Retirement Income Group expects profit this year

Retirement Income Group is ahead of targets with its latest capital raise, amid predictions 2019 will be the year it becomes profitable, despite Fidelity setback.

Tuesday, July 2nd 2019, 6:00AM

Ralph Stewart

Founder and managing director Ralph Stewart said the variable annuity provider had sought a minimum of $3.5 million and a maximum $4.5m.

By Monday it had raised 111% of the minimum and 86% of the maximum.

Almost three-quarters of the amount sought was already pledged before capital-raising opened: Oriens Capital is taking up its right to invest another $2m. Stewart’s family added another $500,000. Existing shareholders offered another $800,000.

Because Retirement Income Group is an asset manager and an insurance company it has to project its sales over the next five months and report that to the Reserve Bank.

The central bank then tells Retirement Income Group how much capital it needs to hold to cover those future sales.

Its capital raising is in advance of 2019 sales.

Stewart said it had decided to run capital raising on a stepped basis as a new company but from next year, retained earnings should cover it.

A year ago, it had $100 million in retirement assets under management and is now past $200m.

Stewart said $300m was “firmly in sight”.

He said recognition of the Lifetime brand had increased and the business should move into profit this year.

“This will reduce our dependency on shareholder capital to support sales growth by replacing shareholder capital with retained earnings. Our progress is however gaining attention and, in expectation of larger wholesale opportunities, we have reached out to the global reinsurance market to support us if needed.”

Stewart said he was also hoping to complete the first transfer of a defined benefit superannuation scheme.

“This is simply where the scheme trustees transfer their long-term pension liabilities to Lifetime in exchange for an equivalent value of scheme assets.”

An increasing number of KiwiSaver members were retiring and needed somewhere to put their money, he said.

A proposed transfer of Fidelity Life business to Retirement Income Group will not go ahead, which Stewart noted in an information memorandum was "challenging" because the business had invested in infrastructure and people to support it.

"However, the strong organic growth of LIF has enabled us to maintain and redeploy the resources to support core business growth."

Tags: Ralph Stewart Retirement Income Group