Challenger Posts $225M Normalised NPAT, 3% AUM Growth, and 24% Retail Annuity Sales Jump

Strong Financial Performance Anchored by Annuity Growth

Challenger Limited (ASX: CGF) has delivered a compelling first half for FY25, with normalised net profit after tax (NPAT) rising 12% to $225 million. This performance reflects solid execution of its growth strategy, particularly in its Life division, which saw record retail lifetime annuity sales surge 24% to $583 million and Japanese annuity sales jump 78% to $616 million. The company’s focus on longer tenor annuity products has extended the average duration of new business to 6.4 years, enhancing the quality and stability of its Life book.

Statutory NPAT also rose sharply by 28% to $72 million, boosted by commercial property revaluations and accounting adjustments. Meanwhile, group assets under management (AUM) grew 3% to $131 billion, supported by positive market conditions and net inflows in key investment strategies.

Strategic Initiatives Fueling Next Phase of Growth

Beyond financial metrics, Challenger is investing heavily in modernising its technology platforms. The company is re-platforming its customer registry and investment administration systems in partnership with Accenture and State Street, aiming to enhance customer experience, improve adviser engagement, and drive operational efficiencies. These upgrades are positioned as foundational for the next phase of growth, enabling Challenger to innovate across retirement income products and asset origination.

Challenger’s Funds Management division also showed strong momentum, with NPAT up 37% to $27 million and funds under management increasing 3% to $121 billion. The division expanded its credit asset origination capabilities, including acquiring a NZ$560 million residential mortgage book, and broadened its investment offering by onboarding System Capital, a global long-short manager targeting family offices and high-net-worth clients.

Dividend and Capital Strength Signal Confidence

Reflecting confidence in its financial strength and growth prospects, Challenger’s board declared a fully franked interim dividend of 14.5 cents per share, a 12% increase from the prior period. The Life division remains well capitalised with a Prescribed Capital Amount (PCA) ratio of 1.61 times the regulatory minimum, providing a robust buffer to support future growth and withstand market volatility.

Institutional sales contributed $2.2 billion in the half, including defined benefit de-risking transactions and lifetime annuity opportunities, underscoring Challenger’s expanding footprint in retirement income partnerships. The company’s disciplined pricing approach and focus on longer duration liabilities continue to underpin its strong return on equity, which improved 120 basis points to 11.6% post-tax, surpassing its target.

Outlook and Market Positioning

Challenger reaffirmed its FY25 normalised NPAT guidance range of $440 million to $480 million, targeting around 10% growth on FY24. The company enters the second half in a strong position, with solid fundamentals, a diversified product suite, and enhanced technology platforms that should support sustainable long-term growth.

As the retirement income market evolves, Challenger’s strategic emphasis on longer tenor annuities, technology modernization, and credit origination positions it well to capture emerging opportunities. However, market conditions such as interest rate movements and investor preferences will remain key variables to monitor.