Challenger posts mixed Q3 FY25 result

Challenger saw strong growth in annuity sales but its assets and funds under management fell in the third quarter of FY25.

Challenger's funds under management were $115.2 billion, a $5.9 billion drop, mainly due to negative market movements, but also net outflows of $1.9 billion and client distributions of $0.3 billion, it said.

Net outflows included the derecognition of $0.8 billion of FUM from Merlon Capital Partners, following Challenger's subsidiary Fidante offloaded its interest in the firm last year.

Meanwhile, its assets under management stood at $125.6 billion, down 4% for the quarter.

The sales figures have, however, perceived positive results, with total life sales recording $1.4 billion supported by longer tenor annuity sales.

Annuity sales increased by 20% to $1 billion aided by the growth of both retail lifetime with $246 million (up 22%) and MS Primary Japanese annuities at $240 million (up 33%) for the quarter.

Challenger said the longer duration sales will improve book quality and returns but has also seen fixed term annuity sales grow by 15% to $505 million due to demand driven by the 'inverted yield curve'.

Managing director and chief executive Nick Hamilton said in the quarter Challenger "maintained momentum" in making significant progress delivering new technology while broadening its customer footprint.

"Challenger saw continued sales growth across domestic lifetime annuities and Japanese annuities, supporting our focus on longer tenor and more valuable sales," Hamilton said.

Challenger has also partnered with NGS Super to work on a lifetime income product for its members.

"The benefits of a lifetime income allocation alongside an account-based pension are powerful and ensure better retirement outcomes and financial confidence," Hamilton continued.

Looking ahead, Hamilton said it is well-prepared of APRA's forthcoming changes to insurance capital changes, while entering a new phase to better accommodate advisers.

"As we look forward, the re-platforming of our retirement customer technology, including customer registry is entering an exciting phase as the build completes and we test and ready for launch," Hamilton said.

"Removing sales friction and integrating lifetime and term income solutions seamlessly for advisers and funds will enable the next phase of our growth."

Hamilton also celebrated Tal Dai-ichi Life as a material shareholder of Challenger, adding that it "recognises the strength of Challenger's strategic position, unique capabilities and the long-term tailwinds in the Australian retirement market."

TAL's parent company Dai-ichi Life Holdings acquired a minority stake of 15.1% in Challenger earlier this month.