Challenger hit by annuity decline
Challenger has reported a $0.9 billion decline in domestic annuity sales as a result of the restructure of the bank-aligned advice network as the firm repositions for the new advice market.
In the firm’s full-year 2020 results which were announced on the Australian Securities Exchange (ASX) today, it said the lower domestic annuity sales offset higher ‘other life’ sales which rose by $1 billion.
“Domestic annuity sales were down $0.9 billion with a decline in term sales driven by a major structural change in the bank-aligned advice networks. Lifetime annuities were also significantly impacted by the transition to new means test rules,” it said.
“While the new means testing rules are supportive of lifetime annuities, they require a period of adjustment as advisers become familiar with the lifetime annuity products that work best for customers under the new rules. In addition, COVID-19 has adversely impacted the ability of advisers to engage with their customers.”
It said Challenger had launched initiatives to react to this such as Retire with Confidence tool and refreshing its Index Plus product.
“Challenger also continues to improve customer engagement and education while building stronger relationships with independent financial advisers and establishing relationships with superannuation funds to develop retirement income solutions for customers,” it said.
Managing director and chief executive, Richard Howes, said: “Our domestic annuities business continues to be impacted by structural changes to the wealth management market and this year have been additionally affected by new age pension means test rules and the COVID-19 disruption. We are quickly evolving the business in response to the changes and we are seeing positive signs that we are well positioned to rebuild momentum in the new market environment”.
In the wider group, total assets under management were up 4% to $85.2 billion, pre-tax profit was down 8% to $507 million and its fund management arm saw net flows of $2.5 billion to bring average funds under management to $80.6 billion.
The fund management flows consisted of $3.8 billion inflows into Fidante Partners, particularly into fixed income and equity strategies, but this was offset by a $1.3 billion outflows from CIP Asset Management following changes to Challenger Life’s investment portfolio.
Looking ahead, the firm said it expected net pre-tax profit in FY21 to be between $390 million and $440 million which “reflects an intention to maintain defensive portfolio settings and carefully manage expenses”.
AUTHOR
Laura Dew
Recommended for you
Two industry executives have highlighted why financial advice practices are less focused on adviser recruitment, as technology means they can service more clients with fewer staff.
Despite fears under the first draft QAR bill, ASIC has confirmed that it does not expect superannuation trustees to check every Statement of Advice.
Iress has signed a three-year extension of its agreement with Count, enabling the financial services firm to continue using advice software Xplan to support its growth ambitions.
Single adviser-led firms continue to expand their footprint in the Australian advice ecosystem, Adviser Ratings research shows, as market conditions prove favourable for boutique practices.
