Challenger’s life business books 18% rise in pre-tax earnings

Challenger’s life business performed strongly in the last financial year, achieving a 18.4% rise in normalised earnings before interest and tax to $472.3 million from the prior corresponding 12-month period.

The investment group says higher sales and growth in assets under management, along with a stable cash operating earnings margin, underpinned life earnings in the 2021/22 year.

Life sales grew 40% to $9.7 billion from a year earlier, including a 12% rise in annuity sales to $5.1 billion.

Challenger says the sales results reflect a focus on broadening distribution channels and driving product innovation across retail and institutional markets, including the launch of the new market-linked lifetime annuity.

The continued focus on working with financial advice groups and independent financial advisers

saw domestic retail annuity sales increase by $240 million or 11% to $2.4 billion.

Challenger – which also runs a bank and a funds management business – says the group’s normalised net profit before tax improved 19% to $472 million but statutory net profit slumped 57% to $254 million.

MD and CEO Nick Hamilton says the “strong” result was delivered against a challenging external backdrop including market volatility, economic uncertainties as well as the ongoing impacts of the pandemic.

“The result reflects the underlying strength of our franchise,” Mr Hamilton said. “Our Life business continues to leverage favourable retirement and demographic trends while higher interest rates are supportive for both annuity sales and investment returns.”

Challenger says it has commenced a strategic review of Challenger Bank, which made a loss before interest and tax of $11 million.

The business says market conditions have changed since it entered into an agreement in December 2020 to acquire the bank known formerly as MyLifeMyFinance Limited.

“It is becoming apparent the Bank is unlikely to realise the expected benefits in the timeframe anticipated,” Challenger said. “As a result, Challenger is reviewing the Bank’s position within the group and has commenced a strategic review of the business.”

Challenger says it is considering “all options” in relation to the future of the bank.

In a separate announcement, Challenger says Duncan West will replace Chairman Peter Polson, who will retire at the conclusion of the annual general meeting on October 27.

Mr West has served on the board as an Independent Non-Executive Director since 2018. He has over 30 years board and financial services experience across the UK and Australia, including CEO roles at Vero Insurance and CGU Insurance.