In its first quarter results, Challenger reported a 1 percent increase in the group’s assets under management (AUM) to $128 billion.
The group attributed the increase in assets under management to growth in funds under management (FUM) in its fund management business and positive movements in the investment market.
Namely, fund management FUM stood at $119 billion at the end of September, an increase of $1.3 billion or 1 percent for the quarter.
Breaking this down, Fidante’s FUM stood at $101 billion, also an increase of 1 percent over the period.
“FUM growth for the quarter included positive investment market movements of $3.4 billion, partially offset by net outflows of $1.9 billion and client distributions of $500 million. Net outflows were primarily driven by redemptions of fixed income mandates,” the group said in an ASX listing on Wednesday.
Meanwhile, Challenger Investment Management’s (CIM) FUM was $18 billion and increased $233 million, or 1 percent, for the quarter, primarily driven by net flows of $330 million. from third-party customers.
Managing director Nick Hamilton said the growth was driven by continued business momentum and progress on strategic initiatives.
“Challenger continues to implement a series of strategic initiatives that will strengthen and expand the business,” Hamilton said.
“Our strategic investment to restructure the customer registry and technology for the annuities industry is progressing as planned. Once launched, the benefit of making our retirement products easy to access will be key to our growth strategy.
According to the CEO, Challenger remains “on track” to launch this feature this fiscal year.
Last month, the group announced it had entered into an agreement to appoint State Street to provide its investment administration and custody services.
Challenger, Fidante and its subsidiaries will benefit from State Street’s advanced technology, capabilities and scale that integrate front, middle and back office functions with custody services.
“As more Australians transition into retirement and the market now develops solutions tailored to their unique needs, we see significant opportunities for Challenger to continue to achieve strong growth across our retirement income range and other investment products,” Hamilton said.
Additionally, Challenger said its life business remained strongly capitalized with a PCA ratio 1.61 times above the minimum regulatory requirement, following the payment of the final 2024 dividend.
Total life insurance sales decreased 14 percent to $2.4 billion in the quarter, including the impact of a $619 million group life annuity contract won in 1Q24.
Apart from this, total life insurance sales increased by 10 percent, driven by growth in sales of retail annuities and Japanese annuities (MS Primary) and strong sales of the Challenger Plus index.
Namely, retail life annuity sales increased 26 percent to $275 million and Japan annuity sales increased 74 percent to $244 million during the quarter.
However, the group said its retail fixed-term annuity sales fell 22 percent to $564 million as Challenger maintained its “disciplined approach to pricing shorter-term business.”
Challenger reaffirmed its normalized net profit after tax for the 2024-2025 financial year of between $440 million and $480 million.
