The Challenger (CGF) Share Price Is Being Hit

Companies and indices mentioned:

The Challenger Limited (ASX: CGF) share price fell 7% this morning after a 3% fall yesterday due to announcements made to the market.

About Challenger

Challenger is Australia’s largest provider of ‘annuities’, which are financial products typically sold to retirees who seek reliable income. Challenger was established in the mid-’80s and listed on the ASX in 1987. In 2018, Challenger managed more than $90 billion between its investment portfolio, which is the sum of the money invested by retirees who buy annuities, and its fund management business.

The Announcements

Yesterday, the Challenger share price fell 3% following an announcement made the day before, which confirmed that Challenger has ceased to be a substantial shareholder in Experience Co Ltd (ASX: EXP), an adventure tourism company that has seen its shares declining recently.

The more concerning news for Challenger shareholders came this morning during its Investor Day presentation. In its presentation, Challenger said it is expecting its 2020 financial year (FY) normalised net profit before tax to be between $500 million and $550 million, down from the expected $545 million to $565 million in FY19.

Its cost-to-income ratio is expected to increase and the tax rate is expected to be 28%-30%, compared to 26%-28% in FY19. All things considered, FY20 is not looking particularly bright for Challenger.

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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.

Max Wagner

Max Wagner

Max is based in Brisbane, Queensland His passion for finance and investing started in high school with the ASX Share Market game. Max is passionate about financial education and truly believes that everybody should learn how to invest and manage their money from a young age. He believes in long-term value investing as the key to growing wealth. You can follow him on Twitter @maxwagner_.