1. 69.3k

    • Group assets under management $86 billion, up 10%
    • Normalised net profit before tax* $279 million, up 3%
    • Normalised net profit after tax* $191 million, down 4%
    • Statutory net profit after tax* $220 million, up $214 million
    • Normalised return on equity 15.2%, 30 bps above target
    • Interim dividend 17.5 cents per share, unchanged
    • Excess regulatory capital and Group cash $1.5 billion, up $0.1 billion
    Challenger Limited (ASX:CGF) has today announced its results for the half year ending 31
    December 2019, with strong growth in assets under management driving earnings growth.
    Managing Director and Chief Executive Officer, Richard Howes said Challenger is on track to
    achieve 2020 full year normalised net profit before tax around the top end of its guidance range of
    $500 million to $550 million.
    “The ongoing execution of our carefully planned strategy, together with our response to industry
    disruption has put Challenger in a good position to optimise performance in the current
    environment,” Mr Howes said.
    “Challenger continues to prove to be resilient. Our business model, leading brand and diversified
    distribution have ensured we can continue to deliver solid earnings despite significant and
    ongoing challenges in our operating environment.
    “In our Life business, strong Japanese and Australian institutional sales have offset lower
    domestic sales, which continue to be impacted by disruption in the financial advice market. In
    Funds Management, exceptional retail flows together with institutional inflows boosted earnings
    momentum, with net flows of $1.9 billion for the half.”
    Challenger has also made significant progress against its strategic priorities during the half. This
    has included the commencement of a new arrangement with MS Primary to reinsure US dollar
    annuities in Japan, addition of new partners in the Funds Management business and investment
    in a range of distribution, product and marketing initiatives in response to changes in the
    domestic wealth management market.
    “We see a significant opportunity in engaging more directly with prospective customers and
    increase support for advisers to better meet customer needs.
    “Our investment of up to $15 million this year in a range of distribution, product and marketing
    initiatives will position Challenger to capture growth as the retirement incomes market evolves.”
    1 All percentage and dollar movements compare 1H20 to the prior corresponding period (1H19) unless otherwise stated.
    Challenger Limited ABN 85 106 842 371
    Challenger Limited
    11 February 2020
    Group financial performance
    Group assets under management were $86 billion, up 10% on the prior corresponding period
    (pcp). Normalised net profit before tax was up $9 million to $279 million or up 3% on the pcp,
    including the impact of the investment in future growth initiatives. Normalised net profit after tax
    was down $8 million (4%) on the pcp to $191 million due to a higher effective tax rate.
    Statutory net profit after tax was up $214 million to $220 million. This includes positive investment
    experience of $38 million, which is the valuation movements on assets and liabilities supporting
    the Life business. It also includes a significant item loss of $9 million which relates to the
    impairment and associated windup costs of two Funds Management boutiques.
    Normalised pre-tax return on equity was 15.2%. This was 30 basis points above the target of the
    RBA cash rate plus a margin of 14% announced in June 2019.
    Reflecting Challenger’s strong capital position and confidence in future growth, Challenger has
    declared a fully franked interim dividend of 17.5 cents per share, which remains unchanged on
    last year.
    Challenger has maintained a strong capital position with $1.5 billion in Challenger Life Company
    Limited (CLC) excess regulatory capital above APRA’s minimum requirement and Group cash.
    This reflects a ratio of 1.54 times2 the Prescribed Capital Amount and is toward the top end of the
    target range of 1.3 to 1.6 times.
    Challenger Life
    Total Life sales were up 15% to $3.1 billion, reflecting a strong contribution from Challenger’s
    Japanese partnership and Australian institutional sales. This was offset by lower domestic sales,
    which continue to be impacted by ongoing industry disruption.
    Total annuity sales were down 9% ($0.2 billion) to $2.0 billion, and include domestic sales of $1.5
    billion (down $0.5 billion) and Japanese sales by MS Primary of $0.5 billion (up $0.3 billion).
    Domestic term annuity sales benefited from a new institutional relationship and the growth in MS
    Primary sales were supported by Challenger commencing reinsurance of US dollar annuities
    during the half. Lifetime annuity sales were $0.2 billion (down $0.2 billion) and were impacted by
    changes to the age pension means test rules introduced on 1 July 2019.
    Other Life sales were up 97% to $1.2 billion, reflecting strong demand from institutional clients for
    guaranteed returns in the low interest rate environment.
    2 The Prescribed Capital Amount (PCA) ratio is the ratio of Challenger Life Company Limited’s regulatory capital base divided by the
    Challenger Limited ABN 85 106 842 371
    Challenger Limited
    11 February 2020
    The strong Japanese and Australian institutional sales contributed to Life book growth of $0.9
    billion, with the total Life book increasing by 6.2%3 for the half. The annuity book continues to
    shift toward long-term annuities, being Australian lifetime and MS Primary. Long term annuities
    represented over one third of all annuity sales, which pushed the tenor of new business sales to
    over nine years. The long-term annuity book is now the same size as the fixed term annuity book,
    which will underpin future earnings.
    Life cash operating earnings were up 5% to $345 million reflecting growth in investment assets.
    Strong progress was made building on Life’s wholesale longevity business with three transactions
    completed in the UK pension market during the half. These transactions resulted in a significant
    increase in the present value of expected future profits from Life Risk, which will also support
    future earnings growth.
    Life’s earnings before interest and tax of $286 million was up 3%. This included expenses of $6
    million from the investment in distribution, product and marketing initiatives.
    Challenger is responding to the ongoing disruption by investing in a range of growth initiatives to
    reshape the business for the evolving wealth management market. This includes a focus on
    supporting more direct engagement with prospective customers, increasing support for advisers
    to better meet changing customer needs and expanding our capabilities in partnering with
    institutional clients.
    While disruption in the retail advice market is expected to be ongoing, Challenger’s strong brand
    and reputation, and diversified distribution networks has supported the resilience seen in the
    business across the half.
    Challenger continues to be recognised as the number one retirement income brand with a strong
    reputation among customers and advisers. The December 2019 Marketing Pulse survey found
    93% of advisers rate Challenger as the leading retirement income brand.
    Funds Management
    Funds Management earnings were supported by strong growth in retail and institutional flows
    during the half, including $1.9 billion of net flows by Fidante Partners.
    Earnings before interest and tax of $28 million was up 7%, driven by an increase in average
    funds under management (FUM), which was up 5% to $81.1 billion.
    Fidante Partners continues to evolve its successful multi-boutique model, expanding partnerships
    and launching new high active boutique manager products. In October, Fidante announced a
    strategic joint venture with Ares Management Corporation, launching Ares Australia Management
    (AAM). AAM will bring high quality credit and other alternative investments from one of the largest
    global alternative asset managers to the Australian market.
    3 Total Life book growth percentage represents Life annuity net flows and Other Life net flows over the period divided by the opening
    Life annuity book, Guaranteed Index Return and Challenger Index Plus Fund liabilities.
    Challenger Limited ABN 85 106 842 371
    Challenger Limited
    11 February 2020
    Fidante Partners has also built on its ActiveX Series of active ETFs with the launch of the
    Kapstream Absolute Return Income Fund in the half. The launch follows the success of the
    ActiveX Ardea Real Outcome Bond Fund in 2018.
    Long-term investment performance remains strong across Fidante Partners’ stable of boutiques
    with 89% of funds achieving either first or second quartile investment performance4
    In December, Challenger Investment Partners was appointed by the Australian Office of Financial
    Management (AOFM) as investment adviser to assist with the evaluation of investment proposals
    and management of the portfolio for the Australian Business Securitisation Fund, which has been
    established by the Australian Government to improve access to credit for small businesses.
    Challenger remains well positioned to optimise performance while also positioning for future
    growth. FY20 normalised net profit before tax is expected to be around the top end of
    Challenger’s guidance range of $500 million to $550 million.
    Challenger is also on track to achieve its normalised return on equity target of the RBA cash rate
    plus a margin of 14%.
    The full year dividend is expected to remain unchanged from FY19 at 35.5 cents per share, which
    is above the target dividend payout ratio of 45% to 50% of normalised net profit after tax,
    reflecting Challenger’s strong capital position and confidence in future growth.

    courtesy of Bell Direct

    ( DYOR )

    i do not hold this share ( can never get my target price)

    but might have exposure via various LICs and ETFs

    market expectations will be key here

    1 like
  2. 6.6k

    CGF is on my watch list ... currently $4.43 ... if the predicted property market falls, this will fall into a very decent BUY range ... good long term prospects

  3. 624

    Nothing to see here. More hogwash from Mucus. Keep an eye on it Mucus.

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