First profit forecast for Stewart's Retirement Income Group; Plus new products

Ralph Stewart's Retirement Income Group is aiming to break into profit this year as well as rolling out a new product and establishing operations in another country.

Wednesday, January 15th 2020, 6:00AM

Ralph Stewart

Retirement Income Group, which is New Zealand's sole variable annuities provider, had massive sales in the last quarter of 2019 which well-exceeded expecations.

Stewart says this was due to falling interest rates and customers wanting to buy their variable annuity before the group reduced its guaranteed rates to reflect what was happening in the market.

Planned sales were $15 million for November and December, however the actual sales ended up totally $41 million.

Even though guaranteed rates have come down there is encouraging demand for annuities with $10 million worth of quotes issued since RIG issued its new rates in November.

The group expects to make its maiden profit this financial year and says EBITDA will be $0.8 million. It is forecast to rise to $1.7 million in 2021 and $3.1 million and $4.6 million in the subsequent years.

Currently RIG is doing a $3.5 million capital raise to help fund future growth. Stewart expects this will be the final capital raise as the company will be able to access other funding sources in the future.

He says the money raised will be used to provide regulatory capital, and support growth in sales and marketing.

While the business started off offering variable annuities it has built a funds management business with Garrison Bridge which offers a UK pension transfer service and it is now looking at other growth opportunities.

"Garrison Bridge Superannuation Scheme is fast approaching $100 million from a cold start in October 2016 and is making a solid contribution to RIG revenue," Stewart says.

One of of the new products is the launch of a home equity release product in the New Zealand market. Stewart says these schemes will help retirees convert part of their home equity into an income for life.

They will not be able to use the funds released for things like holidays and new cars, as other schemes allow.

RIG is also working with two KiwiSaver scheme providers who are considering wholesale income guarantees through their KiwiSaver scheme or managed fund products. "The company has also received interest from two defined benefit pension schemes who are seeking modern solutions and considering our income guarantee options for their members."

Stewart says the company was planning to start offering its products in Japan.

"Our reference company, Challenger in Australia, is now selling more of its guaranteed income products in Japan than Australia. Whilst it is some way off, there is no reason why we cannot participate."

Tags: annuities Challenger Garrison Bridge HER KiwiSaver Ralph Stewart