Challenger posted record life sales but warned investors of lower FY21 profits, as tighter credit spreads force it to change annuity pricing.
The life business, which includes annuities and other products such as Challenger Index Plus, saw $1.37 billion of net inflows from $2.4 billion of sales in the three months to March.
Challenger sold $1.57 billion of annuities in the quarter, which was 165% higher than previous corresponding period's $979 million.
Majority of the annuities sales came from domestic fixed-term sales ($1.39 billion) with small contributions from domestic lifetime ($107 million) and Japan MS Primary sales ($79 million). Sales of other products were $847 million.
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"Challenger reaffirms its FY21 normalised net profit before tax guidance, however, now expects to be at the bottom end of the $390 million and $440 million guidance range," CGF said.
"Earnings reflect the sharp decline in credit spreads over the year, which were not fully reflected in customer pricing. Challenger is responding to the investment conditions by significantly adjusting annuity pricing."
Fidante growing, no external business for CIP
Challenger's funds management business, which includes multi-boutique business Fidante Partners and internal and external manager CIP Asset Management, grew to $99.7 billion (9% growth over December quarter).
Fidante Partners accounted for $78.8 billion of the $99.7 billion total FUM. Its boutique partners attracted $5.5 billion of net inflows and $1.4 billion of market returns. Fidante's net inflows were slightly lower than December quarter's $5.7 billion.
CIP Asset Management, which Challenger has taken to external clients in recent years, accounted for $20.9 billion of the $99.7 billion FUM. CIP saw a $1.5 billion increase in its assets under management which Challenger attributed to the Life business.
Overall, Challenger funds management's 9% or $8.5 billion growth in the March quarter came from: Fidante inflows ($5.5 billion), Fidante market returns ($1.4 billion), CIP Asset Management inflows ($1.5 billion, which came from Challenger's Life business).