Commonwealth Bank
description
Transcript of Commonwealth Bank
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Commonwealth Bank
Investments & Insurance Services
29 July 2003
www.commbank.com.au
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The material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation, 29 July 2003. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate.
Disclaimer
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Speaker’s Notes
Speaker’s notes for this presentation are attached below each slide.
To access them, you may need to save the slides in PowerPoint and view/print in “notes view.”
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Stuart Grimshaw IIS Strategy and Business Group Executive, OverviewInvestments and Insurance Services
Peter Beck CommInsure Strategy Managing Director, and Business Overview CommInsure
John Pearce CFSI Strategy and Chief Executive Officer, Business Overview Colonial First State Investments
Stuart Grimshaw ConclusionGroup Executive, Investments and Insurance Services
Questions and Answers
Discussion Outline
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IIS organisational structure
Investment and Insurance Services
(Stuart Grimshaw)
Financial Planning & Advice Services
(Acting - Jerome Bleijie)
Finance
(Michael Cant)
Business Development
(Robert DeLuca)
Risk Management & Compliance
(Jim Evans)
Human Resources
(Sue Mather)
Colonial First State Property
(Geoff McWilliam)
Colonial First State
Investments
(John Pearce)
First State International
(Tom Waring)
Commonwealth & Colonial Products
(Grahame Petersen)
CommInsure
(Peter Beck)
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Key Messages
There is significant value in having an end to end value chain presence
We are building on our leading competitive position in investments and insurance manufacturing
We are leveraging and extending our distribution strengths
We are growing our platform capabilities
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We have strengths across the value chain and benefit from an end to end presence
IIS Products and Services by Value Chain Element
Business Model Strengths
We are one of the market leaders in:
• Asset management• Life insurance• Platform inflows in
FirstChoice• Breadth and scale
of banking network and 3rd party distribution
Strengths of our model:• Flexibility in pricing • Capture all margins• Serve broad range
of customer needs
Aligned
IBS
External IIS CBA Group
Dealer group
services
• Research
• Compliance
DistributionSupport
• Saleseffectiveness
• Advisertraining anddevelopment
Direct
External
• IFA’s
• Brokers/Agents
• SME/Corporates
• Platforms
• Institutionals
RBS
PFS
IFS
Fu
nd
Man
ager
s / B
DM
s
DistributionAdministration
Platforms
Master Trust
•FirstChoice
Wrap
•Avanteos
Property
DistributionSupport/Services
ManagedFunds
LifeInsurance
GeneralInsurance
ProductManufacturing
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There are a number of notable recent achievements across IIS
Integration of Commonwealth Investment Management and First State Investments
Good progress on legacy product and systems rationalisation
Achieved leading market share position in Life Insurance
Significant growth in Property Funds Under Management over last 12 months
Successful launch and strong growth of FirstChoice
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• Continue to develop a range of tools to meet the broad needs of our planners
• Rationalisation of products and systems
Short Medium Long
Our broad strategic agenda will deliver benefits over short to long term time horizons
Expected Timing of Pay-off
• Capture the investment and insurance needs of more of our banking customers
• Planner and adviser development program
• Product and platform innovation
• Prudent growth options
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Significant margin is captured through our manufacturing capability
DistributionAdministrationManufacturing
Greater leverage of front-end success through capture of manufacturing margin
Flexible offering - can be bundled or offered separately
Illustration: M anaged Investm ent Revenue M argins
(bps)
50-80
170-275
60-9560-100
110-175110-180
120-195
End to End M odel
Asset M anager
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We are extending and leveraging our strengths in distribution
Established one distribution support services team focused on CBA channels
Well positioned to drive sales through CBA channels:
Large internal managed funds and insurance sales growth opportunity
Good progress to date
IIS Internal Distribution Model
= Number of planners as at May 2003[ ]
IBS
FinancialPlanning
andAdvice
Services
Products DistributionDistribution
Support/Services
PFS
RBS
External
CommInsure
CFS[614]
[52]
[63]
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Rationalising products and systems will allow us to realise further efficiencies
Established one team to manage investments legacy products and systems:
Product rationalisation
Client migration
Systems decommissioning
Key drivers of success:
Client retention and service
Realise cost efficiencies
Reduced operational risk
“Legacy” products reduced from 255 to 124 by 2005
Source: Internal Projections. Systems rationalisation by calender year end
2002 2005
L eg acy S ys tem s R a tio n a lisa tio n
(2002 - 2005 )
14
10
5
1 7
2003 2004
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Stuart Grimshaw IIS Strategy and Business Group Executive, OverviewInvestments and Insurance Services
Peter Beck CommInsure Strategy Managing Director, and Business Overview CommInsure
John Pearce CFSI Strategy and Chief Executive Officer, Business Overview Colonial First State Investments
Stuart Grimshaw ConclusionGroup Executive, Investments and Insurance Services
Questions and Answers
Discussion Outline
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The insurance industry outlook has changed
A maturing industry:
• Favourable long term growth
• Commoditised products
• Lower investment returns
• Competitive and consolidating
• Increased regulatory focus
• A time of ‘surprises’: Sept 11, Canberra, Bali, HIH
• Low penetration
• Scale is critical
• Rising re-insurance premiums
• Industry & legislative shake up
• Return to rational pricing
• Requires cost focus as well as revenue
• Importance of broad based distribution
• Commoditisation - difficult to differentiate
• Uncertainty - increasing importance of good corporate governance and security
Winner will be larger players, who maintain profitability by:
• Leveraging scale
• Driving out efficiencies
• Building revenues through:
Cross sell / bundling
Multi-channel distribution
Brand and reputation
Whilst maintaining a service culture built around:
• Service focus
• Innovation
• Simplicity
• Platforms
Industry Outlook Implications The “Winners”
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Progress against stated strategies
Customers
Brand
Product
Distribution
Integrated service
Total insurance & financial solutions
Promoted CommInsure brand Packaging & loyalty programs Rebranding products
Rationalisation
Competitive pricing
Product upgrades
Improved efficiency
Increase cross-sell and retention
Service
Price
People
Technology
Integrated call centre & Ops
Combine life and general insurance
Packaging & loyalty programs
Scale & efficiency in service
Small business culture
Insurance focus
Functional specialist
Rationalise systems
Efficient processes
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We have achieved significant scale and efficiency in our life business
Achieved through:
Leveraging multiple distribution channels
Selective repricing
Product innovation
Improving efficiencies
Building our direct sales capability
CBA channel sales force capacity and productivity improvements
Source: Plan for Life December 2002
CommInsure Life Insurance New Business
(Dec 00 to Dec 02)
5 5
1
5 53 4
22
0
2 0
4 0
6 0
8 0
1 0 0
1 2 0
1 4 0
1 6 0
D e c -0 0 M a r-0 1 J u n -0 1 Se p -0 1 D e c -0 1 M a r-0 2 J u n -0 2 Se p -0 2 D e c -0 2
Ne
w B
us
ine
ss
Pre
miu
m (
$m
)
0 %
2 %
4 %
6 %
8 %
1 0 %
1 2 %
1 4 %
1 6 %
1 8 %
2 0 %
Ne
w B
us
ine
ss
Ma
rke
t S
ha
reT e rm L ife D is a b il i ty G ro u p R is k M a rk e t Sh a re
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Our distribution channel strengths underpin our performance
Continued focus on critical third party channel
Strong recent growth in CBA direct and branch channel sales
Leverage “natural” cross-sell points in CBA channel
Source: CBA Internal Data - June 2003
L i f e In s u r a n c e n e w s a le s & r e - r a t e s b y c h a n n e l( 0 0 /0 1 t o 0 2 /0 3 )
4 %3 % 1 8 %
2 4 %
2 4 %1 8 %
7 9 %7 2 %
5 8 %
0 0 /0 1 0 1 /0 2 0 2 /0 3
D i r e c t N e t w o r k T h i r d P a r t y
1 0 0 % = $ 5 8 .4 M 1 0 0 % = $ 5 4 .1 M 1 0 0 % = $ 8 1 .1 M
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We have also achieved solid growth across our broad range of protection products
Growth over past 12 months:
Group Risk 16.7%,
Disability 9.8%,
Lump Sum 8.1%
Home & Contents 7.8%
Motor Insurance 130% (distribution only)
Offered under the CommInsure brand
Source: Plan for Life Dec 2002, H&C data - Internal CBA analysis and APRA data as at June 2002
5 . 2 %
2 0 . 3 %
1 4 . 1 %
1 1 . 9 %
1 1 . 3 %
H o m e &C o n t e n t s
D is a b i l i t yIn c o m e
A n n u i t i e s
L u m p S u m
G r o u p R is k
# 4
P r o d u c t C a t e g o r y M a r k e t S h a r e / R a n k in g s
# 6
# 1
# 1
# 5
R a n k
M o t o rIn s u r a n c e
O t h e rC o v e r
- D is t r ib u t io n o n ly
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Further opportunities exist to enhance the efficiency and scale of our Insurance business
Build scale and grow the business:
Competitive, rational pricing
Optimised, multi-channel distribution
Meet insurance needs of more of our banking customers
Customising products for customer needs/channels
Build direct sales capabilities
Drive efficiencies:
Process improvements
Integrated technology solutions
High performing teams
Build capabilities:
Platform for simple, convenient interactions with advisers & customers
Product enhancements
Customer service culture
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Stuart Grimshaw IIS Strategy and Business Group Executive, OverviewInvestments and Insurance Services
Peter Beck CommInsure Strategy Managing Director, and Business Overview CommInsure
John Pearce CFSI Strategy and Chief Executive Officer, Business Overview Colonial First State Investments
Stuart Grimshaw ConclusionGroup Executive, Investments and Insurance Services
Questions and Answers
Discussion Outline
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A tough new era for funds management
A maturing industry:
• Slowing, but favourable, long term growth
• Lower investment returns
• Concentration of power
• Growth of platforms
• Institutionalisation of distribution
• Increased regulatory focus
• Industry shake up
• Scale is critical
• Picking investment management winners difficult
• Potential for margin squeeze
• Requires cost focus as well as revenue
• Importance of broad based distribution
• Commoditisation – difficult to differentiate
• Greater activism among consumers / investors / ‘others’
Larger players, particularly those with distribution networks, who maintain profitability by:
• Leveraging scale to drive down costs
Maintaining revenues through:
Offering compelling customer propositions that leverage their portfolios of businesses; and
Differentiating themselves based on brand, service and performance
High performing specialised / niche manufacturers will also thrive.
Industry Outlook Implications The “Winners”
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Our business model
CBA SUPPORT
1. PRODUCT
• depth & breadth acrossinvestment mgmt
• leading masterfund
2. DISTRIBUTION
• strong IFA relationship
• CBA distribution
3. SERVICE &ADMINISTRATION
• service culture
• service reputation
EXECUTION CAPABILITY• Speed to market
• Efficiency focus
BRAND• High brand awareness
• Preferred brand for investors andadvisers
TECHNOLOGY• In-house capability• Single unit registry (FMS)
PEOPLE• Strong culture
• Employer of choice
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Colonial First State has a broad, well positioned product suite
CBA Internal Analysis and Market Forecasts
CFS Internal Product View
HighGrowth
Potential
LowGrowth
Potential
LowMargin
HighMargin
PropertySecurities
IndexFunds
AustralianEquities
(core)
CreditFunds
InfrastructureFunds
AustralianEquities (GDP
Plus)PrivateEquity
GlobalEquities
FirstChoice(3rd partyproduct)
FirstChoice(house
product)
HedgeFunds
Firstchoice(corporate
super)
AustralianEquities
(452Capital)
Incomefunds
Fixedinterest
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CFS has a distribution network with breadth and scale
Continuing importance of the IFA channel
Sales through bank channel growing strongly
Source: Internal Data
01 ,0 0 02 ,0 0 0
3 ,0 0 04 ,0 0 05 ,0 0 06 ,0 0 0
7 ,0 0 08 ,0 0 09 ,0 0 0
Jun-
99
Sep
-99
Dec
-99
Mar
-00
Jun-
00
Sep
-00
Dec
-00
Mar
-01
Jun-
01
Sep
-01
Dec
-01
Mar
-02
Jun-
02
Sep
-02
Dec
-02
Mar
-03
w ith o u t C B A w ith C B A
C F S Q u a r te r ly S a le s ($ M )
(1 9 9 9 to 2 0 0 3 )
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Our brand and customer service ratings continue to be strong
Recognised in the market for customer service
Leading brand - and deliver on proposition
Source: Newspoll data - June 2003
0
5
1 0
1 5
2 0
2 5
3 0
3 5
4 0
4 5
5 0
D e c -9 9 J u n -0 0 D e c -0 0 J u n -0 1 D e c -0 1 J u n -0 2 D e c -0 2 J u n -0 3
M e rc / IN G C o l F irs t S ta te A X A A M P B T P e rp e tu a l
N e w s p o ll S u rv e y - F u n d M a n a g e r P re fe re n c e s(J u n e 2 0 0 3 )
Q : W o u ld y o u in v e s t w ith u s ?
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FirstChoice has been a “killer application” in the market
FirstChoice:
Leverages existing scale Innovative mandate structure Simple, low pricing Late to market but topping industry flows
Avanteos:
Leading technology
Wholesale market exposure
Creates “wrap options” for CFS
Source: Assirt March 2003 data
Platform s M arket Australia
(Septem ber 2002 to M arch 2003)
= $15bn FUA
M arke t S h are
Infl
ow
s (
$m
)
2 5%20%15%10%5%0%
1,200
900
600
300
0
-300
Natio n a l/M L C
AM P
AX A
B T / Westp ac
Asg ard
C B A
Nav ig a to r
M acq u ar ie
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The FirstChoice mandate structure has a number of benefits over a traditional masterfund
• Unique Straight Through Processing between CFS and managers through centralised custodian
• CFS remains legal owner / administrator of the fund. Ease of manager change with minimal CGT and stamp duty. Delivers pricing power.
• CFS controls unit pricing, distributions, annual statements and tax. Superior retail-style service levels.
Custody
Investment Management
Administration
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We have favourable platform economics due to our end to end presence
Typical FirstChoice Revenue Split
Allows CFS/CBA to capture greater share of available margin
Adviser/customer still provided choice - of distribution channel (IFA, branch, tied), and manager (CFS, non-CFS)
AssetManagement
Administration
60 bps60bps 60bps
Percentageof Flows
RevenueMargin
CFS Internal
Asset ManagerSelection
External
Source of Flows
Tied IFA’s
61% 100% 36% 26% 38%
Distribution
39%
Administered
Internal
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We are building our platform capabilities to further drive market advantage
• Launched First Choice
simple offering
competitive pricing
investments, super, pension
• Integrated, end to end platform offering:
increased functionality
front and back end integration
adviser transactional access
practice management interface to desktop
planning interface with
CommSec
“Day One”
“Day Two”
“Day Three”
“Day Four”
• FirstChoice Product
enhancements (functionality)
Increase range Corporate super
• Avanteos leading web-based
technology platform
wholesale market exposure
creates wrap “options” for CBA
• Next Generation platform enhancements:
expanded client review functionality
portal-based encompasses investments,
equities, insurance & banking offering
consolidated and customised reporting
integrated, leading front-end tools
Current Focus
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Stuart Grimshaw IIS Strategy and Business Group Executive, OverviewInvestments and Insurance Services
Peter Beck CommInsure Strategy Managing Director, and Business Overview CommInsure
John Pearce CFSI Strategy and Chief Executive Officer, Business Overview Colonial First State Investments
Stuart Grimshaw ConclusionGroup Executive, Investments and Insurance Services
Questions and Answers
Discussion Outline
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Key Messages
There is significant value in having an end to end value chain presence
We are building on our leading competitive position in investments and insurance manufacturing
We are leveraging and extending our distribution strengths
We are growing our platform capabilities
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Stuart Grimshaw IIS Strategy and Business Group Executive, OverviewInvestments and Insurance Services
Peter Beck CommInsure Strategy Managing Director, and Business Overview CommInsure
John Pearce CFSI Strategy and Chief Executive Officer, Business Overview Colonial First State Investments
Stuart Grimshaw ConclusionGroup Executive, Investments and Insurance Services
Questions and Answers
Discussion Outline
33
Commonwealth Bank
Investments & Insurance Services
29 July 2003
www.commbank.com.au