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Challenger Update

Challenger Limited (CGF) reported a Net Statutory Profit After Tax (NPAT) of $328 million (up 9.6% on 2016). This was largely due to contributions from the group’s Life segment which generated $500 million in earnings, a 9.4% increase. On the other hand, the overall NPAT growth was held back by poor performance from the Funds Management segment as its earnings fell by 15.9% on the back of ‘Brexit’ causing a stall in the UK capital raising activity.

 

Challenger Life Company Limited (CLC) (Challenger’s largest operating subsidiary) is positioned reasonably to accommodate for future growth potential. It currently holds more capital than required from the Australia Prudential Regulatory Authority (APRA) as the group’s Prescribed Capital Amount (PCA) is at 1.57x and therefore on the higher end of the target range. This translates into approximately $1 billion of excess regulatory capital.

 

The current strategy for CGF is to grow its annuities business through broadening the scope of its third party distribution partners. It has recently added partnerships with Suncorp, Clear View and others to the existing partnerships with Colonial First State and VicSuper. This is a promising start to the Annuity segment but it still has a long way to go.

 

Click here for updated research on Challenger Limited Capital Notes (ASX: CGFPA)