Challenger (CGF): Take Care, maintain Buy rating

Bell Potter

Stockbroker

Challenger (CGF): Take Care, maintain Buy rating. The Department of Social Services (DSS) has flagged it plans to reverse a previous means test ruling, impacting one of CGF's products, the Care Annuity which represents ~3% of the existing Life book and ~10% of annuity sales. Essentially the ability for an investor who has a care annuity product to also receive a Government pension or part pension has been reduced - which in turn reduces the appeal of the product. The change will apply from 1 January 2015.CGF rejects the revised ruling and is pursuing its options. We believe this will include possible legal action, or a reformatting of the product so that it complies with DSS's requirements for it to maintain its current means testing features. Until this matter is finalised we have assumed worst case and have downgraded our earnings and Price Target to $7.40 per share, although we maintain our Buy rating around $6.35.


Bell Potter Securities is a leading Australian stockbroking, investment and financial advisory firm that provides a comprehensive offering of financial services to a diversified client base that includes individuals, institutions and corporations.

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