Challenger share price screams 7% higher on half-year results

Shares in the investment manager are well in the green.

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Key points

  • The Challenger share price has soared 7% in early trading after the investment management company released its FY23 half-year results
  • The company reported a 5% lift in net profit before tax (NPBT) of $250 million
  • Strong demand for annuities contributed to a record half for Challenger's retirement income business 

The Challenger Ltd (ASX: CGF) share price soared by 7% in early trading after the investment management company released its FY23 half-year results.

The Challenger share price opened at $7.45 and quickly rose to a high of $7.77, up 7% on yesterday's close. It is now trading at $7.63, up 5.1%.

Challenger share price rockets as dividend is raised

Here are the highlights for the six months ending 31 December 2022:

  • Normalised net profit before tax (NPBT) of $250 million, up 5% on the prior corresponding period (pcp) of 1H22
  • Normalised net profit after tax (NPAT) of $167 million, down 1% pcp
  • Statutory NPAT of $123 million, down 56% due to largely unrealised investment market movements
  • Total assets under management of $99.4 billion, down 14% pcp (reflecting the sale of Whitehelm Capital in 2H FY22 and the market sell-off in 2022)
  • Interim dividend 12 cents per share fully franked, up 4% pcp.

What else happened in 1H FY23?

The company reported a record half-year for its retirement income business, Challenger Life, with $5.5 billion in sales, up 11% pcp.

This was driven by record annuity sales growth of 41%, with particularly strong retail growth of 89%.

The life book grew in value by $1 billion, reflecting 5.5% book growth in 1H FY23.

In its statement, the company said the life business is "benefitting from a more favourable macroeconomic environment, with higher interest rates helping to accelerate annuity sales and expand margins".

In October, Challenger announced the $36 million sale of Challenger Bank to Heartland Group
Holdings Ltd
(ASX: HGH). Pleased investors pushed the Challenger share price 4.6% higher on the day.

The bank is well-capitalised and Challenger expects about $100 million to be returned upon completion.

What did management say?

Managing director and CEO, Nick Hamilton said:

Our strong performance over the half year again demonstrates the resilience we have embedded
through our diversified business model, enabling us to capture opportunities in all market
conditions.

We have positioned the business to benefit from rising interest rates, which have stimulated strong demand for retail annuities, particularly longer dated products.

What's next?

Challenger expects profit growth to continue and reaffirmed its FY23 full-year guidance. It's expecting normalised NPBT of between $485 million and $535 million.

Challenger share price snapshot

The Challenger share price is up 22% over the past 12 months.

This compares to a 3% bump for the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Bronwyn Allen 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 has recommended Challenger. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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