Challenger posted a normalised net profit after tax (NPAT) of $137 million for the first half of FY21, a 29 per cent fall year-on-year and a 10 per cent drop from the previous six months. Its net profit before tax of $196 million was down by 29 per cent year-on-year.
The dip resulted from a move towards defensive portfolio settings in the early stages of the COVID-19 pandemic, as the group retained higher levels of liquidity.
Regardless, the funds management business powered through the half, as it lured $6.54 billion in net flows, a drastic rise from $700 million in the previous half and $1.9 billion in the previous corresponding period.
The group’s total assets under management (AUM) increased by 11 per cent from the previous year, to $96.1 billion.
Challenger managing director and chief executive Richard Howes commented the outcomes were in line with expectations and the company was on track to deliver a full-year normalised profit before tax within its guidance range between $390 million and $440 million.
“Our strategy of diversifying revenue is working with strong book growth in our Life business and industry leading organic flows in funds management,” Mr Howes said.
The funds management business is the fourth-largest in the country, with Challenger claiming it is the fastest-growing active manager.
The segment’s earnings before interest and tax (EBIT) came to $35.3 million, surging by 26.5 per cent on the previous year.
The inflows for subsidiary Fidante tripled to $5.8 billion in the half, supported by institutional flows and retail flows, which were up 32 per cent compared to the previous corresponding period.
The EBIT for the Life business came to $192.8 million, a 32.6 per cent drop on the previous corresponding period, despite an 11 per cent rise in domestic annuity sales to $2.1 billion.
Total life sales were $3.4 billion, 10 per cent higher on the prior corresponding period. The Japanese annuities sales also rose by 15 per cent, representing a quarter of the total annuity sales for the first half.
Mr Howes also reported that the annuity sales came as the adviser market somewhat stabilised.
Meanwhile, the group will be extending its customer and product reach with the recent $35 million acquisition of the MyLife MyFinance bank from Catholic Super.
“It allows us to play a greater role in supporting customer retirement incomes and attracting new cusomters more directly, including pre-retirees,” Mr Howes said.
“The highly strategic acquisition reflects our confidence in the broader role that guaranteed products will play in retirement, the growth that we will enjoy as a result and our willingness to invest to capture this growth over the medium term.”
He added the government’s Retirement Income Review had confirmed the importance of better retirement solutions and the company’s role in the sector.
“Challenger enters the second half of the 2021 financial year in good shape, having withstood industry and COVID-19 related disruption of recent years,” Mr Howes said.
The board declared a dividend of 9.5 cents per share, reporting confidence in the Challenger’s future performance.
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
