CGF - Challenger Limited

Challenger was stung by a $750 million collapse in the value of its investments, pushing the company into the red, as the group looks to reinvigorate its flagging annuities business in Australia, where sales sunk by more than $1 billion.
Challenger revealed a full-year loss of $416 million compared with a profit of $308 million the year before. Revenue [halved], falling to $1.13 billion from $2.37 billion, the company said on Tuesday.

As flagged earlier in the year, Challenger decided against paying a final dividend.

Profit was hit by “losses resulting from the major COVID-19 market event”, chief executive Richard Howes said, as he pointed to growing funds under management as a sign of the business’ resilience.

Assets under management grew 4 per cent to $85 billion, as major superannuation funds parked assets in Challenger’s managed funds as part of a strategy to deal with liquidity requirements during the government’s early super release program.

“Normalised” net profit, stripping out asset price volatility to zone in on ongoing operations, fell 13 per cent over the year to $343 million on an after-tax basis. It expects a full-year normalised profit of between $390 million and $440 million this year.

Sales of life insurance rose 13 per cent with strong results from its Japanese operations. The company is Australia’s biggest seller of annuities, a form of longevity insurance, but said the domestic market was a sore point, with “structural changes to the wealth management market” and new age pension means test rules combining with the coronavirus economic crisis to dampen sales.

Local sales of annuities fell by $900 million over the year.


https://www.afr.com/companies/finan...fter-750-million-value-plunge-20200811-p55khc

So_Cynical said:

Wrong thread maybe? Challenger isn't a bank.

Click to expand...

9 months later and Challenger is a bank, coincidently while bored out of my mind at work today im going thru my portfolio stocks thinking what needs to be culled and i though - Challenger needs to buy something, like a small banking operation and or a retail super fund, and now boom.

Challenger Limited (ASX: CGF) today announced it has entered into an agreement to acquire MyLifeMyFinance Limited, an Australian-based customer savings and loans bank. https://www.challenger.com.au/shareholder/market-announcements/mylife-myfinance-bank-acquisition

MyLife MyFinance - terrible name https://www.mylifemysuper.com.au/

I was thinking that the annuity market is kind of dead and Challenger really need to do something, the Vanguard entry into retail super is really going to shake things up and maybe CGF can be a part of that disruption, rename the fund (Catholic super) and turn it into a simple low cost indexing type of fund and bundle a simple online only banking offering.

Challenger do retirement income really well already so now they can launch a super pension product that will basically just bundle their funds together in the one vehicle but available thru the super system as a pension, this could be a big winner.

a poorly received 1H21 has clipped what was only ever a lukewarm recovery from Covid. Low interest rates must be cruelling their model


• Strong growth and diversification providing business momentum
• Life book growth 4.7% in 1H21
• Funds Management net inflows $6.4 billion in 1H21
• Group assets under management up 13% to $96 billion in 1H21
• Bank acquisition to drive medium-term growth
• Performance in line with expectations
• Normalised net profit before tax (NPBT) $196 million reflects progressive deployment of excess liquidity
• On-track for full year normalised NPBT guidance
• Statutory net profit after tax $223 million with positive investment experience

• Strongly capitalised
• Challenger Life Company Limited excess capital above top end of target range
• Dividend 9.5 cents per share fully franked

Click to expand...

(DNH)

And still getting it wrong? But then with short term pricing and long term commitments, how can they ever hope to be right


Challenger comes unstuck amid credit spread crunch

Challenger has lowered its profit forecast and pledged to rein in overly-generous annuity pricing after it was wrong-footed by an unexpected crunch in credit spreads as the economy rebounds out of COVID-19.

Click to expand...

CGF rallying this morning after news that Athene Holding Limited has agreed to acquire a 15% minority interest in Challenger from Caledonia (Private) Investments Pty Limited.

Challenger’s Managing Director and Chief Executive Officer, Richard Howes said: “Today’s announcement by Athene is a strong endorsement of Challenger’s market position and long-term growth prospects from a leading international retirement services provider. We look forward to working with Athene and Apollo as we continue to pursue our shared purpose of providing customers financial security for a better retirement.”

Click to expand...

CGF currently up 11.7% to $6.11. It's recent low of $4.79 on 5 May looks to be a distant memory now. Sentiment has turned and CGF is looking bullish once again.

Noticed that Australia's only big contrarian fund manger Allan Gray has taken a position.
Blog post link below outlining their investment rational.

Thought I'd put it here. Video from 2015.

Rog's choice was CGF back in Aug 2015 at 2.34m. The stock did rally 100% in +2 years but today is roughly at the price it was when Rog did his pitch.

More entertaining though is the rave these two institutionalized guys did for Isentia (ISD) - "a company with bright future prospects" - late in the video. Most would be familiar - after reaching almost $5 in late 2015 Isentia went into severe decline and was bought out by 'Access Intelligence' for $0.175 beginning June 2021 and that was at a 157% premium to the last closing price before the offer.

Challenger on Tuesday reported record sales of annuities for the six months to December 31 of $3.5 billion, a 41 per cent increase. An increase in base interest rates and corporate debt spreads has allowed it to offer policyholders higher guaranteed returns.

Rising interest rates have allowed Challenger to pay holders of its three-year annuities a 5 per cent rate by October last year, up from just 1.5 per cent in mid-2021.

The company said it was on track to meet the mid-point of its full-year earnings guidance of between $485 million and $535 million.

12c ff dividend ... up a bit. SP lifted a bit.

Market Matters afternoon report

• Challenger Financial (CGF) –11% fell after their largest shareholder offloaded ~10% of their stake.

Not Held

Challenger (ASX:CGF) shares fell by more than 13% on Thursday after its largest shareholder, American investor Apollo Global Management, more than halved its stake in the Sydney-based investment group, from 20.1 per cent to 9.9 per cent.

Challenger Managing Director and Chief Executive Officer, Mr Nick Hamilton said:
"Challenger and Apollo have developed a collaborative partnership that supports our broader growth strategy. We look forward to continuing this relationship and pursuing a range of initiatives to deliver value for Challenger shareholders, including through asset origination and distribution of Apollo’s high-quality products in Australia. Apollo’s re-evaluation of its investment in our business will also significantly increase Challenger’s free float and improve trading liquidity."

Apollo Head of Asia-Pacific, Mr Matthew Michelini, said: "We believe Challenger is a unique platform to offer the next generation of investment products to retirees in Australia. As one of our most important long-term strategic partners globally, we look forward to continuing to collaborate on asset management and product design.”
.
.
....so , not a takeover target anymore

Market Matters comment on CGF H1 result:
"Challenger (CGF) -8.97% whacked on lower margins. We think this is a complicated business best avoided."

Not Held

stealth T/O ?

CGF refers to a news release issued today by Dai-ichi Life Holdings, Inc.that its Australian subsidiary, TAL Dai-ichi Life Australia Pty Limited, has agreed to acquire a 15.1% minority interest in Challenger from MS&AD Insurance Group Holdings, Inc.at a price of ¥763 per share (approx. A$8.46 per share).

The purchase price represents a premium of 53% to Challenger’s closing share price on 4 April 2025. The share sale is subject to customary regulatory approvals including from the Australian Foreign Investment Review Board and the Australian Prudential Regulation Authority.

Challenger’s Managing Director and Chief Executive Officer, Nick Hamilton said: “Dai-ichi Life is a global leader in life insurance and we look forward to building a relationship that will benefit both our customers and shareholders. We welcome their significant investment in our business and will explore future opportunities that support our strategic objectives.
“The strategic reinsurance relationship in place with MS Primary since 2016 has created significantshared value and we are pleased this will continue.
This is an exciting time for Challenger as we deliver our growth strategy and provide financial confidence to even more Australians in retirement.”