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Challenger Ltd CGF

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Morningstar’s Analysis

Currency in AUD
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Challenging Market Hesitancy on Challenger As We Raise Our FVE

Shaun Ler Equity Analyst

Analyst Note

| Shaun Ler |

We lift our fair value estimate on no-moat Challenger to AUD 8 per share from AUD 7.60, after factoring in the time value of money, and revising our expense forecasts in the funds management business. The firm’s first-quarter fiscal 2022 update points to continuous improvements in operating conditions. Annuity sales are stable, thanks to customer diversification efforts, setting the foundation for future sales growth. Financial health is strong, with capital buffer at the high end of Challenger’s target. Ongoing innovation is boosting the appeal of its annuities, and helping it cater to the complex needs of super funds. Our forecast profit before tax, or PBT, for fiscal 2022 sits at AUD 453 million, in line with guidance.

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Company Profile

Business Description

Challenger’s core business is selling annuity products in the Australian retirement market and, since November 2016, selling Australian dollar-denominated annuities into Japan's large retirement market. The firm’s annuity products provide investors guaranteed regular payments over an agreed term for an up-front lump sum investment and is designed primarily to protect investors from the longevity risk of outliving their savings. Challenger also operates a funds management business, Fidante Partners, which has minority stakes in several boutique global investment managers, and CIP Asset Management, which primarily manages investments supporting its annuities business.

5 Martin Place, Level 2
Sydney, NSW, 2000, Australia
T +61 299947000
Sector Financial Services
Industry Insurance - Life
Most Recent Earnings
Fiscal Year End Jun 30, 2022
Stock Type
Employees 738