Challenger has reported its first quarter results, with total assets under management (AUM) increasing 3% to $84 billion thanks to strong net flows and positive investment performance.
Additionally, the low-rate environment saw a strong demand for guaranteed income products as institutional clients were seeking to optimise investment returns
The firm reported a 14% growth quarter-on-quarter for its total annuity sales to $842 million, however Australian Unity sales were down by 11% ($78 million) due to the fallout from the Royal Commission which resulted in significant reduction in financial adviser numbers and increased movement by advisers across licenses. This led to lower new client acquisitions which impacted Challenger’s annuity sales, the firm said.
At the same time, Japanese annuity sales (MS Primary) which represented 26% of total annuity sales, was up by 5% in the June quarter and was helped by the fact that the firm commenced reinsurance of US-dollar denominated annuities issued by the Japanese market by MS Primary.
Managing director and chief executive, Richard Howes, said these results reflected the progress Challenger had made in diversifying its product offerings.
“Despite ongoing disruption in the Australian wealth industry, total life book growth was 5.2% for the quarter. Total annuity sales were up, buoyed by strong Japanese sales which increased by five times on the June 2019 quarter.
“This was a result of our expanded strategic relationship with the MS&AD Group, after we commenced reinsurance of US dollar annuities in July.
Funds under management (FUM) stood at $81 billion and saw a 2% growth for the quarter, benefitting from net flows of $0.4 billion and positive investment markets.
Fidante Partners’ FUM stood at $60.7 billion which translated into 3% growth for the quarter, with net flows of $0.5 billion.
As far as the future outlook was concerned, Challenger said it would target a normalised net profit before tax of between $500 million and $550 million as it announced earlier in August.