Challenger Limited reported a robust FY25 with a 9% rise in normalised profit and a strategic push into digital transformation and retirement income solutions.
- Normalised NPAT up 9% to $456 million, statutory NPAT up 48%
- Record retail lifetime annuity sales of $1.1 billion, Japanese annuity sales up 39%
- Fully franked dividend increased 11% to 29.5 cents per share
- Launch of innovative ASX listed income notes platform
- Expanded retirement partnerships and asset origination capabilities
Strong Financial Performance
Challenger Limited has delivered a solid FY25 financial result, reporting a 9% increase in normalised net profit after tax (NPAT) to $456 million, in line with its earnings guidance. The statutory NPAT surged 48% to $192 million, reflecting both operational strength and favourable portfolio valuations. The company’s normalised return on equity (ROE) improved by 110 basis points to 11.8%, surpassing its target and underscoring efficient capital management.
Record Annuity Sales Fuel Growth
Challenger’s core Life division, Australia’s leading retirement income provider, saw total Life sales reach $8.6 billion. Notably, retail lifetime annuity sales hit a record $1.1 billion, up 26%, while Japanese annuity sales soared 39% to $984 million, doubling the annual target. These figures highlight growing demand for guaranteed income products amid an ageing population and reinforce Challenger’s strategy to grow longer-duration, higher-value annuity business.
Strategic Partnerships and Innovation
The company has strengthened its market position through new retirement partnerships with major superannuation funds and wealth managers, including a significant collaboration with Insignia Financial to support the MLC Retirement Boost offering. Additionally, Challenger is launching a new income platform to issue ASX-listed unsecured fixed income notes, combining the benefits of fixed-term debt securities with accessible, dependable income streams. This innovation leverages Challenger’s investment expertise and responds to investor demand for quality income solutions.
Digital Transformation and Asset Origination
Challenger continues to modernise its technology infrastructure, partnering with State Street and Accenture to upgrade investment administration and customer platforms. This digital transformation aims to simplify operations and enhance client experience. Meanwhile, the company expanded its asset origination platform, acquiring a NZ$560 million New Zealand residential mortgage portfolio and broadening credit asset capabilities to support growth across retirement and income products.
Outlook and Dividend
Looking ahead, Challenger has shifted its FY26 guidance focus to normalised basic earnings per share (EPS), targeting a range of 66 to 72 cents, representing a 4% increase at the midpoint. The board declared an 11% higher fully franked dividend of 29.5 cents per share, reflecting confidence in sustained earnings growth and capital strength. Regulatory reforms by APRA are expected to further support industry growth and balance sheet resilience, positioning Challenger well to capitalise on the retirement income megatrend.
Bottom Line?
Challenger’s FY25 momentum and strategic initiatives set the stage for continued growth amid evolving retirement income demands.
Questions in the middle?
- How will Challenger’s new ASX listed income notes perform in a competitive fixed income market?
- What impact will APRA’s capital reforms have on Challenger’s product offerings and capital efficiency?
- Can Challenger sustain its annuity sales growth amid changing interest rate environments?