Challenger (ASX:CGF) share price pushes higher on Q1 update

The Challenger share price is rising on Wednesday…

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The Challenger Ltd (ASX: CGF) share price is on the move on Wednesday morning.

At the time of writing, the annuities company’s shares are edging 0.5% higher to $6.37.

Why is the Challenger share price rising?

Investors have been bidding the Challenger share price higher today following the release of its first quarter update.

According to the release, Challenger’s Life sales were up 32% to $2.1 billion during the first quarter.

Challenger’s Managing Director and Chief Executive Officer, Richard Howes, advised that this was driven by its diversification strategy. He commented: “Strong quarterly sales growth highlights the success of our diversification strategy and reflects our focus on building relationships with institutional clients.”

This ultimately led to the Life business reporting net flows of $594 million, which underpinned book growth of 3.4% for the quarter.

Challenger’s annuity sales of $1.2 billion were stable and included strong growth in domestic annuity sales, which increased 17% or $143 million to $986 million.

Pleasingly, Mr Howes appears optimistic that this solid form can continue thanks to new product launches.

“Continuing to innovate has been a priority and we recently launched our new market-linked annuity for customers who seek the benefits of lifetime income, while maintaining exposure to investment markets. Benefiting from rigorous market testing, this option will form an attractive complement to our existing lifetime annuity offering,” he added.

Funds under management continue to grow

Also potentially giving the Challenger share price a boost was news that its funds under management (FUM) have continued to grow.

Management notes that Challenger’s Funds Management business is one of the fastest growing asset managers in Australia. The business delivered a strong performance for the quarter, with FUM increasing to $108.4 billion This was a $2.6 billion or 2% increase for the quarter.

This FUM growth reflects net inflows of $1.4 billion for the quarter, a $1.7 billion contribution from investment markets, and net distributions of $0.5 billion.

Bank acquisition

The company has now completed its acquisition of digital bank MyLifeMyFinance.

Management sees the acquisition as a key pillar of Challenger’s growth strategy. It believes it is now well positioned to increase the role it plays in improving retirement outcomes, extending its customer reach, and further diversifying its product offering to accelerate medium-term growth.

Outlook

In FY 2022, Challenger continues to expect to achieve strong profit growth.

It has reaffirmed its FY 2022 normalised net profit before tax guidance of between $430 million and $480 million. The mid-point of $455 million represents 15% growth on FY 2021.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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