Challenger reaffirms FY22 net profit guidance; how are shares faring?

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  • Challenger expects net profit to be near the upper end of the AU$430 million-U$480 million guidance range.

  • Challenger said that it was now focussed on building a more diversified business.

  • The company also said that its business was strongly capitalised with a Life PCA ratio of 1.61 times.

Challenger Ltd (ASX:CGF) on Tuesday reaffirmed that it was on track to meet its full year guidance for FY22 on account of strong balance sheet and sustainable capital settings. The annuities and funds management business expects normalised net profit before tax (PBT) to be near the upper end of the AU$430 million to AU$480 million guidance range, Challenger said in its latest ASX filing.

Challenger also said that its business was “strongly capitalised with a Life PCA ratio of 1.61 times, as of April 2022, which is towards the upper end of its target range.” PCA ratio represents total Challenger Life Company Ltd (CLC) Tier 1 and Tier 2 regulatory capital base divided by the Prescribed Capital Amount (PCA) and is as of 30 April 2022.

By 10:05 AM (AEST), Challenger’s stock was trading at AU$7.49, down 0.93%. The stock is up 9.5% on a year-to-date (YTD) basis. In the past year, the share price has climbed nearly 52%.

Sharing further update on its strategy, Challenger said that it was now focussed on building a more diversified business to meet a wider range of customer needs.

The business is expected to build on its strong foundations as a leader in retirement incomes, and was well positioned for growth, said Challenger CEO and Managing Director Nick Hamilton.

“We have an exciting opportunity to bring the best of Challenger to more customers than we do today. To achieve this, we will expand our brand and deliver more products across a greater number of channels. We will also focus on our investment capability and operating platform to deliver more of what our customers need,” he added.

Apollo joint venture

Sharing its progress on the Apollo joint venture, Challenger said that the opportunity with the US private investment group was expected to address an underserved market. The JV is also likely to leverage the capabilities of the group, and provide business diversification.

Meanwhile, Challenger also has a non-binding MoU with SimCorp to establish joint venture, providing leading investment operations platform.

“Our joint venture with SimCorp will leverage Challenger’s existing investment operations capability and deliver Australia’s first end-to-end investment administration platform. We see an untapped opportunity to deliver these critical services to leading financial services organisations and asset owners,” the company said.

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