Challenger profit up 28% despite declining life sales

In its 1H25 results, Challenger announced a statutory net profit after tax (NPAT) of $72 million, up 28 per cent compared with the six months to December 2023.

This, it said, includes the impact of commercial office property revaluations and accounting valuation changes to Life Risk liabilities.

Normalised net profit before tax, meanwhile, was up 12 per cent to $225 million, which it said was driven by higher earnings across Life and Funds Management, in addition to “management action” aimed to reduce the businesses’ expense base.

On the back of positive investment markets, Challenger reported that its group assets under management (AUM) increased 3 per cent to $131 billion over the period.

“In the first half of 2025, Challenger reported a strong result as we delivered against our financial targets and executed our growth strategy,” chief executive and managing director, Nick Hamilton, said on Tuesday.

“At the same time, we made significant progress in re-platforming our customer and investment technology, which will enable future growth.”

Hamilton added that Challenger’s Life business maintained momentum, with record lifetime and Japanese annuity sales contributing to total Life sales of $4.6 billion, however this was down 12 per cent from the $5.3 billion in the first half of FY24.

Moreover, its Life business remained strongly capitalised with a PCA ratio 1.61 times the minimum regulatory requirement.

“Our focus on longer duration sales has lengthened the tenor of our liabilities and is supporting stronger returns,” the CEO added.

“Further progress has also been made in strengthening relationships across our sales channels, including with institutional clients where we have secured new lifetime annuity and defined benefit opportunities in the half.”

The firm’s Life NPAT increased 7 per cent to $225 million, driven by growth in assets under management and cash operating earnings margin.

Retail lifetime annuity sales saw record highs, increasing 24 per cent to $583 million, while Japanese (MS Primary) annuity sales were also up strongly, increasing 78 per cent to $616 million.

Meanwhile, Hamilton explained that its Funds Management business - which saw a 3 per cent FUM increase to $121 billion over the half - “continue to demonstrate the value of active management”.

This segment of the business benefitted from positive investment markets, although net outflows of $3.1 billion were predominantly from institutional fixed-income mandates, partially offset by inflows across equity managers.

“Funds Management also expanded its leading range of investment strategies and managers,” Hamilton detailed.

“Our leading credit asset origination platform now includes whole loan servicing, and we have participated in a number of flow and block opportunities that provide the Life business with attractive risk adjusted returns. Fidante also broadened its network of affiliate managers, welcoming System Capital to its stable.”

Namely, this month Fidante took a minority equity stake in System Capital and entered into an exclusive distribution agreement.

Other strategic partnerships over the half-year also saw Challenger appoint State Street to provide its investment administration and custody services, and has continued to execute its program to modernise its core customer registry and technology for the Life business, in partnership with Accenture.

“Reflecting confidence in the business, the board determined a fully franked interim dividend of 14.5 cents per share, an increase of 12 per cent,” Hamilton announced.

“Over the last three years, we have reset the business to deliver stronger earnings - uplifting our customer and investment platforms lays the foundations for the next phase of our growth strategy. Our business will have access to the best technology and capability to design, improve and innovate across retirement, investment management and asset origination.”

The CEO added that modernising Life’s core customer registry and technology will make it easier for customers, advisers, platforms and super funds to access its retirement products.

“Challenger enters the second half of the financial year in great shape. We have a business with strong fundamentals that is achieving our targets and will generate long-term sustainable growth,” he concluded.