Annuity Sales Lift Challenger

By Glenn Dyer | More Articles by Glenn Dyer

The super boom, rising employment and the ageing population have helped annuities group, Challenger to report a 21% jump in net profit to nearly $400 million for the year to June 30.

The company said yesterday that record sales of annuities and a double digit surge in fund under management combined to produce a record net result of $397.6 million, benefiting from record annuity sales and growth in assets under management.

Normalised net profit after tax was also up 6.4% to $384.9 million for the year ended June 30.

Revenue from ordinary activities rise 8.8% to $1.97 billion, from $1.81 billion tin 2015-16 while a 1 cent a share rise in the final dividend to 17.5 cents a share took the full year payout to 34.5 cents. Despite all the good news, the shares sank 3.9% to $12.35.

The results came a day after Challenger cemented closer ties with a major Japanese general insurer which will emerge as a big shareholder.

Challenger will raise $500 million via and share placement to MS&AD Insurance Group which will give the Japanese group 6.3% of Challengers issued capital.

As MS&AD will lift this stake to around 10% over the next year, the deal has the same effect of a small share buyback given that the Japanese company will be standing in the market to the tune of $250 to $300 million or so.

MS&AD has also stated it intends to be a supportive shareholder,” said Challenger in a statement.

“This strategic relationship builds on Challenger’s successful distribution relationship with MS Primary and broadens out access to the Japanese market. It also provides significant capital to fund out future growth, Challenger chief executive Brian Benari said yesterday.

Japanese insurer MS Primary (part of MS&AD) accounted for 15% of Challenger’s 2017 financial year annuity sales, so it is a vital relationship.

Challenger has two divisions- its Life arm which includes its annuity products and a funds management business.

It’s Life’s cash operating earnings were up 7% to, $631 million, while its funds management arm saw inflows of $61.8 billion, up 12% on the prior year.

Annuity sales rose 20% to $4 billion.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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