Challenger shares surge after record annuity sales
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More news: Challenger shares were up 7.2% at 1:15pm AEDT, after reporting record annuity sales and an 80% lift on net profit for the six months to December.
UBS analysts noted that while Life annuity sales fell below expectations, normalised net profit before tax was 1% ahead of consensus. Meanwhile, Jarden analysts said Challenger's half-year result reflected the "value-enhancing" shift in the company's annuity book toward longer-duration products that deliver higher spread margins.
Challenger posts record annuity sales, profit up 80%
The news: Investment manager Challenger reported an 80% jump in statutory net profit for the first half, driven by a strong sales performance in its annuities provider Life, and expects to top guidance.
The numbers: Challenger's first-half net profit climbed to $56 million compared to $28 million in the previous corresponding period. The results were boosted by record new business annuity sales of $1.9 billion as total Life sales reached $5.3 billion. The company declared an interim dividend of 13 cents per share, fully franked, up 8% on last year.
It also posted net flows of $5.6 billion in its funds management division for the half to reach a FUM of $108 billion (an increase of 9%). However, its funds management EBIT was down 7% to $29 million due to changes reducing net income by 1% and expenses increasing by 3%.
Challenger also reaffirmed its FY24 net profit guidance and expects to be in the top half of the $555 million to $605 million range.
The context: As part of its half-year results announcement, Challenger confirmed that it would commence a seven-year partnership with Accenture at the start of the 2025 financial year, which will see the professional services firm run its technology platform and modernise Life's customer technology.
Challenger also expects the sale of Challenger Bank to be completed by the second half of the financial year, subject to regulatory approvals in Australia and New Zealand.
What they said: Commenting, Challenger CEO Nick Hamilton said the result demonstrated the company's focus on driving more profitable and longer duration business "with 90% of new business annuity sales for terms of two years or more".
"This in turn is extending the tenor of our Life book, which will support higher, longer term profitability," he said.
The source: ASX announcement
