CHALLENGER'S share price rose as much as 11? to $3.30 after it announced a share buyback at its annual meeting. The fund manager will spend up to $50 million over the next six months to buy back up to 3 per cent of its shares on issue.
In his maiden speech as chief executive, Brian Benari also told shareholders Challenger was well positioned to achieve its 2013 targets of a 15 per cent increase in retail annuity sales to $2.25 billion, or cash operating earnings of up to $450 million in its life business - up from $436 million in 2011/12.
"The most striking feedback we have is investor horizons have moved, with retirees needing retirement income in the next five to 10 years and beyond as opposed to the next two to four years," Mr Benari said.
Challenger has identified a market for annuity products which defer payments until investors reach a certain age, or when savings run out.
"This type of annuity represents a pure form of longevity insurance, but due to unintended legislative oversights, these products cannot be feasibly offered in Australia. Talks are being held with the government," Mr Benari said.
Challenger's net profit fell by 43 per cent to $148.5 million in fiscal 2011/12, mainly due to the decrease in the value of managed investments in its funds management arm.
"We expect the 2012 negative investment experience to largely reverse over time, because the assets are of high quality and we typically hold them through to maturity," Mr Benari said.
Challenger's share price has suffered from poor investor sentiment, as well as uncertainties around capital requirements.
"Despite strong performance, the proposed capital standards have impacted the share price over the past six months or so," chairman Peter Polson told the meeting.
The Australian Prudential Regulation Authority, which regulates the capital levels held by life and general insurers, has introduced new capital standards which take effect on January 1.
Challenger is now required to increase capital holdings over a transition period of three years. It now holds $719 million in capital which is $41 million higher than last year.
Shareholders voted overwhelmingly in favour of the company's executive remuneration.
Frequently Asked Questions about this Article…
What did Challenger announce about a share buyback and how big is it?
Challenger announced a share buyback program to spend up to $50 million over the next six months to buy back up to 3% of its shares on issue.
How did the market react to Challenger's $50 million buyback announcement?
The market reacted positively — Challenger's share price rose as much as 11% to $3.30 after the buyback was announced.
What financial targets did CEO Brian Benari set for Challenger for 2013?
In his maiden speech as CEO, Brian Benari said Challenger was well positioned to achieve 2013 targets of a 15% increase in retail annuity sales to $2.25 billion or cash operating earnings in the life business of up to $450 million (up from $436 million in 2011/12).
Why did Challenger's net profit fall in fiscal 2011/12?
Challenger's net profit fell 43% to $148.5 million in fiscal 2011/12, mainly due to a decrease in the value of managed investments in its funds management arm.
What did management say about the 2012 negative investment experience and asset quality?
Management expects the 2012 negative investment experience to largely reverse over time, saying the assets are high quality and typically held through to maturity.
How do new APRA capital standards affect Challenger and its shareholders?
The Australian Prudential Regulation Authority introduced new capital standards effective January 1. Challenger must increase capital holdings over a three‑year transition period; it now holds $719 million in capital, $41 million higher than last year. Management says proposed capital standards have weighed on the share price.
What did Challenger say about deferred annuity products and availability in Australia?
Challenger has identified demand for annuity products that defer payments until a certain age or when savings run out (a form of longevity insurance), but said unintended legislative oversights currently make these products infeasible in Australia. Talks are being held with the government.
How did shareholders vote on executive remuneration at Challenger's meeting?
Shareholders voted overwhelmingly in favour of the company's executive remuneration at the annual meeting.
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