Challenger benefits from super fund annuities push

Challenger Limited’s strategy to utilise relationships with superannuation funds has paid dividends, with the company posting another strong result with normalised profit after tax up eight per cent to $362 million on the back of record annuity sales.

The company’s expanded distribution capability, particularly its relationship with industry superannuation funds, was highlighted as being a key factor in its success over the past 12 months.

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The group reported to the Australian Securities Exchange (ASX) today that statutory net profit after tax was up 10 per cent to $328 million with annuity sales up 22 per cent boosted by superannuation industry moves to include Challenger annuities on investment and administration platforms.

It said sales accelerated in the second half with annuity sales up 45 per cent on the prior corresponding period (pcp).

The result saw the board declare a final dividend of 16.5 cents per share, contributing to a full year record dividend of 32.5 cents, up eight per cent.

Commenting on the result, Challenger chief executive, Brian Benari, said the firm had leveraged its leadership position in a growing retirement incomes market to deliver record annuity sales and record normalised profit.

“We’ve rewarded our shareholders with record dividends,” he said.

“Challenger is generating superior shareholder returns through a highly efficient, profitable and sustainable model. In our life business we have been able to maintain consistent margins for the past four years which means the growth opportunities we are capturing feed directly through to our earnings and higher shareholder dividends.”

Benari said a key feature of the results had been sales achieved through the company’s expanded distribution capability.

“Building scale via platforms is an important part of Challenger’s strategy with both retail and industry fund partners,” he said.

“We are launching five new annuity partnerships in 1H17 including teaming up with Suncorp to white-label Challenger term and lifetime annuities,” the Challenger CEO said.

“The bottom line is that more retirees are buying Challenger annuities because they better understand retirement risk and seek guidance from advisers who rate us highly and can access our products much more easily from a growing range of platforms.”