Nearly $12bn leaves Challenger in March quarter

Challenger saw $11.7 billion leave its funds management business in the third quarter, of which $3.4 billion came from negative market movements driven by the Middle East conflict.

The lion's share of $8 billion were net outflows while the balance of $0.3 billion were paid as distributions.

Global equity strategies took the biggest hit of $6.3 billion in outflows, followed by $1 billion leaving fixed income strategies from public markets and $986 million exiting Australian equities.

The funds management unit ended up with $104.5 billion in the March quarter.

The annuities business fared better with life sales rising by 19% to $1.7 billion.

Annuity sales grew by 10% to $1.1 billion, driven by strong domestic annuity and offshore reinsurance annuity sales.

Local annuity sales rose by 7% to $806 million, supported by sales in lifetime annuities and guaranteed income solutions, particularly in retirement and aged care. Challenger Index Plus sales jumped 41% to $629 million.

"With APRA's new capital standards for insurers of longevity products now set, we are turning to the implementation, which will deliver an immediate and material reduction in shareholder risk, support a less capital-intensive growth profile, and create opportunities to re-mix our balance sheet asset allocation," Challenger managing director and chief executive Nick Hamilton said.

Last month, APRA released its final response to amending prudential standards on treating capital for longevity products in a bid to improve weak demand.

One of the key changes is refining specific parameters of the proposed advanced illiquidity premium calculation.

"We strongly welcome APRA's reforms, which represent the biggest changes for providers of longevity products in a generation. For Challenger, it will lower the levels of required capital and cyclical risks to our capital position during times of market stress, while maintaining policyholder security," he said.

Challenger recently partnered with Bank of Queensland (BOQ) to inject $3.7 billion of capital via a whole-of-loan sale as it ramps up its private credit push.

The $3.7 billion will be used to reduce BOQ's debt funding by about $3.4 billion and return $300 million to its shareholders.

Hamilton said the deal "will provide access to high-quality whole loans and forward flow and underscores the strength of our asset origination capability."