Good morning, everybody, and welcome to those online to Challenger's AASB 17 briefing. I'm Mark Chen, Challenger's General Manager of Investor Relations. We're coming to you today from our Martin Place head office in Sydney. The conference is now being recorded. 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 briefing will be followed by a Q&A session that will only be open to analysts and investors. To ask a question, you will need to have registered to attend the briefing via the telephone. Today's presentation will be provided by our Chief Financial Officer, Alex Bell. I'll now pass over to Alex to get us underway. Thank you, Mark. Good morning, everyone, and thank you for joining us online for today's AASB 17 presentation. This morning, I'm joined by Challenger Life's Divisional CFO, Long Nguyen. Today, I will cover the key messages and concepts associated with the new insurance accounting standard, AASB 17, the financial impacts from transitioning to AASB 17, and the statutory profit considerations going forward. I will then take you through a case study to demonstrate some anomalies that can arise in statutory profit outcomes driven by the new standard, before finishing with some Q&A at the end. A reminder before I begin that all information in this briefing is unaudited and still subject to external review and therefore change. This first slide will be familiar to those who attended Challenger's 2023 Investor Day in May this year. Challenger has adopted AASB 17, the new accounting standard for insurance contracts, with effect from the first of July this year. Our 2024 interim report will be the first report under AASB 17, with a fully audited transition impact and comparatives included. AASB 17 addresses the recognition, measurement, presentation, and disclosure requirements for insurance contracts, and it replaces the previous accounting standard for insurance contracts, AASB 1038. Before we talk about the impact of this standard on our financials, I want to ensure investors understand conceptually what to expect. Importantly, the new standard does not change the economics of the underlying business that we're writing, nor does it change our normalized profit, cash generation, or dividend policy. However, it will change the timing of insurance earnings recognition, not the overall quantum. The only contracts impacted are insurance contracts. Investment contracts, like our term annuities, which make up approximately 70% of Life's annuity book, are out of scope of this standard. The standard also does not affect the funds management business, the bank, or our other joint ventures. There are no changes to APRA's regulatory capital calculations or our normalized profit framework, which means that any movements in policy liabilities will continue to be reflected in investment experience as they are today. This slide provides a high-level summary of the impacts from AASB 17 on our key KPIs and line items. The transition impact, which requires recalculating all insurance policies as if AASB 17 had applied since inception, will increase Challenger's insurance policy liabilities, resulting in an equivalent reduction in Challenger's net assets. Normalized profit and COE margin is unchanged. However, the net asset reduction will drive a slightly higher normalized ROE. There is no change to the PCA ratio calculation. However, there is a second-order impact to the outcome of the PCA ratio, driven by the current tax benefit recognized as a result of the increase in the insurance policy liability. This slide illustrates the conceptual difference between the old and new standard. AASB 17 allows three possible measurement approaches for the accounting of insurance contracts. These include the general measurement approach, the GMM, the premium allocation approach, PAA, which is a simplified approach for contracts that are one year or less, and the variable fee approach, VFA, which can be used for contracts with participating features. Challenger has applied the General Measurement Model, GMM, to account for all insurance contracts that are in scope. The valuation approach under both AASB 1038 and AASB 17 is a present value of future cash flows. Losses at initial recognition are immediately taken to the P&L, whereas expected profits are required to be capitalized and released over time. Under AASB 1038, these profits were referred to as the present value of future profits, the PVFP. This is now known as the contractual service margin, or CSM, under AASB 17. Under AASB 1038, the best estimate of liabilities, or the BEL, represented the present value of all expected future cash flows. This is now referred to as the present value of fulfillment cash flows or PVFCF under AASB 17.... The BEL or PVFCF are largely the same, except for the projected expense assumptions. This is because under AASB 17, only directly attributable expenses are to be included in the expected future cash flow assumptions, and as such, this drives a small reduction in the PVFCF compared to the BEL under AASB 1038. The risk adjustment is an entirely new concept introduced by AASB 17. It represents the amount required to compensate the insurer for the uncertainty of liability cash flows, and is a new block that is added to the total liability stack, in addition to expected future cash flows and future profits for the non-onerous contracts. For the bulk of our business, that is onerous, this risk adjustment will add to our upfront new business loss as we write more business and then unwind to the P&L as credits over time. The key feature that will have an impact on Challenger is the treatment of capitalized future profits. This is now known as the contractual service margin or CSM. The CSM under AASB 17 must be valued at locked-in discount rates. However, its equivalent under AASB 1038, the present value of future profits, was valued at current rates, which is the same as the BEL, and meant that movements in rates had equal and opposite impacts on the BEL and PVFP that were largely offset. These changes under AASB 17 will drive variable statutory profits due to the requirement to measure the BEL at current rates and the CSM at locked-in rates. Looking now at which product categories are impacted by the introduction of AASB 17. As mentioned earlier, we do not expect a material impact on the majority of life's annuity business, as these are investment contracts or term annuities, and they're accounted for under AASB 9 financial instruments. This represents over 70% of our total life contract liabilities at the 30th of June, 2023. The contracts which are impacted by AASB 17 are insurance contracts, which include our lifetime annuities and the U.K. life risk business. As the majority of the lifetime annuity business is onerous under AASB 17 or in loss recognition under AASB 1038, the change for these contracts is relatively small, with only a AUD 28 million impact or 0.7%, mainly driven by the introduction of the risk adjustment. The non-onerous lifetime annuity contracts, which represent the ex-AXA portfolio acquired by Challenger Life under Part 9 transfer in December 2008, has had a substantial change relative to its AASB 1038 valuation. This is a profitable, closed book of business acquired by Challenger at favorable rates. Under AASB 1038, these contracts were previously allowed to be grouped with the onerous lifetime annuities for valuation purposes, and so its day one profits were offset with new business loss written during the year. Under AASB 17, it requires greater granularity of reporting that does not allow offsetting of losses, and so accordingly, the increase in liability here of AUD 75 million is driven by the requirement to establish a CSM for the profit to be released over time. The U.K. life risk business has had a material increase in its valuation relative to AASB 1038 MOS. This is primarily driven by the discount rate mismatch valuation of CSM, which is at locked-in rates versus the valuation of the PVFCF or BEL at current rates. The total adjustment to retained earnings at the Challenger effective date was -AUD 253 million, reflecting a reduction to net assets. This is made up of two parts: the transition impact to opening net assets of AUD 137 million, and the NPAT impact for the FY 2023 comparative period of AUD 116 million. I'll now step you through each of these in turn. The impact of AASB 17 to Challenger's opening net assets on transition at 1 July 2022 is a AUD 137 million reduction to net assets. This is driven by an increase to policy liabilities of AUD 196 million, offset by a corresponding tax benefit of AUD 59 million. As seen on the chart, the changes to the components of the policy liability driving the net asset reduction are a AUD 183 million reduction due to the introduction of the risk adjustment, a net AUD 71 million reduction due to the recognition of a larger future profit provision or CSM, a net AUD 58 million increase due to the overall reduction to the best estimate liability, and a AUD 59 million increase due to an expected current tax benefit following the overall insurance liability increase. Rolling forward through to FY 2023, we expect a further AUD 116 million reduction to net assets. This is driven by a further increase in policy liabilities of a AUD 166 million and a corresponding tax benefit of AUD 50 million. As you see on this chart, the key drivers of this are the impact of the discount rate mismatch on life risk, offset by a tax benefit associated with the total change in liability. This slide sets out some of our reported KPIs and line items from the interim and full year results for FY 2023. We have then shown the same metrics restated for AASB 17 to enable analysts to update their models for comparability purposes. As mentioned earlier, normalized profit, COE margin, and life investment assets are unchanged. Life investment liabilities that relate to term annuities will continue to be accounted for under AASB 9, and are therefore unaffected. AASB 17 will increase Challenger's insurance policy liabilities, resulting in an equivalent reduction in Challenger's net assets. The net asset reduction will drive a slightly higher normalized ROE. The increase in life insurance policy liabilities has no impact on the PCA Ratio. However, there is a second order impact on the PCA Ratio, driven by the current tax benefit recognized for the increase in insurance policy liability. This slide provides context for understanding how statutory profit will behave going forward for each element of AASB 17. The risk adjustment from the existing book will contribute to future profit. However, if large volumes of onerous new business is written, it will reduce overall profit driven by new business losses from initial recognition of that risk adjustment. The release of the CSM is very similar to the release of PVFP. However, unlike MO, any assumption changes can impact the expected CSM release in a given year, whereas under MoS, assumption changes would only affect future years. The discount rate mismatch will drive variability in profit between periods, with the CSM valued at discount rates at contract inception, which will not move in line with movements in interest rates. This differs to the risk adjustment and the PVFCF, which are discounted at current rates. Assumption and experience adjustments will have timing impacts relative to AASB 1038, and the second order impact being the discount rate mismatch factor. Before we open for questions, we have prepared a brief case study to highlight an example of an unusual outcome arising from the requirements of AASB 17, which helps explain the potential future variability in statutory results. In this case study, we look at the statutory profit outcome on the U.K. life risk portfolio, where there has been a reduction in future expected mortality improvements. In this scenario, a reduction in future mortality improvements leads to higher expected deaths. Higher deaths leads to higher than expected future net inflows for Challenger. So commercially, this is a good thing, and we would expect an overall profit. Like AASB 1038, AASB 17 requires that this profit is recognized over the life of the insured business, and hence, these additional expected future profits are required to be held on the balance sheet within the CSM. However, unlike AASB 1038, these future profits have to be valued at current interest rates, whereas the CSM continues to be valued at the rate on the date the business was originally written or locked in rates. This mismatch, which used to largely offset, now causes an accounting loss as we make this assumption update, because the average locked in rates are lower than current interest rates, and hence, the present value of the change in the CSM is greater than the present value of the change in fulfillment cash flows. It is important to note that the higher CSM will then be released through higher profits over time in the future. So there is no change to the underlying economics, but there is a change to the timing of the profit recognition. I hope today's briefing has provided you with a clear understanding of the impacts of AASB 17 on Challenger's financials, leading up to the first half 2024 financial results announcement, which we will have on the thirteenth of February next year... In closing, I'd like to remind you that AASB 17 does not change the economics of the underlying business we're writing. It does not change our normalized profit, cash generation, or dividend policy. However, it will affect the timing and variability of statutory profit recognition. Also, there are no changes to our regulatory capital calculations or to our overall normalized profit framework. Long and I would now be happy to take your questions. Thanks, Alex. We'll now turn to the Q&A session. As a reminder, to ask a question, you will need to have registered to attend the briefing via the telephone. As this presentation is on AASB 17, can I please ask that all questions be in relation to this? Operator, are there any questions via the telephone? Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on speakerphone, please pick up the handset to ask your question. Your first question comes from Julian Braganza from Goldman Sachs. Please go ahead. Good morning, guys. Just a couple of quick questions from me. Just in terms of the PCA ratio and the improvement there, can you just break it up for us to explain what happened to the capital base and also the actual PCA within that ratio? Cheers. Thanks. The PCA Ratio that you're talking about? Just to clarify- That's right, yes. Julian. Sorry, I thought you said PPA. Yeah, no, no problem at all. So what, what we're reporting today is that there is no change to the way our PCA ratio is calculated at all, so APRA has made no changes to the capital requirements. But one of the second order impacts of the constituents of the calculation is that we are able to take credit for any current tax assets, and because we have had an increase in the policy liability on transition, that attracts a current tax asset to be recognized. And so when you do that, you have the PCA ratio increase in the order of about six basis points. Okay, sure. And in terms of the treatment of that tax asset, both current versus deferred, and any likely change in that treatment that could come through once the tax office provides more clarity on that treatment? Yeah, no, that's a great question, Julian. So, we have been in discussions with the ATO in order to provide them with transparency around the consequences of implementing AASB 17. We have applied the tax treatment at, you know, as the letter of the law requires, but the ATO have said that they will still review those impacts when all life companies prepare their tax returns for the year. So they haven't indicated definitively one way or the other whether there will be any changes, which is why we've sort of highlighted that it is still subject to ATO review. On the other hand, they have acknowledged that we have applied the treatment consistent with the law as it stands. Okay. So worst case, if we take out that benefit, then there's no change to the ratio as it currently stands? That's right. I think worst case- Yeah ... it wouldn't, it wouldn't go away altogether. More likely, there'd be some sort of transition arrangement where you would get that benefit over time. But as I say, that's certainly not something the ATO have directly indicated as yet. Okay, great. And then just in terms of the statutory profits, the volatility there from movements and discount rates, is that something that you would be looking to hedge, just in terms of managing that volatility on the stat profit? Yeah. No, that's, that's a great question. It, it's not something we're going to hedge, and that's because it's not a true economic difference that needs to be hedged. It is just an accounting impact. And so we will see those movements come through our investment experience line today. But as I say, it's not a true economic impact, so we wouldn't hedge it. Great. Thank you so much for that, Alex. Not at all. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Simon Fitzgerald from Jefferies. Please go ahead. Hi, Alex. Just one question from me. Obviously, a lot of the changes that have been highlighted today relate to the transition. I was curious if there are any rule changes in the way that you would calculate movements in the fixed income book from credit spreads or anything like that, in terms of, you know, market change movements and how the liabilities would interact with that? Thanks for the question, Simon. No, very happy to confirm. No impact at all in the way we would- Yeah ... calculate the fixed income book at all. So it's just the insurance contract liabilities itself. No, no second-order impacts on the fixed income balance. Great. Thank you. Thank you. Your next question comes from Scott Russell, from UBS. Please go ahead. Well, good morning, Alex. Just on the onerous contracts, I was a little surprised at the size of those on slide seven in liability terms. Can you just maybe explain a little further on the criteria for defining onerous contracts? My understanding was that these are NPV negative. But how have you defined those? Yes. So we've defined them in line with the accounting standards. So an onerous contract, you know, it has a loss on day one. And so the criteria for onerous is really very similar to, you know, in loss recognition under AASB 1038. Very, very similar. ... So AUD 3.8 billion of onerous contracts, which policies are they're referring to there? So these are all of our Lifetime Annuity contracts. So those are considered to be onerous, and then from an economic perspective, we make profits on the asset side, on how those liabilities are invested. So why would you include the asset side, presumably the yields, to square against the obviously, the liabilities over the long run? Why are they considered onerous? Because as you say, economically, you put it together, they're still profitable contracts. Yeah. So, really, just by following the letter of the accounting standard, I can't honestly tell you that that means that it's a rational way to account for them. But you have to show the liability completely separate as an onerous contract, and then we show our assets on the asset side of the balance sheet separately. Okay. And I was under the impression that for onerous contracts, there would be additional disclosures required. What can you tell us about what's needed to be presented in your stat accounts about that book, disclosures that perhaps weren't provided in the past by Challenger? Yeah, there are some additional, detailed disclosures in the stat account, some of which you'll see at the half year. But it, it's not anything that will provide any sort of further insight than we've provided today. Okay. And then just last question around disclosures. I mean, everything we've referred to here today is obviously stat, balance sheet, stat P&L. In terms of the way Challenger, we've always, focused more on the management accounts and the presentation of the P&L, presumably, that there, there'll be no changes to the, the way you set out the, the profits, the COE, the breakdown of product cash margin. I assume there'll be no changes to that, and, and all of this relates to what we'll find in, in the annual report and the stat accounts. Great question, Scott. So no, that's absolutely right. We'll show our normalized profits in exactly the same way. So any movements that are caused by AASB 17 will flow through investment experience, as they did with AASB 1038. So movements in the policy liability go through investment experience today, and that's where you'll continue to see them. Anything above the line that forms part of the normalized result and our normalized COE margin, and the presentation of all of that will remain entirely unchanged. Okay, great. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mark for closing remarks. Thank you. Just a reminder that both Lan, Irene, and I, we're available today on the phone, so if you have any further questions following this presentation, feel free to give us a buzz. Thanks for your interest today in Challenger, specifically on a Friday in the morning. Thank you, and have a great day.