Challenger discloses 14% AUM fall

Challenger has posted a 56 per cent fall in statutory net profit after tax (NPAT) to $123 million for the first half of the 2023 financial year.

In a statement to the ASX on Tuesday, the firm explained that this figure was impacted by negative investment experience of $42 million after tax over the half year due to investment market movements which resulted in largely unrealised investment experience.

However, Challenger’s normalised net profit before tax (NPBT), which it claimed better reflects the underlying operating performance of its business, was up 5 per cent to $250 million.

The investment management firm said that a stronger contribution from its life business had been offset by its funds management as well as investing for growth.

“Our strong performance over the half year again demonstrates the resilience we have embedded through our diversified business model, enabling us to capture opportunities in all market conditions,” commented Challenger chief executive officer and managing director Nick Hamilton.

“We have positioned the business to benefit from rising interest rates, which have stimulated strong demand for retail annuities, particularly longer dated products. Total annuity sales grew 41 per cent, led by record retail annuity sales, which were up 89 per cent to $2.1 billion.”

Total life sales were reported to be up by 11 per cent to $5.5 billion, driven by the exceptional growth seen in retail annuity sales. Life earnings before interest and tax (EBIT) increased by 13 per cent to $263 million after benefitting from a more favourable macroeconomic environment.

Meanwhile, funds management EBIT was down 32 per cent to $31 million due to lower average FUM of $93 billion compared to the prior period. This 14 per cent reduction reflected the sale of Whitehelm Capital in the second half of the last financial year as well as investment markets.

The firm also reported group assets under management of $99 billion, a 1 per cent increase on the previous half but down 14 per cent on the prior corresponding period.

“In the first half we have been focused on building a more customer-centric business, simplifying our operations, and executing our growth strategy,” said Mr Hamilton.

“We have reorganised our business, centralising our operations around our customers and investing in a range of initiatives that will help enhance and expand customer access to Challenger products and services. This includes launching a new registry service to support our customers and make it easier to access products, whilst also improving our ability to bring new solutions to market.”

Challenger has declared an interim dividend of 12.0 cents per share fully franked, up 4 per cent. The firm expects profit growth will continue and has reaffirmed its full year guidance range for normalised net profit before tax of between $485 million and $535 million in FY23.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.