Challenger life sales hit $9.1bn, NPAT drops 24%

In its full-year earnings results, Challenger announced a 24 per cent slip in statutory net profit after tax (NPAT) to $130 million, accounting for asset and liability experience.

This, it said, includes the unrealised impact of lower commercial property valuations and changes to UK mortality rate assumptions, which will be “supportive of future earnings”.

Normalised net profit before tax, on the other hand, was up 17 per cent to $608 million over FY2023–24, which it said was above its earnings guidance range and was partially driven by a “disciplined approach” to cost management.

On the back of Life book growth and strong funds management net flows, Challenger reported that its group assets under management (AUM) increased 21 per cent to $127 billion.

Moreover, it said its Life business remained strongly capitalised with a PCA ratio 1.67 times the minimum regulatory requirement, reflecting the impact of diversifying strategies on the Life balance sheet.

Managing director and chief executive Nick Hamilton said: “In FY24, Challenger delivered a very strong financial performance, executed on our growth strategy and made strategic investments around the customer and our capability to support our long-term sustainable growth.

“Our Life business performed exceptionally well and demonstrates our expertise in providing guaranteed income to more Australians, with longer tenor term sales and lifetime annuity sales contributing to Life sales of $9.1 billion.”

The firm’s Life earnings before interest and tax (EBIT) increased 17 per cent to $634 million, driven by its focus on longer duration and more valuable annuity sales.

“The success of our strategy to grow longer tenor, more valuable annuity sales is also supporting stronger returns. New business annuity sales tenor continued to materially improve to 8.5 years, which has led to a reduction in the maturity rate and will support future growth,” Hamilton said.

Moreover, Retail lifetime annuity sales increased 27 per cent to $901 million, including CarePlus sales of $496 million – the highest volume of annual sales since launching in 2015, according to the group.

Japanese (MS Primary) annuity sales were $709 million, exceeding the annual minimum target by some 36 per cent, and Challenger Index Plus sales were $3.9 billion.

Meanwhile, Challenger’s Funds Management business saw its earnings before interest and tax drop 11 per cent to $55 million due to “changes in business mix” that reduced income by 3 per cent and higher expenses which increased by 2 per cent.

Funds Management FUM, however, increased by 19 per cent to $117 billion, benefiting from strong institutional net inflows and positive investment markets.

“Funds Management also expanded its offering and capability, launching new investment strategies across Fidante, as well as driving private credit origination in Challenger Investment Management to meet growing demand for higher yielding income strategies,” Hamilton said.

Namely, Challenger said that Fidante now offers a broad range of capabilities to investors across private credit, real estate, specialist infrastructure, hedge funds, liquid alternatives, and diversified alternatives.

Fidante commenced distributing the Apollo Aligned Alternatives (AAA) strategy in Australia, providing clients with access to a diversified portfolio of private market opportunities, in which Apollo has invested more than US$10 billion of its own balance sheet capital.

Challenger Investment Management has also established a whole loan servicing platform to help originate domestic whole loans for Challenger Life and third-party clients.

Hamilton added: “Reflecting Challenger’s strong performance this year, the board determined a fully franked dividend of 26.5 cents per share, an increase of 10 per cent on last year.”

He also noted that Challenger’s strategic investments in FY23–24 will support future growth, including the appointment of Accenture as its long-term technology partner, who will deliver Challenger’s customer experience uplift program that includes modernising Life’s customer technology.

“This year, we made key decisions that will see us further strengthen and broaden the potential of our business. In our core retirement business, we commenced our customer uplift program that integrates technology and experience,” Hamilton said.

“This will make it easier to do business with us, enable the delivery of more retirement income solutions and position us for growth with customers, advisers, platforms and institutional clients.

“As we focus on our competitive strengths in retirement, investment management and asset origination, the sale of the bank is also now complete.”

Looking ahead, Hamilton said that Challenger is in a “very strong position” for FY24–25 and beyond.

“We have a clear growth strategy that is orientated around the customer and leverages our core capabilities, underpinned by a strong balance sheet.”