Challenger (CGF) investor relations material

Overview of APRA's proposed capital standards for longevity products

• APRA's proposed capital standards represent a major regulatory reform for longevity and retirement products, aiming to reduce capital intensity and enhance financial resilience.

• The new standards shift to a principle-based approach for the illiquidity premium, allowing broader reference indices and risk allowances that better reflect actual portfolio risks.

• These changes are expected to align capital requirements more closely with the true risk profile of assets and liabilities, supporting better asset-liability matching.

• The reforms are anticipated to remove disincentives for offering lifetime income products, improve global alignment, and support competitive annuity pricing.

Strategic positioning and business model

• Focus on sustainable long-term growth with a scalable, simplified business model and strong capital flexibility.

• Emphasis on improving book quality, customer focus, and stable spread-based earnings.

• Investment excellence and industry partnerships drive retirement solutions at scale.

Illustrative impacts and capital resilience

• Under modeled stress scenarios, the new standards would significantly improve capital resilience, with the PCA ratio showing only marginal declines during market shocks.

• The PCA ratio is expected to improve from 1.60x to 1.77x under proposed standards, with further increases possible in normalized spread environments.

• In a normal credit spread environment, the benefit to the PCA ratio could be approximately 23 points, with a potential reduction in target capital base of AUD 400 million.

• Most of the reduction in target capital base would arise as excess CET1 capital, creating strategic optionality.