Challenger Limited (CGF) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Challenger limited Half Year Results. [Operator Instructions] I would now like to turn the conference over to Mr. Mark Chen, General Manager, Investor Relations. Please go ahead.

Good morning, everybody, and welcome to those in the room and online to Challenger's 2024 half year results briefing. As mentioned before, I'm Mark Chen, Challenger's General Manager of Investor Relations. We're coming to you today from 60 Martin Place in Sydney. Before we begin, I'd like to acknowledge the Gadigal People of the Eora Nation, traditional custodians of the land on which we are hosting this event today and pay my respects to Elders past, present and emerging. Today's presentation will be followed by a Q&A session. You can ask a question either in the room in person, via online portal or via the telephone. Today's presentation will be brought to you by our Chief Executive Officer, Nick Hamilton; and Chief Financial Officer, Alex Bell. I'll now pass over to Nick to get us on the way.

Thank you, Mark, and good morning to everyone for joining us today. So today, as Mark noted, I'm joined by our CFO, Alex Bell, to deliver our 2024 interim financial results. Challenger starts 2024 in great shape with significant growth momentum. Over the last 2 years, we've positioned the business to take a broader stance in retirement. Our achievements this half demonstrate that we are delivering on that opportunity. Our focus on driving longer duration, more profitable business is improving returns. Broadening our customer reach has delivered early wins, including retirement partnerships with Aware Super, TelstraSuper and Commonwealth Super Corporation. Funds Management has continued to innovate and expand its offering, launching new investment strategies. Our strategic partnership with MS&AD and Apollo are stronger than ever. And the transformation program we're announcing today will help drive growth, deliver efficiently -- deliver efficiencies and importantly, make it incredibly easy for our customers to do business with us. We have executed all these initiatives in service of delivering on Challenger's purpose, to provide customers with financial security for a better retirement. Today, Alex and I will cover the key drivers of our first half results, our transformation program and how it will support our broader strategic initiatives and our outlook. I'm extremely pleased with our strong performance in the first half that reflects the team's unwavering focus on executing our growth strategy. Group normalized net profit increased to $290 million, driven by strong performance in Life. Group assets under management reached $117 billion as our leading active management capability saw significant growth. Life performed exceptionally with outstanding growth in Lifetime annuity sales, reflecting the attractiveness of our offering and the demand for Retirement Lifetime Income. Pleasingly, as we focus on driving longer term, more profitable business, 90% of new business and annuity sales with the terms of 2-years or more. We remain well capitalized with a more diversified balance sheet with Challenger Life holding 1.5x the minimum regulatory capital. Group ROE was up 270 basis points to 15%, benefiting from a considerable improvement in Life's returns. Later in this morning's presentation, Alex will take you through our pathway to delivering higher sustainable ROE. Reflecting confidence in our business, the Board determined a fully franked interim dividend of $0.13 per share, an increase of 8%. This result emphasizes the strength of our business as we leverage our retirement and investment expertise and it positions us extremely well for the second half. Challenger is a unique business and we've built a reputation as a leader in retirement income and active management. We will continue to leverage that reputation and meet more demand for a broader range of retirement income solutions and across more channels. Our strategy will drive growth by broadening our customer base through a multichannel approach, providing solutions that leverage our core capabilities and our strength in investment management. The premise of our strategy is clear, and that is to position Challenger as the trusted partner in retirement for retirees, advisers and institutional clients. To help achieve this, we are diversifying our Life business in a material way. Retail has always been core to our offering, and we'll expand our presence across the retail adviser market with a focus on Lifetime and long tenure business. At the same time, we will deliver a broad range of initiatives for institutional clients. Building on our recent successes, we will work with Superfunds to develop solutions that meet their members' needs in retirement. We continue to see a significant opportunity in the defined benefit market as an increasing number of institutions start looking to derisk their in-pension phase DB liabilities. Our long-standing partnership with Mitsui Sumitomo Primary is a great example of our ability to provide reinsurance offshore, and we'll seek to build on that success more broadly. We will leverage our core capability in retirement income, in yield and active management to deliver a broad range of offerings, multichannel enabled by great customer technology. Building on our decades of experience, we will lead in secure innovative Lifetime income solutions that are tailored to the specific needs of retirees. In Funds Management, we have our leading in-house yield capability and a highly successful multi-affiliate platform. We'll utilize our expertise to drive credit origination for Life, continue our exceptional growth in wealth markets, expand and strengthen our relationships with institutional clients and pursue our focused international growth strategy. There are also exciting opportunities and alternatives. We have expanded our range of capabilities and we will continue to launch new strategies into the market. Our capability across investment management and asset origination remains central to Challenger's success. Across the business, we'll deliver a great customer experience and simplify our advisers and institutions engage with us. That will, in turn, drive growth. As we look ahead, our business model positions us extremely well for the future. This half, we've made great progress in delivering on our strategic priorities. We executed new partnerships of superannuation funds delivering both defined benefit derisking and retirement income solutions. Our highly successful reinsurance with MSP has expanded to include the reinsurance of yen annuities and early signs from broadening that relationship are very promising. Our investment in establishing a capital markets team is off to a great start with the team successfully completing a capital raise for our partner, Elanor, in commercial office. Throughout the half, our team conducted over 60 roadshows, workshops and webinars to help advisers understand how our innovative offering can help their clients in retirement. In Funds Management, we brought new alternative offerings to the market to meet growing client demand led by Apollo's aligned alternative strategy. We also expanded our strategic relationship with Apollo to include an origination partnership. This will provide our Life business with greater access to Apollo's global investment management capability, including privately-originated global credit and alternative investments. Our domestic credit platform Challenger Investment Management has a well-owned reputation and invested over $3 billion in the half, almost 1/3 of which was directly originated. We are also delighted to launch our new brand sponsorships, including partnerships at PGA Australia and more recently the Melbourne International Flower & Garden Show. This provides an excellent platform to enhance our brand, showcase our credentials and engage more directly with our target audience. This morning, I've outlined our exciting growth plans that will see us broaden our reach, deliver more secure income offerings and leverage our investment expertise. To help achieve these ambitions, we have entered into a long-term technology partnership with Accenture who has a track record in delivering transformation programs at international insurance companies. Challenger and Accenture spent 12-months building and understanding of each other's businesses and areas for commercial collaboration. Accenture will run our technology platform and modernize our customer technology, replacing our core annuity registry system with ALIP, that is used by insurance firms across the world. This partnership will be a game changer for Challenger. It will give us access to Accenture's world-class technology, including automation, AI and will support our long-term success in a rapidly evolving technology landscape. It will be much easier to do business with Challenger. Customers, advisers and institutional clients will receive a seamless digital experience. Customers will be able to fully originate services online, advisers will write new business more efficiently and we'll improve how we integrate our offering with superannuation funds and the retail platform market. With an improved service, the time to bring new innovations to market will be significantly improved. And the platform will be able to scale to support business growth, delivering productivity gains and efficiencies through automation and straight-through processing. The partnership is expected to deliver $90 million of operating savings over 7-years. The opportunity for Challenger to take a broader stance in retirement is extraordinary. Our new transformation partnership will provide the tech capability to support our growth ambitions, meet our clients' evolving needs and deliver significant efficiencies. This half, we have hit milestones across the business, at the same time is driving a strong financial performance. I will now pass to Alex, who will provide the details of our first half result.

Thank you, Nick, and a very good morning, everyone. Today's result clearly shows the benefit we're starting to realize from our strategy to focus on longer duration and higher quality sales. We have experienced both margin and ROE expansion and with strong cost control, we are well positioned to finish the year in the top half of our guidance range. Before getting into the detail, I'd like to remind everyone that Challenger adopted AASB 17, the new accounting standard for insurance contracts from the 1st of July this year. The new standard does not change the economics of our underlying business. Normalized profit, cash generation and dividend policy are also all unchanged. It does, however, affect the timing of insurance earnings recognition but not the overall quantum. As required by the standard, we've restated last year's statutory result and also provided relevant restatements to investment experience in our results for comparative purposes. This half, we have also excluded the bank from our normalized result given its pending sale. Looking at our financial performance for the half. We've delivered a strong result with the benefits from executing our strategy, emerging in our financial performance. We are seeing an improvement in the quality of our Life book, which will support higher long-term profitability. In the first half of FY '24, normalized net profit before tax was $290 million, an increase of 16%, driven by strong growth in Life earnings, partially offset by lower funds management earnings. Normalized net profit after tax was $201 million, an increase of 20%, slightly above the increase in pre-tax earnings due to a lower effective tax rate. Statutory net profit after tax was up 80% to $56 million and includes investment experience losses of $145 million. Pleasingly, we continue to narrow the gap towards our normalized ROE target with the pre-tax return on equity for the half of 15%, up 270 basis points, and I'll provide more detail on both the investment experience and our ROE in a moment. Group assets under management increased 18% to $117 billion, with growth driven by net inflows in both our Life and Funds Management businesses. I'd like to now turn to our earnings drivers. Income increased 9% to $447 million and was driven by strong growth in Life, partially offset by lower Funds Management fee income. Life income or normalized cash operating earnings increased by 13%, benefiting from both COE margin expansion and growth in investment assets. In Funds Management, net fee income was down 1% with lower fund-based fees, partially offset by higher performance fees. I'm really pleased with the cost discipline shown this half in the face of a challenging inflationary environment. Group expenses decreased 2% to $155 million or if I exclude the bank from last year, they increased a modest $4 million or 4%. This increase was largely due to wage inflation and higher Funds Management administration costs. The group's cost-to-income ratio improved 390 basis points to 34.6%, exceeding our target of 35% to 37%. For the full year, we expect to come in at the bottom end of the cost-to-income target as we continue to capture scale benefits and maintain strong cost control. Turning to our return on equity. A key priority for me since taking this role a year ago has been to improve the returns of the business and bridge the gap to our ROE target, which remains set at the RBA cash rate plus 12%. I remain confident we can achieve this target and have set out on this slide some of the levers that will contribute to achieving it. Group ROE increased 270 basis points to 15%. Improvement in ROE was supported by stronger Life earnings and a Life ROE well above the group target at 18.1%, up 330 basis points from last year. Life's ROE continues to improve as the benefits of higher rates season through. As we look forward, we have a clear pathway to improving the group ROE further. The gap between our ROE and our target was 120 basis points for the half compared to 250 basis points 6-months ago. I'm confident we can bridge the ROE gap in the near term through a range of both cost and income initiatives that include momentum in our Life business as we continue to execute our strategy to extend the duration of sales, increased contribution from the funds management business driven by FUM growth and new revenue opportunities, cost efficiencies related to Artega and operating savings mainly generated by the transformation partnership we've announced today. Looking at the Life business performance in more detail. Life delivered an exceptional half yearly performance, with earnings before interest and tax increasing 15% to $302 million. Our performance reflects strong normalized cash operating earnings growth of 13%, with both margin expansion and higher investment assets. Last year, we outlined our strategy to improve the quality of the Life book through focusing on growing longer-duration annuity sales. This is enabling us to expand our investment horizon and support higher margins and ROE. The Life result clearly shows the emerging benefits of the strategy. Let's now look closer at the Life investment portfolio. There's been no change to our risk appetite, and we continue to match assets and liabilities. Fixed income represents 74% of Life's investment portfolio. The absolute value of the fixed income portfolio is stable, but proportionately down 2% in the half as a result of new investments into alternatives. Within the fixed income portfolio, investment grade represents 77%, which is above our target of 75%, and the average credit rating of the portfolio is A. Fixed income continues to perform well with only 15 basis points of default experience in the half across 2 new issuer names, which is within our normalized assumption. Alternatives represent 12% of the investment portfolio and comprise a group of diversified absolute return funds and general insurance exposures. These are less correlated to both equity and credit markets and the absolute return funds provide a source of liquid capital and financial flexibility. The right-hand side of the slide includes investment experience for the half or the fair value movements on asset valuations as well as net new business strain, which will unwind over time. Total pre-tax investment experience was a loss of $202 million, of which $58 million was net new business strain with the remaining $144 million combined asset and liability valuation movements. The total asset movement was largely driven by unrealized property valuation movements from cap rate expansion. In the period, we revalued 100% of our portfolio in accordance with our policy. The portfolio was revalued downward by 3%, which included office revaluations downwards of 5%. Pleasingly, occupancy remains high at 92% and we're seeing positive leasing activity. Also within asset valuation investment experience, there are gains in the fixed income portfolio from tighter credit spreads and these offset the property revaluation from cap rate expansion. We will continue to maintain our diversified investment portfolio. Life COE margin continues the positive trajectory it has been on over the last 5 halves. At 3.04%, the COE margin was 28 basis points higher than this time last year and 16 basis points higher for the half. This is a significant improvement. For the half, the product cash margin expanded 7 basis points, supported by higher yields on fixed income and our disciplined approach to annuity pricing. Return on shareholder funds increased 9 basis points, also reflecting higher fixed income yields. This is a strong margin outcome with our longer tenor sales, enabling investment in longer duration and higher yielding investments. Now looking at Life sales. You would be familiar with this next slide on sales composition and tenor, which shows the progress we are making, shifting sales to longer durations. Over the last 2 years, we have been successful in converting 1 billion of 1-year fixed term annuity sales into durations of 2 years or more. Total Life sales of $5.3 billion were 4% down on the first half as we deliberately did not pursue short lower-margin shorter tenor business. Annuity sales of $3.3 billion were supported by rising demand for guaranteed income with record Lifetime annuity sales of $1.1 billion, up 190%. This included a group lifetime annuity policy to the value of $619 million from Aware Super and outstanding retail Lifetime sales that grew 25% to $469 million. Fixed term annuity sales of $1.9 billion were lower as Challenger maintained its disciplined approach to shorter durations. In particular, institutional term sales, which are typically lower margin, were down 51%. Our focus on driving higher longer duration sales is reflected through 90% of new business annuity sales being greater than 2 years compared with only 34% 2 years ago. Japanese annuity sales of $364 million represented 67% of the annual minimum budget with the commencement of Japanese yen denominated annuities, delivering promising results. Index Plus sales remained strong at $2 billion and include a new $500 million 5-year investment from a significant insurance client. This demonstrates the unique and compelling proposition to our institutional clients and our ability to extend its tenor. Looking now at Life net flows and book growth. This chart shows Life net flows of $328 million for the half across all channels, delivering total Life book growth of 1.7%. Annuity net flows were $508 million for the half or 3.6% annuity book growth. Considering there was over $435 million of 1-year institutional term annuity outflows experienced in the half, this is a really strong result. Excluding those institutional term annuities, the annuity book growth was 6.8%. As a result of our focus on longer duration business, the tenor of new business increased significantly to 8.9 years, up from 5.4 years. The benefit of a greater proportion of longer duration sales is starting to emerge in a materially lower maturity rate, which will support future book growth. Total annuity maturities this half were $4.9 billion or 17% of annuity liabilities, and this will improve to only 9% in the second half of the year. Turning now to the Funds Management business. Funds Management EBIT was down 7% to $29 million due to changes in business mix and higher expenses reflecting increased investment administration costs from higher trading volumes. Average FUM increased 7% to $100 billion. Closing FUM grew more strongly by 15% to $108 billion, reflecting strong institutional net inflows in Fidante, particularly in the second quarter, partially offset by the derecognition of FUM following the sale of Challenger's Australian real estate business to Elanor. Reflecting this change in mix, the net income margin fell 1.3 basis points to 17.4%. This result highlights the resilience of the franchise and the strong growth potential. Looking now more closely at Funds Management net flows. Net flows this half were $5.6 billion with a particularly strong second quarter. Institutional net flows were $6.5 billion across both equity and fixed income strategies whilst retail net flows were softer with an outflow of $0.9 billion. The FUM movement for the half included over $4 billion of positive market movements. Challenger Life remains well capitalized with a PCA ratio of 1.5x, which reflects changes in the investment portfolio and lower property revaluations. The PCA ratio is well above both APRA's minimum requirement and our own internal capital targets. Reflecting the strength of the business and our commitment to shareholder returns, the Board determined a fully franked interim dividend of $0.13 per share, up 8% on last year. I'll now provide guidance -- I will now provide an update on our FY '24 guidance. Today, I'm pleased to announce we expect to be in the top half of our FY '24 guidance range for normalized net profit before tax. This reflects continued momentum that we're seeing in the Life business, which is expected to carry into the second half and a commitment to remain disciplined on costs. As a result of the transformation partnership that we announced today, a $25 million investment is the expected one-off significant item, which will be accounted for across FY '24 and FY '25. This is an investment that will deliver significant modernization of our technology and unlock material operating efficiencies. While ROE has improved considerably this half, as previously disclosed, we don't expect to reach the target this year. We do remain committed to achieving it in the near term, and I highlighted the levers to achieving this in my presentation. We have shown strong cost discipline in this result, and we'll continue to do so, and we expect to be at the bottom end of the cost-to-income target for the full year. In conclusion, we have delivered a strong result this half, which -- the benefits of our strategy to grow longer duration business emerging well. We have a clear pathway to improve returns for our shareholders and initiatives in place to enable us to drive sustainable profits. And with that, I'll hand back to Nick and look forward to rejoining you for Q&A.

Thank you, Alex. Let me just say a few words now on the longer-term opportunity for Challenger. Australia is now firmly focused on retirement. And I believe that this will be a pivotal year for our industry. Demographic and policy changes and evolving market and growing customer demand highlighted the very real need to develop Australia's retirement income system. A strong policy focus on the accumulation phase has helped grow our super system that is the world's largest pool of pension assets relative to the size of our economy. More broadly, the retirement market is evolving rapidly and recent policy reform is encouraging. Superfunds are responding, designing and implementing strategies to support their members in retirement. Readvising Australia has now begun. The industry is looking at a range of opportunities to scale advice and provide clients with retirement solutions, including integrating lifetime income. Retirees today are rightly concerned about the impact of inflation. And research reinforces what we're hearing from customers, advisers and institutional clients that demand has never been greater. At Challenger, work is well underway to meet the retirement challenge. We have been providing lifetime income for retirees for as long as Australia's superannuation guarantee system has been in place. We're now addressing the needs of an even broader range of customers as we work with advisers and build innovative retirement income partnerships with Superfunds. To achieve this, we're drawing on our team's exceptional experience in liability and balance sheet management, retirement, product design, distribution, investment management and partnering. Retirement is fundamentally different than accumulation and Challenger is already addressing the very real issue of how to turn retirees financial uncertainty into certainty. I'm extremely pleased with our performance this half and the momentum that we take into 2024. The team are motivated to execute our strategy, where we will leverage our core capabilities, to take a broader stance for and in retirement. We delivered some great outcomes this half and our focus on execution will continue through the second half. We will expand our reach and offering pursuing new retirement income partnerships. In Funds Management, we'll maintain strong momentum inflows. Our transformation program will support the delivery of our strategy at the same time as capturing efficiencies. We remain committed to our ROE target that will deliver higher returns for our shareholders. Challenger is in a really strong position. We are a unique business with a compelling growth strategy that leverages our core capabilities. I'm confident in our ability to maintain momentum through the second half and beyond. This will build long-term sustainable growth. I'd like to thank the committed and capable team at Challenger, the driving force of our success. And with that, Alex and I will now take your questions.

As a matter of process, we'll first take questions from the room first. We're going to cut over to the telephones, and then if there are any questions via the online portal, we will take those after that. I can see some hands up here. Can we fist start with Kieren and then Simon in the room.

Kieren Chidgey from Jarden. Maybe just starting on the Life sales. Nick, just keen on sort of commentary around the government retirement income review whether or not you see that potentially actually slowing some of the decision-making process by some of the Superfunds who were due to put in place retirement income covenant product solutions, whilst that review is still outstanding?

Thanks, Kieren, for the question. I think the short answer is we're not seeing any evidence of that. We're not seeing any -- is that coming through? Okay. Here we go. So, to Kieren's question, in terms of the government policy and the many discussions that are going on across government regulators and Superfunds about what the future retirement looks like, the short answer is no. I mean our observation in the last number of years, a number of the funds have been completing mergers. They've been very busy with that program of work. That the Chairs and the Board of the Superfunds are very much turning their attention to how you meet retirement. And I think if you think since retirement income covenant, the settings that have changed have been the interest of the regulators around Superfunds delivering more quickly for their members and retirement solutions. So submissions have gone in last Friday from a whole range of players around the treasury review into retirement products and retirement, what retirement should look like, which clearly we had a submission for and I think it's the right sort of conversation. So for us, very engaged discussions across the industry. What we've done in this half with Telstra and what will happen as we go live with CLC gives you very tangible discussion points with funds and not all funds will approach this the same way. So some will approach it that way. Some will approach it this way, which is fine. We can work with them in a number of different capacities.

And just related to that, I know it's very early days with the experience with TelstraSuper so far and also on your direct-to-customer initiative. I haven't seen sort of any update around that.

Yes, sure. So I'll start with TelstraSuper. That went live right towards the back end of the year. So the body of work as TelstraSuper, created cohorts of their members and a series of retirement products that they could then take their members through advice to product. We're incorporated in a number of those retirement solutions as a building block. There's been some terrific engagement with the Telstra Financial Advice group, training of them, building the presentation materials, workshops with TelstraSuper members and their advisers. And it's very early days, but we've started to see flows coming through. Contracts being written. So that's really pleasing. And our experience more broadly in financial advice is once you get advisers able to understand the take-up and how to talk about how to use the Lifetime products actually become really good advocates for it. So that's the real focus of the team. I think on the direct side, what we did over the last 12 months was a lot of test and learning went, we said as a business we need to organize ourselves around the customer to understand where the opportunities are to grow. Our core has been the advised retail and we're seeing just fantastic growth of longer tenor business through there. So that's the base of our business. With the direct, we started to build a capability to bring clients to us, but we've built a limited capability because of our technology base. But at the same time, you saw huge amount of bank competition around the 1 year, very short dated. So we actually just pivoted and we said we know that there's market there long term. The investment we need to make into the technology at this stage doesn't make sense as we were also exploring how we uplift the entire platform for the business. So the work we're doing around the brand in market, the new look and feel, the campaigns the team are doing. It's all building future capability there, but we've pivoted back at this stage from the direct-direct on the basis that we're focusing the energies of the team on the other parts of the market.

And one last question, Alex, on the Life spread margin on Slide 16, you've unpacked. That 16 basis point improvement half-on-half sort of into asset and funding cost changes. But just wondering if you could give us some commentary under a different lens around product duration and sort of just thinking about the evolution that's taking place in your book as you move away from 1 year to longer-dated product. How we should be thinking about the potential for that [ 3.04% ] to go higher in future periods?

Sure. Thanks for the question, Kieren. So you're absolutely right, to [ 3.04% ] for the half, which has come a long way over the last 12 months. And a lot of that is starting to see the impact of our investment universe opening up, and therefore, the investment team being able to invest in longer duration assets. As you look forward, we can say that the annuity business that we're writing today is definitely accretive to that margin. And the only sort of caveat example I would provide is that some of the real innovative stuff that we're doing with our Index Plus product can be lower margin but very accretive to the ROE. So I spoke today about a 5-year index plus piece of business that we sold during the year. That is lower margin, low capital too, though, so great for ROE, which is obviously our primary KPI that we're driving towards. So that's one reason why you will have -- there won't be a complete linear trajectory on the COE margin.

Okay. Is that because they've got the option to rebalance every year within the 5 years, so you need more liquid assets?

No. That is just lower capital, so we hold much more capital like assets against it.

They've got a constraint, collateral pool that stands behind it that's segregated that doesn't earn the same ROE, it doesn't earn the same ROE, on margin I should say, as the life book. So it's still earns the ROE, but it's just a constrained -- collateral trust.

Simon Fitzgerald here from Jefferies. Just the first question on the ROE trajectory. I think you've got the right set of glasses on, but new term looks like FY '25. But could you just emphasize with the gap between second half '23 to first half '24, was there any effect of the AASB 17 standard change to enhance that?

Yes. Thanks for the question, Simon. So there are a lot of moving parts from one period to the next. We did call out when we did our presentation just before Christmas, so there is a benefit to the ROE target of about 50 or 60 basis points at the group level. That can move around though, and so difficult to take just a positives to that. The negatives at the same time, we probably had more of a negative impact from the FM business in the half. So we've got ups and downs in there, but what you can see consistently is that momentum in the Life business coming through, which is why we feel really confident about being able to be -- need to get in the near term.

Sure. And this is the first one we've actually seen a reference to the average RBA rate. But could we just clarify the target you see RBA rate or the average over the period?

In total, it's the cash rate plus 12 in an absolute sense. But in any given period, we do measure what the averages particularly because we've had periods where there have been so many rate changes. It's been important to measure the average but...

All right. That's fair. And then just one other question on the new business strain. In the context that you did about $1 billion worth of Lifetime sales this year relative to the first half of the prior period around $375 million. The $56 million that was referenced in terms of new business strength. Can you just clarify in terms of how much rolls in and reverses from prior periods versus what was marked against the new sales this time around in the Lifetime at least?

Yes. Thanks for the question, Simon. And maybe we can take some of that offline. It is a net movement to that new business strain, and we don't breakout the components because there are a number of different factors within there. But to the extent to which we continue to write new business, you would expect that net to be a negative in the near term. But it is just an accounting concept as you know. And so all of that unwinds over time as we hold on to that business. So there's a short-term negative to the P&L.

Take the next question from Sid and then Nigel in the back.

Siddharth Parameswaran from JPMorgan. A couple of questions, if I can. First, just carrying on the theme on ROEs. Alex, I think there's just been a little bit of a change of comments on what drove the increase in ROEs. I think in the past, you've been saying that there was a lag just on timing. I think you're making the point here that you're now seeing longer duration sales which are really benefiting the ROE. But I just want to be clear, is the ROE benefiting from the longer duration? Or is it actually just the COE margin? So that's just the first part of the question. But also how much did the ROE benefit from the change in the investment mix as well being the increase in the alternatives? And just how much of [indiscernible] the COE margin?

Yes. Thanks for the question, Sid. So there are a number of factors at play. So the first question that you asked just in terms of whether the longer duration sales is impacting just the COE margin or the ROE? It is absolutely impacting both of those. And so the ability to invest in longer duration assets, capture liquidity premium is driving higher ROE on the truly longer dated, particularly the Lifetime book. In terms of the total impact on the ROE expansion is a combination of a number of things. So the cash rate seasoning through, which we've definitely talked about previously in terms of it taking time for that to come through. And we've seen another layer of that come through in this period. And you also have the investment mix. So we have slightly more capital-intensive balance sheet today. So you've had a little bit of impact from that. And then the longer duration too. So there's a combination of all 3 on those.

Okay. I'm not sure I got the numbers from what you're saying, but maybe just a related question there. Just the investment mix, I mean, you're writing longer duration stuff. So are we going to see a further change in the investments? I mean presumably, you need to back it with longer duration assets. So property is still -- you're writing it down. So presumably you're not going to go into property and maybe if you can just give us some idea of where the investment exchange will occur as you change the...

Yes, I'll make a couple of comments and maybe Nick can talk about Apollo. So we're not calling out any material changes to the investment portfolio today, but we have made some changes to ensure that we are matching the assets and liabilities. You're right, we're not an active buyer of property at this stage, but it does remain a useful asset to have on the balance sheet to back some of the longer-dated liabilities. And of course, mathematically, as some of those revaluations downwards occur, that's good for ROE. And -- but from an Apollo perspective, the credit origination agreement that we've signed. I think is really going to open up some long-direction opportunities.

Yes. I think the additive comment there is that there's mix change within the fixed income book that you can use to also increase the term of that book as well. So what the investment team are focused on is making sure they've got a whole range of investment capability domestically and offshore, fixed income alternatives, insurance-linked securities that can be used to line up against the liabilities. And so Alex -- as final point there, one of the reasons why we call out the partnership with Apollo and its additive over the medium term as it will be a high-quality source of capital -- sorry, of asset origination for the balance sheet into the broader investment program. But we're not calling out any major changes in that allocation here today. It's more within the allocations that you might see some mix.

And just a final question just on the property portfolio. You've had a couple of revaluations of the entire book. Just -- do you think you're done? I mean, can you draw a line now? Or is this a progressive valuation down...

Okay. Well, I'll start, and then Alex can add to it. I mean as you're aware, we've got -- we independently value the portfolio. We've valued a 100% of the assets -- of the properties through this period, majority of which 60% something, 65% or so were externally valued. You've seen in this period, the same pressure you're seeing across the market more broadly in terms of the office portfolio, just where the impact of wider cap rates is coming through the valuations there. But as Alex said, comments here are -- the portfolio is performing really well. We've got strong lease activity. We get the benefits of leasing and re-leasing coming through. This is one of those assets on the balance sheet where it does take time for the benefits of inflation interest rates to come through in terms of the rent roll, but we're starting to see the benefits of that come through. That office portfolio is about half of the assets we've got. Half of that is 100% government, tenant half is multi-tenanted. It's a multi-tenant of where you have seen more broadly, more impact from revaluation. Retail portfolio has done -- continues to do really well, which is the non-discretionary anchored assets and then the industrial property over the medium term, so always had a bit of a mark this time. But I think there's nothing systemic there and the [indiscernible] book out at 5 to 6 years, the cost of it as rates go up. But maybe if we are topping out on rates, that will need to be the advantage of it. So we feel good -- really good about the assets, but we are a taker of valuations from the market where we've taken a lot on that office portfolio through this period through the last 2 halves.

Just Nigel and then Anthony.

Okay. It's Nigel Pittaway here from Citi. Just first of all, I wanted to ask about the $90 million of savings from the Accenture deal. I mean is that going to be straight line? front ended? back ended? How should we think about that?

Yes. Thanks for the question, Nigel. So the $90 million of savings represents the delta between what we will be paying Accenture versus what our baseline technology costs would have been over the period. They won't be completely straight line. We'll provide some guidance for FY '25 specifically as we look out in the next couple of months, but it will slightly increase over time rather than being completely flattish and straight lined. And that's because one of the key advantages of working with Accenture will be the efficiencies that they can gain through processes, and that will build over time, but certainly, not hockey sticks or anything like that. So we'll provide some details for FY '25 shortly.

Secondly, just picking up on the COE margin again. I mean, obviously, you did have a reasonable interest rate flow through from the cash rate this period. How much more from the recent rises is left to flow through? Are we still talking about a significant lag in that to come through? Or is it largely through this period?

Yes. Thanks for the question, Nigel. So when we think about the cash rate, the average cash rate for this half is 4.2%. It's still going to get to 4.35%. So there's a little bit just seasoning through to come if interest rates stay where they are. We previously spoke about expecting 100 basis points through this total financial year. We probably had most of that -- so I think there is a little bit more to come, but it will be less than 100 basis points across the remaining of this year and into FY '25.

And then maybe just also picking up on a bit of the previous question, just on this sort of -- well, the Aware Super deal. Have you still got to reallocate investments to match the long-dated liabilities that you've picked up there? And will there be any capital implications as you do that?

And so, I mean, when we take on the liability that size, it comes into the broad bucket of liabilities and then the team will work to match the assets to it over time. So we have deployed some assets around it, but that's a choice around how we deploy the balance sheet at that time. And the biggest impact in this period has been through the new business strain, as Alex has called out. But ultimately, that business, which we spoke about being 10 to 15 years business forms a really great piece of liability within the broader balance sheet, which will give optionality down the track. So we do still have the opportunity to change the asset allocation mix. We're not calling that out today. Within, say, the fixed income component, you have seen some remixing across the book there, but that's just in many ways, path of the course in terms of where the team is seeing relative value across the different parts of the market there.

Just to be clear, have you match the duration yet or not? so you still got work to do on matching that?

No. Within the broad pool? It's matched.

We'll go to Anthony next, and then we'll come to the telephones.

Anthony Hoo at CLSA. Just firstly, I want to ask about the agreement with Accenture. Can you talk about -- you talked about cost savings, $90 million. Do you expect any revenue synergies or revenue benefits from that agreement?

I'm going to start and then Alex can speak to us. So, $90 million doesn't have any assumptions, including that. I mean, the journey for us over the last 12, 18 months is to recognize that we've got this great opportunity ahead of us, how we're going to meet it with the technology that is required, we just didn't -- we don't have that. And so we're going to have to make -- identify ways to uplift our capability. And so work with Accenture, we've put together in a partnership model, a way in which we can use their scale to manage the cost -- our existing cost better and also implement the new CTU, what we're calling customer technology uplift, which is the new ALIP Registry and all the customer tools over this next 12 and a bit months. So that -- off the back of that, the sales team were here or the product team were here, they would say that's going to make things just a whole lot easier. It's going to give us a lot of capacity to work better with advisers, work better with platforms, Superfunds, bring product to market quicker, and far better tools to engage with maturities, to engage with clients that have taken out an annuity, which at this point, yes, those processes remain pretty manual in Challenger. So we're not factoring any of that into the call out on the $90 million.

Absolutely all upside. So maybe just to add to that, we wanted to be sure that what we are communicating today in terms of the $90 million was really, really tangible. It's almost all entirely contractual savings that we will get from Accenture. And clearly, all the revenue upside and the ability to launch new products, which we have a slightly less definitive clarity on, but very, very much see as upside to that $90 million.

And then can I ask a second question around annuity sales? You look at the fourth quarter, in particular, there was a bit of a slowdown in sales. I mean, you look at the only category that had growth was retail lifetime. So would it be fair to think about -- if we think about the short-term trajectory of sales, does that mean that we should expect maybe a short-term slowdown as you continue to work to try and increase lifetime sales? Or was there anything specific in that fourth quarter that you called out?

Yes, let me -- is that working? Yes. Okay. Let me make a start on that. So within the retail term book, as we've spoken about, we've seen a real increase in longer-dated term sales and lifetime. So we're at a point, and you don't see these numbers where the 3-year plus sales are in line with the 1-year sales over that first half. So the way we think about it from creating value as we think about the tenor of the business and then you think about the dollars. And so for that -- for this period, if you took the tenor that was lengthened -- that the retail term tenor is out of 3.3 years, which on PCP is up from 2.3 years, and you look at the sales we're generating, if you adjust dollars and tenants, it's actually more. So for us, that is how we can really deliver more value to the balance sheet. Lifetime is going extremely well. So over the last 2 years, Lifetime's up almost double in terms of the dollar sales on a rolling 12-month basis. And that's across both the lifetime and care product range where we just -- we really -- the team are doing a lot of work around bringing on more advisers, training them around the products and just meeting what looks to be very strong demand, particularly around the care range right now, very strong demand for the care products. So I think when we look at the numbers, we think about it maybe a little bit differently to that in terms of really trying to account for the tenor in the sales, and that's ultimately as we roll off that 1-year business, you can only lose 1 year business once, you can't lose it twice, once you start to build this longer tenor business that's what will start to really compound the book growth.

Thank you. Operator, we'll now take calls from the telephone.

[Operator Instructions] The first question comes from Scott Russell with UBS.

A couple of questions, please. Just coming back to the Accenture transformation. Just trying to understand this $90 million figure of operating savings -- Alex, perhaps you could tie this back to the P&L for us. At least I'm trying to understand where these costs sit at the moment, whether they're all in Life, whether they're all OpEx or some of it CapEx. Can you maybe be a bit more specific about where we'll see these savings come from in the future, please?

Yes, sure. Thanks, Scott, for the question. I can certainly describe where they are. And as I said previously, we'll be really specific about the FY '25 guidance shortly. So these are -- this is the operating cost base of our technology team today. And we've always said that about 2/3 of our cost base is people. So that is true for our IT team, too. But you have also got infrastructure costs and license costs within that Phase 2. It goes across the Life and Funds Management business as well as our corporate costs. So it is truly traverses across the whole business, and so you will see savings in all 3 of those categories as we move to the Accenture partnership. None of it is CapEx.

Got it. Okay. And in terms of the investment spend to achieve those savings, the $25 million or $4 million spend so far, should we just assume the remaining $21 million is spread evenly over the next 3 halves?

I do expect most of it to be incurred within FY '24. We're just finalizing some of the timing. So it is possible that some of it will come through in FY '25. And -- but yes, the vast majority of the remaining $21 million will be in the FY '24 financial year.

Okay. Got it. And just another question, please, around the alternative. Challenger's added almost $1 billion to that investment book, that asset class in the last sort of 9 to 12 months. Can you clarify for us some of the reasons for it? I mean I appreciate that there's a diversification benefits, you're working more closely with Apollo who are strong in that space. And perhaps you could outline the sort of income yield you're achieving on that book as well.

Sure. I'll make a start and Alex can pick up on it. So we've -- as you're aware, over the last 3, 4 years, we have been moving the overall balance sheet allocation around. And so the alternatives in many ways has replaced plus a little bit more the equity portfolio that used to form part of the liquid capital on the balance sheet. In addition to which the lower real estate position that we have today as well as funded some of that higher absolute return exposure. So we work within the major capital standards, the absolute return portfolio, we see as you noted, Scott, having strong diversification benefits and so far is it's very lowly correlated to either credit or equity within the portfolio. But it also represents more stable capital and more stable assets than, say, equity, but it has the benefit of being providing us liquidity in the event that we needed it. And so it forms -- it plays sort of that important role and the way that the portfolio is constructed, and we've provided some additional disclosure in the analyst pack on 44, I think it is 44 around allocations between the absolute return and the general insurance component. So more recently, some of the general insurance has gone up in [indiscernible] as well as on a relative value basis, we saw very attractive investment opportunities and premiums in that space. In absolutely return strategies, it's global macro equity market neutral are the 2 components there. And so if you think about the Swiss Re or the Soc Gen depending on which asset class, if insurance or absolute return funds is a decent benchmark and the performance of both assets are going well against those benchmarks for us. So that's -- I'm turning what else I can add to that?

I think they're the best indicators, the Soc Gen CTA index for the absolute return funds and the Swiss Re for the general insurance exposures.

And probably the final point just for clarity, one of the things we've said a few halves is that for our internal capital models, the volatility of these assets is materially lower than what the equivalents would have been to, say, equities, which is probably a pretty obvious statement. But it attracts the same capital charge. So for us, these are -- they're capital intensive, which in some ways is going to be positive, but they have a far lower expected volatility than the portfolio was previously.

Your next question comes from Lafitani Sotiriou with MST Financial.

Can I get a quick update on 3 previously announced initiatives? The first is, can you remind us on the quantum and timing on the anticipated Artega efficiencies and broadly is that still on track? And second, Apollo non-bank lending platform was kind of fallen away from communications, can you give us an update on that? And third, how are the direct annuity sales going versus expectations? And are they set up first [indiscernible] here?

Thanks, Laf. Just -- I've lost you a little bit on the first question. I think it was the initiatives around managing costs. And I just want to check if you mean what we've announced today?

Sorry, in relation to Artega efficiencies. Can you just remind us exactly the timing and quantum of those? And are they on track?

Okay. Well, let me make a start on those 3. So with Artega, that's our investment administration operation platform, stands behind Life company and Funds Management. What did occur through as rates started to rise, volumes went up very materially across the platform and some of the managers, which led us to have to put in material additional costs into Artega to support those higher volumes. What we spoke about at the last half was allocating some capital in a one-off nature to invest into some of those systems and processes to automate them better than what they were. So that is ongoing. What I think Alex's comments is we'll see the benefits of that over the next 12 months. And that's -- the team were working very hard automating and there's a slight element of complexity to the strategies, but we're very aware of where the investments need to go. On Apollo, just to set this out 2 years ago, when Apollo acquired a position in Challenger, we started to look at ways we could work together. And one way that felt very adjacent and obvious was around asset origination and the non-bank lending activity, which challenged us in a significant way but intermediated in most instances. What we looked at with Apollo is asset origination and actually whether or not some of the platforms could make sense to partner with, acquire, build, et cetera. In that period of time, I think we've -- both businesses have identified a lot of additional ways to work together. So on that platform, on that part of where we are focused on working, we still have -- that's in our BAU. We still have the teams talking a lot about different ideas and different opportunities, but there's no new news there. But in many ways, what we discussed last year with Apollo and the origination partnership to access some of their private lending to support our balance sheet is almost an extension of that. So I think the very constructive, the relationship there. But on that exact initiative, we're just running it through as BAU and there are still opportunities we expect may come of that over the next 12 months. On the direct annuities side, it really comes out the comment. I think I was making to Kieren's question. When we organize the business around the customer, we started to look at different ways in which we could grow the term annuity business on the basis that we had made a decision to get out of term deposits and out of banking. The actual product similarity is very high. And so we took a view that we should invest into some terms annuity, direct capability, which we did for individuals and couples. We have not done it beyond that. On the base that as we started to go through that, we saw very extreme -- we've seen on the bank competition around one year. And we saw very significant opportunities for us to focus energies through the retail adviser channel, which you can see in today's results through institutional. And so organization, we said, look, that's the focus. The Accenture partnership that we've announced today and bringing in the ALIP platform will enable us to come back and revisit all of that in the not-too-distant future, but in a way that is far more automated and almost effectively off the shelf relative to what it was that we were working to develop off our existing technology platform.

Can I just quickly follow up on the Artega efficiencies? Can you just remind us on the quantum and timing on that? So what is -- is it actual cost savings that will come through? I can't remember where we're at with that. So could you just detail that? And just while my last follow-up was in relation to the comment made by Alex in relation to your Life company ROE being well above the target at 18.1% pre-tax. Can you just remind us, are you running your business in the Life company to hit your group ROE, not just the divisional?

Yes. Thanks, Laf. So I might just make a quick start on that. So we didn't explicitly call out with the Artega. What we called out is that in this year, we saw an additional $5 million of expenditure into one-off projects. Now we haven't used all that up because the team has just worked on which they've started the investment into that, which are the initiatives are most responding to what the task is. But the reason -- and we haven't provided any specific guidance around the payback on that, what you should consider though is the cost-to-income ratio more broadly at the group because that's how we recognize -- trading volumes are an outworking of what happened in the markets. It's an important part of the business model. It did create significant requirement to add additional resources. We're automating those processes. That will start to ameliorate, but it then comes into the overall mix. We've grown the -- funds business is growing a lot more FUM on it. So there's additional revenues and costs. So we're not splitting it out in more detail than that other than it forms part of the overall cost-to-income ratio. And then on the annuity business writing and pricing, I'll make a start, and then what Alex noted was that relative to the group ROE right now, we're definitely writing our annuity business, accretive to that what -- to the NCOE margin, I should say. So it is all meeting our ROE target.

So one of the things maybe just to add to that, Laf, is when the ROE target was set, the contribution from the funds business and the group costs broadly net off to Nil. And so at that point in time, the Life ROE and the group ROE were broadly the same. We don't have that dynamic playing out in the same way now because we do have higher group costs and a lower contribution from FM. So in terms of the new business that we're writing today, the Life ROE is targeting very slightly higher than the overall group, but it is a group ROE target, and it's that one that is the principal KPI for the group as a whole.

Your next question comes from Julian Braganza with Goldman Sachs.

Just to add to the -- just the conversation about the trajectory for COE margin. I understand most of the benefit there, particularly on the interest rate side appears to have come through the P&L. Can I just ask the first question just on the sort of expected interest rate cuts and the impact from there. I am just interested to understand how you manage that impact in terms of headwinds to margin as and when they come through? And then the second point, just on the product cash margin. It feels like you're getting about 7 basis points a half benefits from that interest rates. Just the net impact of rates and expenses on the product cash margin. But just being interested to understand what boost that got from alternatives? And also what boost that got from debt saving costs? And is that expected to continue at that rate going forward?

Yes. I'll make a start. The last part, I thought -- I slightly lost it, but we don't take interest rate risk on the policyholders' funds. So that's all hedged out. So you see the impact of changes in interest rates coming through the shareholders' funds. As we have noted in the past, it takes time for the benefit of higher rates to come through the shareholder funds because it's not all floating. So there's still a bit more to come through there any which way. In terms of -- I kindly lost the last part of that.

I think you -- contributions that have made to the COE margin. So absolutely, as we've written longer duration sales, and we therefore acquired longer duration assets, that is the other -- other than cash rate seasoning. The other contribution is those longer-duration assets and having a benefit on the COE margin. That includes alternatives.

Yes. That 7 basis point improvement in terms of the boost that you would have gotten from just the risk up in the half. And I'm just trying to understand run rate, is that 7 basis points underlying improvement in product cash margin in the seasoning of that -- of the higher rates?

It's a benefit of the difference between investment yields and interest expense. So we're getting the benefit of the liquidity premium is you get a longer-dated business coming through the book and disciplined pricing.

Okay. Okay. Great. Okay. That's fine. And then just the other question I had was just on the guidance. So where to look at seasonality of guidance, historically in this year what you've got here at a high level, just as a reasonable [indiscernible] side in terms of where you can get to for full year, not to mention the fact that perhaps some of the Funds Management earnings will bounce back given flows late in the second quarter. Can I just understand, at a high level, is there anything holding you back in terms of -- or anything cautious in your view of guidance that might impact second half?

I have to start that one. Thanks, Julian. So when we think about our guidance, we're really pleased to be able to talk about an outlook that we'll deliver in the top half of our guidance for the second half of the year. We still obviously maintain a range around that because there are things that are not locked in and will vary in quantum, not least things like performance fees and transaction fees in the Funds Management business, and the timing of those are very much not certain. There is timing of distributions in the Life company that are also not completely certain either. So what we feel confident is the momentum of the Life company more broadly as well as the exit rate of where the FUM is combined with the cost discipline, we'll see us being able to land in that second half but not being sort of more definitive than that.

Okay. Great. And then last question for me, just on the MS&AD renewal. Do you have any further update on that in terms of just how that's tracking in terms of the minimum sales per annum that's due to expire this year?

Yes. Thanks, Julian. So last year -- over the last year, we've been working closely with MSP around broadening how we can work with them. And so we launched the yen annuity in -- back in November, and so we saw a good month. We're very encouraged. It was early days. We're very encouraged. There's a few observations to make and Alex and I will know more. We're up in Japan next week. But there are some structural things happening in Japan, which is driving significant demand for yen denominated annuities. And it relates to the Bank of Japan guiding certain parts of the market around multicurrency. So we're really pleased to be able to bring that to market. In terms of your point about what we did say is that it's going to -- the relationship with MSP goes from evergreen one -- from sort of the end of this year. And encouraged not to read anything negative into that. It's more typical for these relationships to be evergreen. The relationship between MS&AD, MSP and Challenger is very strong.

Your next question comes from Shaun Ler with Morningstar.

I just wanted to circle back on Funds Management. I had several questions. The first was the flows were quite strong, yet the revenues are not coming through. I can see some fee compression in CIP, but I was wondering if there's anything else to call out. For example, was it the timing or we should receive the FUM. And my second question is, could you provide an outlook for FUM in FY '24 and beyond. I mean given stabilizing interest rates, can we get back to that $3 billion per quarter as was the case with pre-2022. And lastly, what's in that other expenses line of about [ $63 million ] because it seems to be quite strong relative to the past. And you could please shed some color on that? It would be great.

Okay. Thanks for the question. I'll start. The sound coming through wasn't perfect. So just correct me if I'm driving down the wrong path here. But relating to the FUM and flows within Funds Management, what we saw -- it's the third quarter for the Funds business, but there's been very strong institutional flows. It has been set against the backdrop of weaker retail flow. So you are getting a slight mix shift. Towards the back end of the calendar year, we saw very strong flows in institutional across a range of our managers and pleasingly, it's spread across fixed income and equities, which is always good from a margin perspective. And it speaks to the quality of those managers. So the starting FUM for this half is clearly higher than the average FUM for the second half of last year. We're also bringing to market a number of new products and a number of potentially materially higher margin, including alternatives. We've seen very strong growth in our in-house SIM fixed income teams -- multi-sector private lending credit income fund strategies. The fixed income team running this -- over this last 12 months. So we've got a really great set of capability coming through, but we have seen more broadly just that retail institutional mix shift coming through and I think -- I mean, hopefully, that's captured some of the answer to the question. We don't forecast FUM or flows. We've got -- each quarter, we'll provide an update on that projection not so far away again. But I think what we would say is we feel good about the momentum across that institutional business coming into calendar year '24.

Your last question, Shaun, was just in regards to expenses. I'm assuming that's expenses from a Funds Management perspective and what's in that line item. So I'll just refer that to Alex.

So thanks for that question, Shaun. So when we -- from a total perspective, we're really pleased that we've been able to translate cost discipline into a lower cost-to-income ratio for the group as a whole. So you've seen us actually exceed and the 35% to 37% range, which we set out. Within there, you have got a dynamic within the Funds Management business, so where we've experienced higher investment administration costs. So as Nick spoke about before, as rates went up very dramatically, so too did the trading volumes we experienced in our boutiques, and we had to put extra costs, which was people into the Artega business in order to process those volumes. And so you're seeing some of that come through in the year or continue to come through in the second half. But when you look at the Funds Management expenses stand-alone. And more broadly, we've spoken about the fact that the Funds Management income is slightly subdued at the moment, and we very much expect that to increase. And therefore, the cost-to-income ratio for the FM business stand-alone, you would expect it to come down over time.

There are no further phone questions at this time. I'll now hand back to the room.

Thanks, operator. It's a very long Q&A session, just conscious of that. So there is one question online, which I'll ask very quickly. It's a relatively easy one. So the question comes from [ Thomas Sharp ]. Are you able to please explain how Challenger's driving longer duration annuity sales? What are you specifically doing to achieve this?

Short question with a very long answer. So what we're really pleased around in this half is the shape of the retail term book and the growth that we're getting in the retail Life book, and that is straight an outworking of the attractiveness of those capabilities, how we're articulating their work within a retiree or within a broader investment program, the quality of our distribution capability. And I think the brand, the trust that people have in Challenger more broadly. Within the Institutional channel, you think about the last 12 months, we had this extraordinary success raising short-dated Index Plus and Institutional term business, which was very sizable and led to strong book growth but in of itself is lower margin. This last couple of years, we've been working on product innovation in the Index Plus to push the tenor of that longer. The announcement today around this really exciting 5 year piece of business, harbingers well for the opportunities more broadly with what we can do with Index plus. So that's terrific. Within the Institutional term annuity, we have just repriced amount of that. So we haven't seen a lot of that role. It's down to about $1.2 billion in the book there. When you think about what we've done with partnerships in DB. DB became a real opportunity for us over the last couple of years. The work we did with a signature client in Aware, around their in-pension phase liabilities over an extended period that they went to open tender and very competitive open tender, which we won is allowing us to really broaden the discussions with other sponsors of DB schemes. And so we expect more of that to come to market. So that's been a really important part of driving longer data business because that's like a Lifetime contract albeit in sort of mega scale. And then the partnerships we announced with Telstra and CSC -- with Commonwealth Superannuation Corporation, are building us into the flows of their own strategies, the flows of their retirement strategies. And so we're just -- we're trying to broaden how we face off against the market and focus on our longer tenor. And it's been a really exciting 6 months for us in every respect on that part of the strategy.

Great. So there's no further questions. That closes today's briefing. Thanks for your interest in Challenger. Irene and myself are both on the phones today if anyone has any questions they want to ask. And thank you, that close today's presentation.