This morning annuities provider Challenger Ltd (ASX: CGF) posted its results for the full year ending June 30, 2017. Below is a summary of the results with comparisons to relevant prior corresponding periods.
- Statutory net profit of $398 million, up 21% on prior year
- Normalised net profit (excluding investment gains and losses) after tax of $385 million
- Group assets under management at June 30, $70 billion, up 17%
- Record annuity sales of $4 billion over year, up 20%
- Funds management business posted net flows of $6.2 billion, up 258%
- Normalised cost-to-income ratio improved 1.2% to 33.4%
- Normalised earnings per share of 68.5 cents, up 6%
- Full year dividend of 34.5 cents per share
- Japanese insurer Mitsui Sumitomo will take a 10% stake over next 12 months
Another solid year from Challenger, which is a beneficiary of Australia's ballooning superannuation pile as more people reach retirement age with large superannuation balances to invest in return for reliable income streams over fixed terms, or the rest of their lives.
Challenger also announced its Japanese business partner Mitsui Sumitomo is to take a 5% stake in the business via a placement of shares at $13.04 each. Mitsui plans to lift its stake to 10% over the 12 months ahead via on-market buying of Challenger shares. The funds raised will be used to fund Challenger's growth and capital adequacy backing, as its balance sheet stretches due to the popularity of its retirement products.
The business is also expanding its footprint in the giant Japanese annuities market at a good rate, with new distribution deals also struck in Australia with the likes of AMP Limited (ASX: AMP) and BT Investment Management Ltd (ASX: BTT).
In FY 2018 the group stated it is targeting "normalised net profit before tax of between $545 million and $565 million, representing growth of 8% to 12% on FY17". The annuities provider is also aiming to maintain a normalised pre-tax return on equity of 18%.
