is right. There is a couple of points in it.

Speaker #1: And we're in a year where we're transitioning the business, both in terms of how we think about the balance sheet, but also the business between the Challenger Life Company, Calyx, and the fee business.

Speaker #1: So all of that has been considered in the 8 to 10. As a principle, we think core earnings growth is clearly quicker as a percentage rate than operating earnings.

Speaker #1: On the ROE expansion, your point is right. There were a couple of points in it. As we continue to grow the balance sheet, we will have operational leverage in our core business.

Nick Hamilton: As we continue to grow the balance sheet, we will have operational leverage in our core business so that the infrastructure, the humans, the capabilities that we have in Challenger will scale with the platform. Secondly, clearly, as noted, as we evolve the asset allocation over time, the fixed income allocation going up will also support higher returns per unit of equity that we are deploying. All the new business we write will be a less capital-intensive business. On the I missed the last one.

Speaker #1: So, the infrastructure, the humans, and the capabilities that we have in Challenger will scale with the platform. And then secondly, clearly, as you've noted, as we evolve the asset allocation over time, the fixed income allocation going up will also support higher returns per unit of equity that we're deploying.

Speaker #1: And so, all the new business we write will be less capital-intensive business. Sorry, I missed the last one.

Speaker #5: No, that's okay. Maybe I'll just—yeah, yep, that's all good. So maybe one of the things in thinking about that operating EPS, $8 to $10, I think it's important to look at it in conjunction with the operating ROE, because the two together are what creates the real power from the business.

Alex Bell: No, that is okay. Maybe I will just, that is all good. Maybe one of the things in thinking about that operating EPS 8 to 10, I think it is important to look at it in conjunction with the operating ROE, because the two together are what creates the real power from the business. That ROE target through the cycle, which starts at 12%, so the bottom end of the range is above what we have delivered in FY27. What we are signaling is growth in our ability to generate returns on equity whilst also delivering growing operating EPS, recognizing, as you said, that as the balance sheet shifts towards fixed income, the AUD of actual return on fixed income per AUD deployed are just clearly lower than other asset classes as a unit.

Speaker #5: That ROE target through the cycle, which starts at 12 percent—so the bottom end of the range is above what we have delivered in FY27.

Speaker #5: So what we're signaling is growth in our ability to generate returns on equity, whilst also delivering growing operating EPS, recognizing—as you said—that the balance sheet shifts towards fixed income.

Speaker #5: The dollars of actual return on fixed income per dollar of depot allowed is clearly lower than other asset classes as a unit. What we've said in terms of the PCA is that we expect in the near term and medium term to target operating at the top end of that range.

Alex Bell: What we have said in terms of the PCA is that we expect in the near term and medium term to target operating at the top end of that range. We are not reaching for risk in any way in how we think about these targets, and we have also not made any assumptions about credit spreads widening. That also presents upside from here.

Speaker #5: So we are not reaching for risk in any way in how we think about these targets, and we've also not made any assumptions about credit spreads widening.

Speaker #5: And so, that also presents upside from here.

Speaker #4: Sorry, the last part of that question was just: are you assessed on these targets, and which year are you assessed against?

[Analyst] (JPMorgan): Sorry, the last part of that question was just, are you assessed on these targets? In which year are you assessed again?

Speaker #3: Which baseline year?

Nick Hamilton: Which baseline year?

Speaker #5: Oh, the baseline year was FY26, so growth starts from FY26.

Alex Bell: The baseline year was FY26. It starts growth from FY26.

Alex Bell: The baseline year was FY 2026. It starts growth from FY 2026.

Speaker #4: And just one other question. You have a preference to operate at the upper end of your target capital range. What happens in a stress scenario?

[Analyst] (JPMorgan): Just one other question. You have a preference to operate at the upper end of your target capital range. What happens in a stress scenario? Are you signaling that you will seek growth at that stage or?

Speaker #4: I think—are you signaling that you will seek growth at that stage, or…?

Speaker #5: Yeah, it's going to be quite a different dynamic to what you've seen in Challenger, or during COVID, or the GFC, if you look back in time.

Alex Bell: Yeah. It is going to be quite a different dynamic to what you have seen to Challenger of COVID or GFCs, if you look back in time. The graph that I showed earlier, if we had a COVID-like scenario starting at the top end of our range at 1.35, you would see the impact of the stress moving us just 5 points down, which means that we would have a huge amount of capacity to lean into a crisis as credit spreads widen in order to take advantage of that opportunity, which we have never been able to do before in a crisis.

Speaker #5: So the graph that I showed earlier, if we had a COVID-like scenario starting at the top end of our range at 1.35, you would see the impact of the stress moving us just five points down. This means that we would have a huge amount of capacity to lean into a crisis as credit spreads widen, in order to take advantage of that opportunity.

Speaker #5: Which we've never been able to do before in a crisis.

Speaker #4: And that's the intention.

[Analyst] (JPMorgan): That is the intention.

Speaker #5: Absolutely.

Alex Bell: Absolutely.

Speaker #2: Kieran?

Mark Chen: Kieran

Speaker #4: Morning, Kieran. Should you, UBS? Maybe just starting on the '27 guidance on slide 22. Just interested in the non-core component you've got in that waterfall.

Kieren Chidgey: Morning, Kieren Chidgey, UBS. Maybe just starting on the 2027 guidance on slide 22. Just interested on the non-core component you have in that waterfall, Alex Bell, of AUD 0.24, which is 34% of the AUD 0.71. I know it is not guidance, the AUD 0.709 for the year ahead, but just to understand what is in that AUD 0.24, is that only achieved if the actual equity and also returns you achieved in 2026 repeat next year?

Speaker #4: Alex, of 24 cents, which is 34 percent of the 71. I know it's not guidance—the 70.9 for the year ahead—but just to understand what's in that 24 cents, is that sort of only achieved if the actual equity and auths returns you achieved in '26 repeat next year?

Speaker #5: Yeah, thanks for the question, Kieran. I guess maybe a useful point just to remind people why the new framework will be so much cleaner to understand—because we won't have normalized assumptions and normalized accruals for income, which we would then have to explain the other side of in asset experience going forward.

Alex Bell: Yeah, thanks for the question, Kieren. I guess maybe a useful point just to remind people why the new framework will be so much cleaner to understand, because we will not have normalized assumptions and normalized accruals for income, that we will then have to explain the other side of in asset experience going forward. In order for that AUD 0.24 to repeat, we would just need to meet what was previously those normalized assumptions that we had, because that is roughly what we earned in FY27. They will all come through investment returns. That is why we have got it coming down as a delta between core and operating. The other feature of that AUD 0.24 is also the returns that just no longer feature in core.

Speaker #5: So, in order for that $0.24 to repeat, we would just need to meet what were previously those normalized assumptions that we had, because that's roughly what we earned in FY27.

Speaker #5: They will all come through investment returns. That's why we've got it coming down as a delta between core and operating. And then, the other feature of that $0.24 is also the returns that just no longer feature in core.

Speaker #5: So everything that we earn—the total return from equities, infrastructure, and sort of non-fixed income-like assets—will sit in investment returns, because we know they are more lumpy in nature.

Alex Bell: Everything that we earn, the total returns from equities, infrastructure, and non-fixed income like assets, will sit in investment returns because we know they are more lumpy in nature.

Speaker #4: Okay. But that's been stripped out of the 24 already for the purpose of that diagram.

Kieren Chidgey: But that has been stripped out of the 2024 already for the purpose of that diagram.

Speaker #5: That's in the '24. That's part of the—

Alex Bell: That is in the 2024. That is part of the 2024.

Speaker #4: Okay, so last year, you had $42 million of positive liability in asset experience, which is $0.06 per share. Are you saying that's in the $71?

Kieren Chidgey: Okay. Last year you had AUD 42 million of positive liability and asset experience, which is AUD 0.06 per share. Are you saying that is in the 71?

Speaker #5: I'm saying that, because I'm not guiding to the $71 million, those returns will show up in investment returns next year to the extent to which they repeat.

Alex Bell: Well, because I am not guiding to the 71. I am saying that those returns will show up in investment returns next year to the extent to which they repeat. But some of the things that sit in normalize today come through from less predictable things. Across our whole balance sheet, we will have a range of things that happen in the year, even on our fixed income portfolio. You could have a prepayment that brings forward fees on a transaction, for example. Those are not predictable, and they will-

Speaker #5: But some of the things that sit in 'normalized' today come through from less predictable sources. Across our whole balance sheet, we will have a range of things that happen in the year, even on our fixed income portfolio.

Speaker #5: You could have a prepayment that brings forward fees on a transaction, for example, and those are not predictable. They will sit in investment returns.

Kieren Chidgey: Okay

Alex Bell: sit in investment returns.

Speaker #4: But they are included in the $0.24 for last year.

Kieren Chidgey: They are there in the AUD 0.24 for last year.

Speaker #5: Yeah.

Speaker #4: Okay. Secondly, just on the maturity profile of the business: I know the guidance for next year is a step up in the maturity rate from 23% to 26%, which seems at odds with the narrative around long-duration sales continuing to improve.

Alex Bell: Yeah.

Kieren Chidgey: Okay. Secondly, just on the maturity profile on the business. I note the guidance for next year is a step up in the maturity rate from 23% to 26%, which seems at odds with the narrative around long duration sales continuing to improve. Can you just unpack what is happening there? Equally, I would note in the stat accounts, your life insurance contract book is not really growing at the pace I would expect given the sales you are achieving there. Are there any one-off maturities that are coming through there?

Speaker #4: So, can you unpack what's happening there? And equally, I'd note that in the statutory accounts, your life insurance contract book is not really growing at the pace I'd expect, given the sales you're achieving there.

Speaker #4: Are there any one-off maturities coming through there?

Speaker #5: Yeah, thanks for the question. Look, in terms of the maturity outlook, it is just the mathematical outworking of the business that we wrote previously.

Alex Bell: Yeah. Thanks for the question. Look, in terms of the maturity outlook, it is just the mathematical outworking of the business that we wrote previously. You will remember that we had some large short-term institutional business earlier in the year that was really good business to write. We had some great short-term liquidity investment options to back that business with. Functionally, that matures next year and drives up the maturity rate. It was business that met our ROE, so it was really good business to write. I will take that stat account one on notice and, yeah, come-

Speaker #5: You'll remember that we had some large short-term institutional business earlier in the year. There was really good business to write. We had some great short-term liquidity investment options to back that business with.

Speaker #5: And functionally, that matures next year and drives up the maturity rate. But it was business that met our ROE, and so it was really, really good business to write.

Speaker #5: And I'll take that stat account question on notice.

Speaker #4: Okay. And just last question: the life contracted services margin—the unearned profit, the future profit on your life book—in the stat accounts is down 20% today on PCP. What's driving that?

Kieren Chidgey: Okay. Just last question. The life contracted services margin, so the unearned profit, the future profit on your life book in the stat accounts is down 20% today on PCP. What is driving that?

Speaker #5: I think there's a large currency element in that. That's the main driver for this year versus the prior year.

Alex Bell: I think there is a large currency element in that. That is the main driver of this year versus prior year.

Speaker #4: All right. So, Japan sits in that book.

Kieren Chidgey: All right. Japan sits in that book?

Speaker #5: GBP.

Speaker #3: GDP AUD.

Alex Bell: JPY. JPY, AUD. JPY.

Speaker #5: GDP.

Speaker #4: Okay. All right. Thanks.

Kieren Chidgey: Okay. All right. Thanks.

Speaker #2: Just Nigel?

Mark Chen: Just Nigel.

Speaker #4: Hi, it's Nigel Pisaway from Citi. Maybe just coming back to the 8% to 10% operating EPS growth CAGR. I mean, the sort of AUM path you've got sort of suggests a CAGR of around about 12% plus.

Nigel Pittaway: Hi, it is Nigel Pittaway from Citi. Maybe just coming back to the 8% to 10% operating EPS growth CAGR. The AUM path you have suggests a CAGR of roundabout 12% plus. Can you maybe just walk us through the differences? How much is yield? Did you actually say how much you were allowing for buybacks in that 8% to 10% as well?

Speaker #4: So, can you maybe just walk us through the differences—how much is yield, and then did you actually say how much you were allowing for buybacks in that?

Speaker #4: Eight to ten percent as well?

Speaker #5: Maybe I'll start with you, and then you can talk about the $15 million more broadly. So, we've only talked about buybacks this year in terms of upsizing the program to $450 million.

Alex Bell: Well, I will start with you, then you can talk about the AUD 50 million more broadly. We have only talked about buybacks in this year in terms of upsizing the program to AUD 450 million. We do expect that as we generate retained earnings, that will continue to be in excess of our requirements as we are changing the asset allocation. A modest continuation of on-market buybacks is reasonable through that outlook period, but not something we are specifically articulating. As I said before, the 8% to 12% of operating EPS also assumes that we are growing the ROE at the time. We are remixing to fixed income, growing the ROE, and delivering the 8% to 10% EPS. You have all three triangulated at the same time.

Speaker #5: But we do expect that, as we generate retained earnings, they will continue to be in excess of our requirements as we're changing the asset allocation.

Speaker #5: So, sort of a modest continuation of on-market buybacks is reasonable through that outlook period, but not something we're specifically articulating. As I said before, the 8 to 12 percent of operating EPS also assumes that we're growing the ROE at the time.

Speaker #5: So, we're remixing to fixed income, growing the ROE, and delivering the 8–10% EPS. So you've got all three triangulated at the same time.

Speaker #4: So there's an assumption of lower yield, and there's some buybacks in the $8 to $10 range, is effectively what you're saying, yeah?

Nigel Pittaway: So there's an assumption of lower yield and there's some buybacks in the 8 to 10, is effectively what you're saying, yeah? Yeah. All right. Also then, on that maturity number, I mean, obviously that, as Kieren says, is going up to 26%. I mean, moving forward, is this likely to come down now that you've got a little bit more discernment about what sales you have to take on board, et cetera? I mean, is that a realistic prospect that that should really be a peak at 26%?

Speaker #5: Yeah.

Speaker #4: All right. Also, then, sort of on that maturity number—I mean, obviously that, as Kieran says, is going up to 26 percent. I mean, moving forward, is this likely to come down now that you’ve got a little bit more discernment about what sales you have to take on board, et cetera?

Speaker #4: I mean, is that a realistic prospect—that that should really be a peak at 26%?

Speaker #3: Yeah, no, I might pick that one up. I think Alex made the comment that, in this year, we had that large institutional sales number on the Terminity book.

Nick Hamilton: Yeah. No, I might pick that one up. I think Alex made the comment that in this year we had that large institutional sales number on the term annuity book. So that was positive in terms of ROE, but clearly not positive in terms of maturity rate. As we look forward to the new channels that we've opened up, the CABNs, the first one we issued is a three-year note. The next one will be five, seven years plus. The lifetime business that we'll do through the retirement partnerships is clearly multi-decade business. So the product reinsurance that we do with Japan is in excess of that maturity rate, and then some of the new business we're looking at with them is very long-dated. So what we've been working on is consistent with a lower maturity rate.

Speaker #3: And so that was positive in terms of ROE, but clearly not positive in terms of maturity rate. As we look forward to the new channels that we've opened up—the CABNs—the first one we issued is a three-year note.

Speaker #3: The next one will be five, seven years plus. The lifetime business that we'll do through the retirement partnerships is clearly multi-decade business. And so the product solution—oh, sorry—and the product reinsurance that we do with Japan is in excess of that maturity rate.

Speaker #3: And then, some of the new business we're looking at with them is very long-dated. So, what we've been working on is consistent with a lower maturity rate.

Speaker #5: And I think the only thing to add would be, we are still— we've always said that if the businesses weren't writing and meet our ROE, we’ll write it.

Alex Bell: I think the only thing to add would be, we've always said that if the business is worth writing and meet our ROE, we'll write it. So we'll still be opportunistic about where shorter duration business makes sense. We won't not write that because of the impact that it has on the maturity profile.

Speaker #5: So we'll still be opportunistic about where shorter-duration business makes sense, and we won't avoid writing that because of the impact it has on the maturity profile.

Speaker #4: And I guess an example of that was the pickup in SIF in the fourth quarter. So, I mean, you're still saying that's difficult to write from an equity hedging point of view.

Nigel Pittaway: I guess an example of that was the pickup in SIF in the fourth quarter. So, you're still saying that's difficult to write from an equity hedging point of view. So presumably that wasn't equities, is that right to-

Speaker #4: So presumably that wasn't equities, is that right too?

Speaker #5: Is that on the index plus? Yeah, exactly. Yeah.

Alex Bell: That is on the index class.

Nick Hamilton: Yeah, the index class.

Alex Bell: Yeah, exactly, yeah.

Speaker #4: And that was just opportunistic again. But it's short-dated, is it?

Nigel Pittaway: Then that was just opportunistic again.

Alex Bell: Right.

Nigel Pittaway: But it is short-dated, is it?

Speaker #5: It is short-dated. Yeah. So, a lower margin as a result, but meeting the ROE.

Alex Bell: It is short-dated, yeah. And lower margin as a result, but meets the ROE.

Speaker #4: Okay, thank you.

Nigel Pittaway: Okay, thank you.

Nick Hamilton: Yep. We will just cut to Richard, and then we will go to the phones.

Speaker #2: We'll just cut to Richard, and then we'll go to the phones.

Speaker #4: Sorry, last question around the difference between core EPS growth and operating EPS growth. But I’m interested in the midpoint that we're talking about this year: 6% core EPS growth. The medium-term target is 8 to 10%.

[Analyst]: Sorry, last question around the difference between core EPS growth and operating EPS growth. I am interested in the midpoint that we are talking about this year is 6% core EPS growth target, the medium-term target is 8% to 10%. Should we anticipate the core EPS is going to accelerate into that target, or is the assumption that the investment book is actually going to drive the earnings acceleration going forward?

Speaker #4: Should we anticipate that the core EPS is going to accelerate into that target, or is the assumption that the investment book is actually going to drive the earnings acceleration going forward?

Speaker #5: Yeah, that's a great question. Thank you. So, stepping back, the growth in core EPS from '26 to '27 is really strong at 6 percent, and that's materially up on the growth from '25 to '26.

Alex Bell: Yeah, that is a great question. Thank you. Stepping back, the growth in core EPS from 2026 to 2027, really strong, 6%, and that is materially up on the growth from 2025 to 2026. We expect core earnings to grow as a percentage of our total operating profit as the asset mix changes. You should start to see that core EPS, which we will provide year-on-year guidance on, accelerate exactly into that operating EPS target that we have provided.

Speaker #5: We expect core earnings to grow as a percentage of our total operating profit as the asset mix changes. And so you should start to see that core EPS, which we will provide year-on-year guidance on, accelerate exactly into that operating EPS target that we've provided.

Speaker #4: Okay.

[Analyst]: Okay. That is probably, go to the phones.

Speaker #2: That's probably good. Operator, can we please cut to the telephone now? Can we go to the first question?

Nick Hamilton: Operator, can we please cut to the cellphone now? Can we go to the first question?

Speaker #1: Your first question comes from Andrew Buncombe with Macquarie.

Operator 2: Your first question comes from Andrew Buncombe with Macquarie.

Operator: Your first question comes from Andrew Buncombe with Macquarie.

Speaker #6: Hi, team. Thanks for taking my questions. Just the first one: I'm interested in your FY27 EPS guidance. Out of interest, how much of your $6 billion saving target are you assuming is sold in FY27 in that EPS '27 guidance?

Andrew Buncombe: Hi, team. Thanks for taking my questions. Just the first one, just interested in your FY27 EPS guidance. Out of interest, how much of your AUD 6 billion saving target are you assuming is sold in FY27 in that EPS27 guidance? Thanks.

Speaker #6: Thanks.

Speaker #3: Yeah, I mean, when you think about the profit signature on new business, any business written in a year has a reasonably small impact on the profit for that given year.

Nick Hamilton: Yeah. When you think about the profit signature on new business, any business written in-year has a reasonably small impact on the profit for that given year. So because it fits into the broader book, the EPS guidance is built up of the in situ book, more than impacted by a program of sales, be it CABN or other sales.

Speaker #3: So, because it fits into the broader book, the EPS guidance is built up from the in-situ book, more than impacted by the program and sales, be it CABN or other sales.

Speaker #6: Yep. And then the second one was just, how should we be thinking about the group tax rate going forward as you start to write more business out of Bermuda?

Andrew Buncombe: Yep. The second one was just how should we be thinking about the group tax rate going forward as you start to write more business out of Bermuda? Thanks.

Speaker #6: Thanks.

Speaker #5: Yeah, thanks, Andrew. We've not been explicit about an effective tax rate this year, and that's because it's come down closer to the 30 percent that you'd expect.

Alex Bell: Yeah. Thanks, Andrew. We've not been explicit about an effective tax rate this year, and that's because it's come down closer to the 30% that you'd expect. It's still slightly elevated for the one remaining Challenger Capital Notes that we have that's non-deductible. So it's 30% plus a bit. In the near term, the volume of business written through Calix Re is relatively modest in the context of the overall group, so it doesn't provide much of a driver in terms of a reduction in that ETR. So just above 30% is the right way to think about it.

Speaker #5: It's still slightly elevated for the one remaining Challenger capital note that we have that's non-deductible. So it's sort of 30 percent plus a bit.

Speaker #5: In the near term, the volume of business written through Calyxree is relatively modest in the context of the overall group, so it doesn't provide much of a driver in terms of a reduction in that ETR.

Speaker #5: So, just above 30 percent is the right way to think about it.

Speaker #6: Maybe I should ask the question in a different way. What's the Bermudan tax rate that you expect to get?

Andrew Buncombe: Maybe I should ask the question in a different way. What's the Bermudan tax rate that you expect to get?

Speaker #5: So we will, yeah. So we will write— we will pay tax in the U.S. at 21 percent, out of Calyxree.

Alex Bell: Yeah. So we will pay tax in the US at 21% out of Calix Re.

Speaker #6: That's it from me. Thank you.

Andrew Buncombe: That's it from me. Thank you.

Speaker #1: Your next question comes from Julian Burganza with Goldman Sachs.

Operator 2: Your next question comes from Julian Braganza with Goldman Sachs. Good morning, guys. Just a quick one. In terms of the AUD 0.47 a share core EPS, what does that translate to for operating EPS for FY27?

Operator: Your next question comes from Julian Braganza with Goldman Sachs.

Speaker #7: Good morning, guys. Just a quick one—in terms of the $0.47 per share core EPS, what does that translate to for operating EPS for FY27?

Julian Braganza: Good morning, guys. Just a quick one. In terms of the AUD 0.47 a share core EPS, what does that translate to for operating EPS for FY27?

Alex Bell: So we haven't done that walk, Julian. That's because we are deliberately not guiding to what investment returns are in any one year. However, what we have done in the analyst pack is we've provided some ranges around what we target as asset returns on each of our asset classes. Then you'll have liability experience as well. It's one of the good things about this new framework is that the things that we guide to are things that should be much easier to model, and are predictable, rather than something that represents more of a soup of the overall balance sheet.

Speaker #5: So, we haven't done that walk, Julian, and that's because we are deliberately not guiding toward investment returns in any one year. However, what we have done in the analyst pack is we've provided some ranges around what we target as asset returns on each of our asset classes.

Speaker #5: But then you'll have liability experience as well. So it's one of the good things about this new framework— the things that we guide to are things that should be much easier to model.

Speaker #5: And are predictable, rather than something that represents more of a soup of the overall balance sheet.

Speaker #2: And just for reference, that's page 15 of the analyst pack for those that are looking for those total return assumptions.

Nick Hamilton: Just for reference, that's page 15 of the analyst pack for those that are looking for those total return assumptions.

Speaker #7: Got it. No, that's clear. And then just a second question. In terms of the ROE guidance, just wondering, what is the timeline to kind of get to the midpoint of that range?

Nick Hamilton: Got it. No, that's clear. Just a second question. In terms of the ROE guidance-

Julian Braganza: Got it. No, that's clear. Just a second question. In terms of the ROE guidance. Just wondering, what is the timeline to get to the midpoint of that range? Also just the levers that can take you towards the top end of that guidance range, just to encapsulate the upside potential for the business to get to 14%. Just given that you have now taken out the cash rate benchmark, and how this moves. Just want to understand how you are thinking about that. Cheers. Thanks.

Julian Braganza: Just wondering, what is the timeline to get to the midpoint of that range? Also just the levers that can take you towards the top end of that guidance range, just to encapsulate the upside potential for the business to get to 14%. Just given that you have now taken out the cash rate benchmark, and how this moves. Just want to understand how you are thinking about that. Cheers. Thanks.

Speaker #7: And also, just the levers that can take you towards the top end of that guidance range, just to encapsulate the upside potential for the business to get to 14%.

Speaker #7: Just given that you've now taken out the kind of cash rate benchmark and how this moves, I just want to understand how you're thinking about that.

Speaker #7: Cheers, thanks.

Speaker #5: Yeah, thank you. So from a timing perspective, we're thinking about them as sort of 3- to 5-year targets. And it will depend on the mix of business that we write, and therefore the mix of assets and the types of fixed income assets that we can originate.

Alex Bell: Yeah, thank you. So from a timing perspective, we are thinking about them as three to five-year targets, and it will depend on the mix of business that we write and therefore the mix of assets and the types of fixed income assets that we can originate. So when you think about levers, the two most material ones to call out will be how the credit spreads move in that period, as well as the speed to execute our buyback. Those would be the two.

Speaker #5: So, when you think about levers, really the two most material ones to call out will be how the credit spreads move in that period, as well as the speed to execute our buyback.

Speaker #5: Those would be the two.

Speaker #2: And just as a reminder again, I mean, in FY27, Alex did call out the gain on sales associated with the merger between Verdanta and Channel when that completes.

Mark Chen: Just as a reminder again, in FY27, Alex Bell did call out the gain on sale associated with the merger between Fidante and Channel when that completes. So that will contribute in terms of the operating ROE that we generate next year or this year.

Speaker #2: So, that will contribute in terms of the operating ROE that we generate next year—or this year.

Speaker #7: Got it. And just one last question in terms of the FY27 outlook: what do you assume for those transition expenses of about $8.5 million?

Julian Braganza: Got it. Just a last question in terms of the FY27 outlook. What do you assume for those transition expenses of about 8.5 million, I think, in FY26? Any color just around the margin, just from mix impacts. I know you have increased your allocation to investment grade to 80%, and also just on spreads. How are we thinking about that margin story? As much as you can give us just on the existing basis, and also just that expense commentary. Thanks.

Julian Braganza: Got it. Just a last question in terms of the FY27 outlook. What do you assume for those transition expenses of about 8.5 million, I think, in FY 2026? Any color just around the margin, just from mix impacts. I know you have increased your allocation to investment grade to 80%, and also just on spreads. How are we thinking about that margin story? As much as you can give us just on the existing basis, and also just that expense commentary. Thanks.

Speaker #7: I think in FY26. And any color just around the margin, just for mix impacts, and then if you increased your allocation to investment grade to 80%.

Speaker #7: And also, just on spends, how are you thinking about that margin story? As much as you can give us, just on the existing basis.

Speaker #7: And also, just that expense commentary. Thanks.

Speaker #5: Yeah, so I think your first question was around the transition expenses. As a reminder, when we entered the deal with State Street to provide our investment operations, what we said was that for a period of transition through that project, we would need to be carrying the costs associated with running the old platform too.

Alex Bell: Yeah. So I think your first question was around the transition expenses. As a reminder, when we entered the deal with State Street to provide our investment operations, what we said was for a period of transition through that project, we would need to be carrying the costs associated with running the old platform too. So we showed those as a completely separate line item called transition expenses, which are about AUD 8 to 10 million a year. When that project completes, most to all of those expenses go away. We will need a small retained team our side to manage the relationship and a small number of services, but most of that cost disappears at the end of FY27. So you can think about that as a step change in our cost base at that point. Then I think your other question was around margin.

Speaker #5: And so, we showed those as a completely separate line item called transition expenses, which are about $8 to $10 million a year. When that project completes, most or all of those expenses go away.

Speaker #5: We will need a small, retained team aside to manage the relationship and a small number of services, but most of those costs disappear at the end of FY27.

Speaker #5: So you can think about that as a step change in our cost base at that point. And then I think your other question was around margin.

Speaker #5: And like the old framework, the new framework won’t provide guidance around margin outlook either. As our fixed income book changes, and as our balance sheet changes, we will have more in the way of fixed income.

Alex Bell: Like the old framework, the new framework won't provide guidance around margin outlook either. As our fixed income book changes, we will have more, as our balance sheet changes, we'll have more in the way of fixed income. We're not calling out a change today in terms of our mix between investment grade and sub-investment grade. So, nothing to speak to on that specifically today. But you'll be able to see in the detail that we've provided what our spread margin looks like through time. You can see very clearly over the last few years the impact that credit spreads has had on that spread margin, which today gets hidden quite a bit in the way we try and articulate the COE margin. So it's much clearer and more transparent.

Speaker #5: We're not calling out a change today in terms of our mix between investment grade and sub-investment grade, so there's nothing to speak to on that specifically today.

Speaker #5: But you'll be able to see in the detail that we've provided what our spread margin looks like through time. And you can see very clearly, over the last few years, the impact that credit spreads have had on that spread margin, which today gets hidden quite a bit in the way we try and articulate the COE margin.

Speaker #5: So it's much clearer and more transparent. But we won't guide to it specifically because, as I say, achieving a margin on fixed income in and of itself is not the goal.

Alex Bell: But we won't guide to it specifically because, as I say, achieving a margin on fixed income in and of itself is not the goal. It's the return on the capital that we can deploy that's the most important metric.

Speaker #5: It's the return on the capital that we can deploy that's the most important metric.

Speaker #7: Great, thanks so much for that.

Julian Braganza: Great. Thanks so much for that.

Speaker #1: Your next question comes from Simon Fitzgerald with Jefferies.

Operator 2: Your next question comes from Simon Fitzgerald with Jefferies.

Operator: Your next question comes from Simon Fitzgerald with Jefferies.

Speaker #8: Hi there. I'm just wanting to delve into a little bit more detail in terms of the COE margin between the halves, in terms of the 295 to the 317 step up.

Simon Fitzgerald: Hi there. I just wanted to delve into a little bit more detail in terms of the COE margin between the halves in terms of the 295 to the 317 step-up. Can you break that down just in terms of how much of that related to fixed income and how much related to the other asset classes?

Speaker #8: Can you break that down just in terms of how much of that related to fixed income and how much related to the other asset classes?

Speaker #5: Yeah, thanks for the question, Simon. So I sound a bit like a broken record, but when we talk about, when we think about COE, the first thing to say always is that we write the business to meet the ROE.

Alex Bell: Yeah. Thanks for the question, Simon. I thought I'd sound a bit like a broken record, but when we think about COE, the first thing to say always is that we write the business to meet the ROE. Having said that, when you look at the two halves, the trends between the H1 and the H2 is very similar to the trend that we saw last year between the H1 and H2 of FY25. So there is seasonality to how that COE margin plays out, not least from the timing of our catastrophe bond distributions, as well as just tight credit spreads broadly playing out across the two. So it really is just timing and seasonality.

Speaker #5: Having said that, when you look at the two halves, the trends between the first half and the second half are very similar to the trend that we saw last year between the first and second halves of FY25.

Speaker #5: So there is seasonality to how that COE margin plays out, not least from the timing of our catastrophe bond distributions, as well as just tight credit spreads broadly playing out across the two.

Speaker #5: So, it really is just timing and seasonality. If you step back from just one half and look at it year on year, FY26 is a bit lower than FY25, and that's that tight credit spread dynamic.

Alex Bell: If you look at it, step back from just one half and look at it year-on-year, FY26 is a bit lower than FY25, and that's that tight credit spread dynamic.

Speaker #8: Okay. Thank you.

Simon Fitzgerald: Okay. Thank you.

Speaker #1: Your next question comes from Andrew Adams with Barron Joey.

Operator 2: Your next question comes from Andrew Adams with Barrenjoey.

Operator: Your next question comes from Andrew Adams with Barrenjoey.

Speaker #2: Yeah. Good morning. Just on the investment return line—so I guess that's below core earnings, but it's still in operating earnings, which is our medium-term guidance.

Andrew Adams: Yeah, morning. Just on the investment return line. I guess that is below core earnings, but it is still in operating earnings, which is our medium-term guidance. How are we thinking about those investment returns over the three to five-year guidance? Do we expect that to run down significantly?

Speaker #2: So how are we thinking about those investment returns over the 3- to 5-year guidance? Do we expect that to run down significantly?

Speaker #5: Yeah, thanks, Andrew. So, probably two things to say. Your characterization is exactly right. So, investment returns sit outside core earnings, but are very much part of operating returns.

Alex Bell: Yeah. Thanks, Andrew. Probably two things to say. Your characterization is exactly right. Investment returns sits outside core earnings, but very much part of operating returns. What we are running the business to. Those returns are really important. We expect the contribution from investment returns to come down over time because core earnings should be going up as we remix the balance sheet towards fixed income. In terms of what we should be generating on the asset classes that sit in investment returns, as Mark said, we have got that in the analyst pack in terms of target total returns on those assets.

Speaker #5: So, we're running the business, too. So those returns are really important. We expect the contribution from investment returns to come down over time, because core earnings should be going up as we remix the balance sheet towards fixed income.

Speaker #5: And in terms of what we should be generating on the asset classes that sit in investment returns, as Mark said, we've got that in the analyst pack in terms of target total returns on those assets.

Speaker #2: But does it get to the end of the 5 years? Is my investment return line assuming I can hit that $50 billion growth, everything—is my investment return line close to zero then?

Andrew Adams: But as I get to the end of the 5 years, is my investment return line, assuming I can hit that 50 billion growth, everything, is my investment return line close to zero then?

Speaker #5: It shouldn't be zero. No, the whole point is that investment returns will now contribute positively to the overall result. We're not starting from a minus like the old asset experience used to.

Alex Bell: It shouldn't be zero, no. The whole point is that investment returns will now contribute positively to the overall result. We're not starting from a minus like the old asset experience used to. And we will always have a role for non-fixed income assets to play on the balance sheet. So they will just be proportionately smaller. But as the balance sheet grows, for all the way up at 50 billion, you probably don't need to sell any of the non-fixed income assets that we have today in a proportionate sense, for how much we would hold in non-fixed income.

Speaker #5: And we will always have a role for non-fixed income assets to play on the balance sheet. So, they will just be proportionately smaller, but as the balance sheet grows, all the way up at $50 billion, you probably don't need to sell any of the non-fixed income assets that we have today, in a proportionate sense.

Speaker #5: For how much we would hold in non-fixed income—definitely not zero.

Andrew Adams: Great, thanks.

Alex Bell: That's not zero.

Speaker #1: That does conclude our phone questions. I'll now hand back for closing remarks.

Operator: That does conclude our phone questions. I will now hand back for closing remarks.

Speaker #3: Okay. Are there any final questions in the room before we close off? Sorry, back to Richard.

Mark Chen: Okay. Are there any final questions in the room before we close off? Back to Richard.

Speaker #4: Sorry. Do we actually have an investment return number for FY26 somewhere? That is going to be if we're dividing up forward earnings composition into core and investment income, we've sort of got a sense of core, but is there an investment return number somewhere?

[Analyst]: Sorry. Do we actually have an investment return number for FY26 somewhere? That is going to be, if we are dividing up forward earnings composition into core and investment income, we have sort of got a sense of core, but is there an investment return number somewhere?

[Analyst]: Sorry. Do we actually have an investment return number for FY 2026 somewhere? That is going to be, if we are dividing up forward earnings composition into core and investment income, we have sort of got a sense of core, but is there an investment return number somewhere?

Speaker #5: Yes, there is. So, we've provided a spreadsheet of FY26, FY25, and FY24.

Alex Bell: Yes, there is. We have provided a spreadsheet of FY26, FY25, and FY24.

Alex Bell: Yes, there is. We have provided a spreadsheet of FY 2026, FY25, and FY24.

Speaker #4: Okay, so that was sent Friday? Right. Okay.

[Analyst]: Okay. So that was sent Friday?

Alex Bell: Yep.

[Analyst]: Right. Okay.

Speaker #3: That can be accessed through the Challenger shareholder website. The link is in the media release.

Mark Chen: That can be accessed through the Challenger shareholder website.

[Analyst]: Okay.

Mark Chen: The link is in the media release.

Speaker #4: Okay, I didn't get to that. Thanks.

[Analyst]: Okay. I didn't get to that. Thanks.

Speaker #3: All right. So that wraps up all the questions for today. Thank you for attending. Both Irene and I were on the phones. If you've got any further questions, thank you for your continued interest in Challenger.

Mark Chen: All right, so that wraps up all the questions for today. Thank you for attending. Both Irene and myself are on the phones if you've got any further questions. Thank you for your continued interest in Challenger, and see you next time.

[Analyst]: Thank you.

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