The Challenger Ltd (ASX: CGF) share price drops despite recording solid growth in the third quarter. Why is the Challenger share price dipping?
Challenger share price
Challenger records growth in sales
Following on from its HY21 results, Challenger appears to be experiencing solid growth in sales.
The value of group assets under management jumped by 8% for the third quarter of FY21, which currently exceeds $100 billion.
The Challenger Life segment comprised of annuities and guaranteed retirement income products posted record quarter annuity sales of $1.6 billion. The value of these assets also surged by 6% for the same period.
The company notes its fund management arm further solidified its position as the fastest-growing active manager in Australia.
Total funds under management grew by 9% during the quarter and received net flows of $7 billion.
Challenger’s outlook
Challenger remains on track to achieve its FY21 normalised profit guidance but at the lower end of the guidance range. This is due to a tighter credit spread environment.
What’s normalised profit guidance? This is often used to remove one-off items to provide investors with a picture of what profit is under ‘normal’ operating conditions.
The business is currently responding to such conditions by considering adjustments to its annuity pricing.
My thoughts
It appears the market has punished Challenger for advising that it would only be able to meet the lower end of the normalised profit guidance range.
Rathern than focusing on this metric, I think it’s more important to monitor Challenger’s investment performance and strategy.
As outlined in my article covering the HY21 results, investors should be wary of the level of investment revenue against the level of Life contract claims and expenses.
Instead of Challenger, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access all of our free analyst reports.
