The Challenger Ltd (ASX: CGF) share price has been a strong performer this morning following the release of a positive announcement.
At the time of writing the Challenger share price is up almost 6% to $7.70.
What was announced?
This morning Challenger announced that it has further progressed its strategic relationship with MS&AD Insurance Group Holdings Inc. (MS&AD) to support the company's strategy for growth in Australia and internationally.
According to the release, the new arrangement will see Challenger commence a quota share reinsurance of U.S. dollar denominated annuities issued in the Japanese market by MS&AD subsidiary Mitsui Sumitomo Primary Life Insurance Company Limited (MS Primary). This is expected to commence from July 1.
MS Primary will provide the company's Challenger Life business with an annual amount of reinsurance, across both Australian and U.S. dollar annuities, of at least ¥50 billion (~A$640 million) per year for a minimum of five years. Though, this is subject to review in the event of a material adverse change for either party.
In addition to this, the release advises that MS&AD intends to increase its stake in Challenger beyond 15% and seek a spot on the company's board. This is subject to necessary regulatory approvals and market conditions.
The annuities company's CEO, Richard Howes, appeared to be pleased with the new arrangement.
He said: "Today's announcement reflects the success of the strategic relationship Challenger and MS&AD commenced three years ago. This expanded alliance leverages the strengths of both businesses to create opportunities for continued growth."
Should you invest?
This deal appears to be a positive for Challenger and so I'm not overly surprised to see its shares push higher today.
However, I have been thoroughly underwhelmed with its performance over the last 18 months and intend to stay clear of its shares until there has been a marked improvement.
Instead of Challenger, I would suggest investors gain exposure to the financial sector through the likes of Australia and New Zealand Banking Group (ASX: ANZ) or Macquarie Group Ltd (ASX: MQG).
