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BT Financial Group
Strongly positioned for growth in
Superannuation and Life Insurance
11 July 2012
Brad Cooper
Chief Executive
2
BT strongly positioned
BT attaining sound returns and delivering on strategic initiatives
Favourable long-term macro forces for the wealth sector remain, with
regulation, customer preference and technology driving change
BT is well positioned across the value chain and continues to invest in
extending its capability, particularly for Prime of Life1 and High Net Worth
customers, Superannuation and Life Insurance
Wealth a key investment priority of Westpac Group, helping to deepen
customer relationships while providing low capital intensive growth
1 Prime of Life customers defined as between 45 and 65 years of age.
3
BT solid earnings growth driven by improving wealth
penetration
3
1 Based on BTFG reported results for FY11 to be comparable with prior periods. From 1H12, BTFG results also include earnings from equities business. 2 FY08 includes St.George
on a pro forma basis. 3 ASX200 price on 30 September 2011 compared to 30 September 2007. 4 Refer to slide 21 for Wealth penetration metrics provider details. Period March
2008 to March 2012.
536 493
595
649
294
FY08 FY09 FY10 FY11 1H12
Around 10% of Group earnings
Solid 4 year earnings
performance (2008 to 2011)
despite ASX200 declining 39%
over same period3
Wealth penetration of WBC
Group customers up 230bps
since 20084
2
BT Cash earnings1 ($m)
Delivering against 2010 key strategic targets
4
1. Alignment of
banking and
wealth distribution
2. High net worth
(HNW) customers
3. Compelling
customer
experience
2010 Targets1 2012 Progress
20.3%
14.0%
13.6%
18.4%
15.5%
Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
WRBB St.George Peers 1, 2 & 3 Wealth penetration (%)2
Highest wealth penetration
in sector with WRBB.
St.George has the fastest
growing wealth penetration
Customer service and
products being externally
recognised
Movement in HNW metrics 2010 to 20123
Total customer numbers Up 9%
Wealth penetration4 Up 26 percentage points to 50%
Customers with 8+ products4 Up 16%
High net worth customers
Focus on deepening
relationships across the
sector
Customer experience indicators
Westpac Private Banking won five Australian Private Banking awards in 2012
Asgard Infinity awarded “Best New Product” from Investment Trends in 2011
BT Super for Life Fast Mover Award 2011
1 Targets detailed in BT market presentation June 2010. 2 Refer to slide 21 for Wealth penetration metrics provider details. 3 Internally sourced. 4 Data for Westpac Private Bank.
Delivery against 2010 key strategic targets (cont.)
5
4. Target
insurance
segments
5. Superannuation,
accumulation and
transition to
retirement
6. Advice and
platform service
2.7
1.9 1.9
0.3 0.3 0.7
0
Jun-10 Dec-10 Jun-11 Dec-11
BT
Average of two nearest competitors by FUA
Insurance growth ($m)
Significant growth in
General and Life Insurance
from stronger sales and
extending distribution
Net platform flows ($bn)1
Capturing a high portion of
market flows on Wrap, BT
Super for Life & Corporate
Super – all platforms rank
#1 in last 12 months
Advisers
Solid growth in adviser
numbers and growth in
interviews per planner per
week (IPPPW)
2010 Targets 2012 Progress
Movement in advice metrics Mar10 to Mar12
IPPPW3 Up 29%
No. of IFA4 using BT platforms Up 10%
No. of salaried planners Up 6%
1 Plan for Life, December 2011, All platforms net flows per half year for BT and average of largest two nearest competitors. 2 $2.9bn was from the transfer of Westpac staff
superannuation plan. 3 IPPPW is interview per planner per week for Westpac Financial Planning. 4 IFA are independent financial advisers.
136 170
General Insurance Gross Written Premiums
Mar-10 Mar-12
2.92
2.1
424 540
Life In-force Premiums
Mar-10 Mar-12
CAGR 11%
CAGR 12%
Regulation, customers and technology driving change
Changing
Customer
Demands
→ Ageing population increasing focus on Superannuation and Life Insurance
→ Current low risk appetite and changing demographics is seeing increased
focus on different asset classes
→ Customers want to be more in control of their activities, with strong growth
in self managed superannuation
Regulatory
Change
→ Superannuation guarantee step-up to 12% by 2019/20 will lead to
increased competition and consolidation
→ FOFA provisions for scaled and self service advice will drive growth of
simple, affordable and scalable advice models
→ Increasing compliance costs will require increased economies of scale
6 6
Technology
→ Internet is accepted method for managing finances with nearly 70% of
consumers going online for bank transfers and bill payments
→ Detailed information and resources readily available online
→ Online and self directed choices will continue to grow at a faster rate than
the market
• Deeper customer relationships with
improving wealth cross sell
• Re-orientating to larger and
growing market profit
pools – Prime of Life,
HNW3, Superannuation,
Life Insurance
• Sector leading
planner productivity2
• Improved efficiency
over next 5 years with
– Scale economies and
„lean‟ process improvements
– Technology, including straight
through processing
• 21% market share in
platforms overall4
• Preferred primary
platforms in IFA space5
• Highly recognised brands6
• Well positioned for regulatory
changes
• Australian macro wealth industry trends very positive
• Group has relationships with ~11m customers
• Wealth penetration less than 20% of customers1
7
BT well positioned for change
Growth Higher growth
sector with
access to
customers
Return Re-orientating to
larger/higher return
profit pools
Strength Across products,
distribution and
brands
Productivity Scale
economies
1 Refer to slide 21 for Wealth penetration metrics provider details. 2 Comparator December 2011. 3 HNW is High Net Worth. 4 Plan for Life, December 2011, All Master Funds Admin.
5 Investment Trends April 2012 Planner Technology Report. 6 BT brand tracking.
Growth - macro wealth industry trends are very positive
8 8
Australia‟s superannuation growth expected to outpace
growth in the real economy
Australian wealth profit pool expected to increase 43% by
20171, driven by an aging population, compulsory
superannuation and Australians under-insured versus
other developed countries
Strongest growth in wealth profit pools expected to be in
– Superannuation (advice, administration and asset
management) with 7.4% CAGR to 2017
– Life Insurance with 7.3% CAGR to 2017
1 McKinsey & Co. 2 Internally sourced.
3.1
4.8
0.7
1.0
0.3
0.4
1.3
2.0
1.4
1.5
2011 2017
Personal/General Insurance
Life Insurance
Direct Equities
Managed Investments
Superannuation
6.8
9.7 Potential
profit pools
Life
Ins.
7.3%
CAGR
Super.
7.4%
CAGR
Expected Australian Wealth industry profit pools ($bn)1
0
2
4
6
8
Estimated value of
Australian
superannuation
assets ($tn)
9% CAGR
Expected growth in Australia’s superannuation assets ($tn)2
Productivity - driven by scale, technology and
regulatory reform
9 9
29
19
16
32
4
Retail Sector Funds
Industry Sector Funds
Public Sector Funds
SMSF
Corporate Sector Funds
Segmentation of the Superannuation Market (%)1
On conservative estimates, the Super industry profit pool is
expected to grow by 55% between 2011 and 2017
This estimate is based on significant margin decline yet little
change to the expense to income ratio
Significant opportunity exists to enhance this profit pool
through
– Scale from increased asset under administration
– Technology enhancements and straight through processing
– Regulation supporting electronic processing and simple
investment solutions
– Industry consolidation as some smaller players exit the
industry or join with more efficient players
Estimated Australian Superannuation industry profit pool
2011 2017
Total superannuation assets ($tn) 1.2 2.1
Revenue ($bn) 15.0 22.2
Assumed revenue margin (bps) 125 105
Assumed expense to income ratio (%) 79 78
Total industry profit pool ($bn) 3.1 4.8
11 out of 68
players have
75% of the
market
4 out of 30 players
have 70% of the
market (including
BTFG)
9 out of 54
players have
70% of the
market 7 out of 29
players have
61% of the
market
1 Plan for Life, December 2011.
Mass (all ages)
Affluent < 45 years
Affluent > 45 years
SME
Lending
General Insurance
Life Insurance
Superannuation and Investment
Deposits
Increased focus on
sources of highest
growth and value -
Deposit, Superannuation
and Life Insurance
Return - re-orientating focus to higher profit pools
Australian financial service profit pools by segment & product1 ($)
1 Lending = housing, business and personal loans along with credit cards; General insurance = home and contents and Personal insurance; Life Insurance = Retail Life Insurance
and excludes Group Life Insurance. Superannuation and Investment = Retail Superannuation and self managed superannuation funds (excludes corporate and industry
superannuation) and investments is retail investments.
Affluent (45+ years) and SME are the
highest profit pools for our targeted
areas of Superannuation, Life Insurance
and Deposits
Prime of Life customers (45-65yrs)
account for 80% of wealth inflows
Significant opportunity given wealth 54%
of total market footings for customers
45-65 years, yet only 5% of total WBC
Group footings
10
Superannuation remains a priority
11
1 Includes Westpac Staff Super of $2.9bn transferred March 2012. 2 IFA is Independent Financial Advisers. 3 Refer slide 16 for further details. 4 There is some overlap
between the SMSF and Mass Market. 5 Excludes $2.9bn of BT Super for Life that was transferred from Westpac Staff Super in March 2012.
Mass Market Advised Market Self Managed
Superannuation
Funds (SMSF)
Corporate
Superannuation
BT Super for Life 1,030 Planners
Over 10,000 IFA2
Strong platforms Growing Corporate
Superannuation
platform
$5bn FUM1 $90bn in FUA $14bn in FUA4 $10bn in FUA5
Continue to grow
BT Super for Life
penetration
Focus on
increasing account
balances
Continue to
expand direct and
aligned planner
network
Maintain platform
leadership
Launching BT
Select3
Established
banking accounts
designed for SMSF
Investing in
administration
capability to
support SMSF
Extended BT
Super for Life to
Corporate
Superannuation
market
Continue to
leverage Lead
Institutional Bank
position
Life Insurance a significant opportunity
12
1 IFA is Independent Financial Advisers. 2 Plan for Life data at December 2011. 3 Plan for Life, December 2011.
Australians significantly underinsured
– Reform amendments support growth
– Insurance within superannuation is an
attractive proposition
BT well positioned with broad distribution
– Retail adviser Life Insurance sales
$39m in 1H12 (up 105% on 1H11)
Strong upside potential given BT only
have a 7% share of in-force premium
market
– BT‟s Feb 2011 successful launch into
the IFA1 market took 19% of industry
growth in new customers in 20112
1H09 2H09 1H10 2H10 1H11 2H11 1H12
IFA Bank Aligned Planners
12
39 36
19 21 17 19
Life insurance sales by retail advisers ($m)
In-force premium share of market3 (%)
7
16
12
13 17
8
13
14
WBC
AMP
ANZ
Colonial First State
NAB
Suncorp
TAL
Other
1
13
Five measures of success
1. Alignment of banking and wealth distribution
2. Deepening relationships with Prime of Life1 and High Net Worth customers
3. Compelling customer experience
4. Market share of Superannuation and Life Insurance
5. Growing advice capability (scaled, salaried and aligned)
1 Prime of Life customers defined as between 45 and 65 years of age.
14
Summary
Wealth will increasingly be a strong growth driver supported by changing demographics, regulation and customer preferences
BT well positioned across the value chain to capitalise on change
Prime of Life and High Net Worth customers, Superannuation and Life Insurance are key focus areas for investment
BT Financial Group
Appendix
BT Select - accelerating growth via planner footprint
Attractive multi-brand advice offering
Aligned dealer groups saw net growth of 34 practices in
last 12 months to March 2012, 26 with Securitor and 8
with BT Select (previously Magnitude)
Bank financial planning saw net growth of 33 planners in
last 12 months to March 2012
offers flexibility and choice
BT Select is the new dealer group brand launched 11 July
2012
Focus is on recruiting Independent Financial Adviser
practices and Authorised Representatives
Offers advisers access to a broad range of resources
giving them both flexibility and choice
Practice Management
& Operations
16
35
32
9
19
5
Super & Investment
Private Bank / Advice / Equities
Asset Management
Insurance
Capital & Other
17
BT Financial Group at a glance
Note: Aligned Advisers includes 550 Securitor & BT Select advisers for which we hold the license, and 450 Licensee Select advisers who operate under their own licenses. BTFG
owns 64.5% of BT Investment Management (BTIM) which includes J O Hambro Capital Management.
OWNED
EXTERNAL
EXTERNAL
OWNED
EXTERNAL
(~100 dealer groups)
ALIGNED
OWNED
Customer
Advice &
Distribution Platforms &
Administration
Product
Management
Asset
Management
Diversified business
% of total BTFG
1H12 revenue
OWNED
Life Insurance customers (‘000)
396 423
463 509
Sep 10 Mar 11 Sep 11 Mar 12
Wealth penetration of banking customers1 (%) High net worth customers (‘000) and those
with 8+ products (%) Home and Contents cross sell2 (%)
70 76 79
105
47 58
68 68
Sep10 Mar 11 Sep 11 Mar 12
WRBB St.George
Platform market share3 (%)
19.9 20.0 19.9
20.7
Jun 10 Dec 10 Jun 11 Dec 11
191 218
253
288
0.0
0.5
1.0
1.5
2.0
2.5
0
50
100
150
200
250
300
350
Sep-10 Mar-11 Sep-11 Mar-12
St.George customers (LHS)
WRBB customers (LHS)
FUM (RHS)
(000‟s) ($bn)
BT Super for Life customer growth & FUM
Strong and improving wealth position
15.9
16.5
17.0
17.7
Sep10 Mar 11 Sep11 Mar12
36
38
40
42
44
46
6
7
8
9
10
11
Sep-10 Mar-11 Sep-11 Mar-12
High net worth customers ('000)
Customers with 8+ products (%)
18
1 Refer to slide 21 for Wealth penetration metrics provider details. 2 Home and Contents cross sell rates are defined as the number of risk sales divided by the total home loan sales.
3 Plan for Life to December 2011.
FUA and FUM
Average Period End
$bn % mov't
1H12 - 2H11 $bn
% mov't
1H12 - 2H11
BT Wrap/Asgard FUA 67.5 (3) 69.7 6
Corporate Super FUA1 11.8 30 12.7 48
Total FUA 82.5 – 85.6 11
Retail FUM 15.1 (6) 15.3 3
Institutional FUM 12.7 (8) 13.7 5
Wholesale FUM 13.8 (6) 15.2 12
Total FUM 41.6 (7) 44.2 7
Cash earnings 19%
• Cash earnings down $69m (19%) to
$294m
• Cash earnings impacted by irregular
items and markets impacts amounting to
$67m
Funds
management
Cash earnings
21%
• Cash earnings down 21% to $180m
• Average FUM up 17% (down 7%
excluding J O Hambro acquisition) with
solid net flows offset by avg. ASX200
down 6%
• Average FUA flat with wrap platform flow
and transfer of Westpac Staff
Superannuation balances to Corporate
Super, offset by avg. ASX200 down 6%
• BT/Asgard platforms (including corporate
super) increased market share by 1% to
21%2
Insurance Cash
earnings 33%
• Cash earnings down 33% to $83m (up
11% on 1H11)
• 7% growth in Life in-force premiums
offset by higher claims
• 13% growth in General Insurance gross
written premiums offset by seasonally
higher claims in first half
• LMI revenue down from de-risking of the
book and lower credit growth
Capital and
Other
Large
• Contribution was higher from a rise in
earnings on invested capital up $11m
and a reduction in expenses
1H12 solid underlying business momentum offset by
irregular items and market movements
Cash earnings movement half on half ($m)
FUM / FUA (excluding J O Hambro)
Movement 1H12 – 2H11
342 363
294
49
21
(8) (20) (49)
(41)
1H
11
Funds
Managem
ent
Insura
nce
Capital
2H
11
Funds
Managem
ent
Insura
nce
Capital
1H
12
Down 19% Up 6%
1 Growth in Corporate Super due to transfer of Westpac Staff Super balances. 2 Plan for Life, December 2011, All Master Funds Admin.
19
1H11 2H11 1H12 Change on
2H11
Employees (# FTE) 3,632 3,709 3,693
Women in senior leadership (%) 39.5 41.9 38.3 x
Revenue per adviser ($000‟s) 114 120 115 x
Customers with a Wealth product (#m) 1.59 1.62 1.67
Customers with an Insurance product
(#m) 1.0 1.1 1.2
Wealth penetration Group customers2
(%) 16.5 17.0 17.7
BT Super for Life customers („000) 218 253 288
BT Super for Life FUM ($bn) 1.3 1.5 2.0
H&C Insurance (WRBB) cross sell (%) 76 79 105
H&C Insurance (SGB) cross sell (%) 58 68 68 –
Deposits on Wrap6 ($bn) 8.4 9.2 10.1
• Platforms saw increased market share in BT Wrap / Asgard Platforms (including corporate
superannuation) up 1% to 21% and #1 in net flows at 60% share of annual new business1
• Cross sell continued improvement in wealth penetration2 to 17.7% (WRBB sector leading at
20.3% and St.George the fastest growing up 140bps to 14.0%)
• Advice continued investment through 549 advisers (up 8%), focused on wealth and aligning
the network to maximise affluent and high net worth opportunities
• Sector leading revenue per adviser3 (WRBB Financial Planner); St.George Financial
Planner in line with Bank sector median
• Deposits had strong growth, particularly on platforms, of $1.1b (6%)4 to $19.5b (up 20% on
1H11)
• Insurance premium growth above system5. Strong sales of Life Insurance through the IFA
network (up 33%) and cross sell of home and contents insurance. General insurance
gross written premiums up 13% and Life Insurance in-force premiums up 7%
Solid underlying performance, Cash earnings lower
Key metrics
• Participate across the full wealth value chain to earn all our Australian customers‟
superannuation, advice and insurance business
– The opportunity is significant, with Wealth penetration across the Westpac Group at only
17.7% (20.3% of WRBB and 14.0% of SGB)2
• Be the platform and services provider of choice for Independent and salaried Financial
Advisers
• Grow owned and aligned financial planning networks
• Grow a diversified asset management portfolio to achieve sustainable above market
performance
• Build on momentum in insurance sales from strengthened distribution and increased
product knowledge across banking channels
1 Plan for Life, December 2011, All Master Funds Admin. 2 Refer to slide 21 for Wealth penetration metrics provider details. 3 Comparator December 2011. 4 Includes Private
Wealth and term deposits on Wrap. 5 Plan for Life December 2011. 6 Includes cash accounts.
Key features of 1H12 underlying performance
Strategy
20
21
Definitions:
Wealth Penetration metrics. Data based on Roy Morgan Research, Respondents aged 14+. Wealth penetration is defined as the number of
Australians who have Managed Investments, Superannuation or Insurance with each group and who also have a Deposit or Transaction Account,
Mortgage, Personal Lending or Major Card with that group as a proportion of the total number of Australians who have a Deposit or Transaction
Account, Mortgage, Personal Lending or Major Card with that group. 12 month rolling average to March 2012. WRBB includes Bank of Melbourne
(until Jul-11), BT, Challenge Bank, RAMS (until December 2011), Rothschild, and Westpac. St.George includes Advance Bank, Asgard, BankSA,
Bank of Melbourne (from Aug-11), Barclays, Dragondirect, Sealcorp, St.George and RAMS (from January 2012). Westpac Group includes Bank of
Melbourne, BT, Challenge Bank, RAMS, Rothschild, Westpac, Advance Bank, Asgard, BankSA, Barclays, Dragondirect, Sealcorp and St.George.
Disclaimer:
The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (Westpac) and its
Australian wealth division, BT Financial Group.
The information is supplied in summary form and is therefore not necessarily complete. It is not intended that it be relied upon as advice to investors
or potential investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial
situation or particular needs. The material contained in this presentation may include information derived from publicly available sources that have not
been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information.
All amounts are in Australian dollars unless otherwise indicated.
Unless otherwise noted, financial information in this presentation is presented on a Cash earnings basis. Refer to Westpac First Half 2012 Results
(incorporating the requirements of Appendix 4D) for the half year ended 31 March 2012 available at www.westpac.com.au for details of the basis of
preparation of Cash earnings.
This presentation contains statements that constitute “forward-looking statements” including within the meaning of Section 21E of the US Securities
Exchange Act of 1934. The forward-looking statements include statements regarding our intent, belief or current expectations with respect to our
business and operations, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions,
financial support to certain borrowers, indicative drivers, forecasted economic indicators and performance metric outcomes.
We use words such as “will”, “may”, “expect”, “indicative”, “intend”, “seek”, “would”, “should”, “could”, “continue”, “plan”, “probability”, “risk”, “forecast”,
“likely”, “estimate”, “anticipate”, “believe”, or similar words to identify forward-looking statements. These statements reflect our current views with
respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond our control and
have been made based upon management‟s expectations and beliefs concerning future developments and their potential effect upon us. Should one
or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from the
expectations described in this presentation. Factors that may impact on the forward-looking statements made include those described in the section
entitled “Risk factors” in Westpac‟s Interim Financial Report for the half year ended 31 March 2012 available at www.westpac.com.au. When relying
on forward-looking statements to make decisions with respect to us, investors and others should carefully consider such factors and other
uncertainties and events. We are under no obligation, and do not intend, to update any forward-looking statements contained in this presentation.
For further information please contact Westpac Investor Relations. Andrew Bowden +61 2 8253 4008.
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