In its third-quarter update, Challenger signalled it expects its FY21 net profit before tax will be at the bottom end of its previous $390 to $440 million guidance, due to difficult investment conditions.
The company is responding by “significantly” adjusting its annuity pricing.
But Challenger has also seen some wins through the three months to 31 March. Group assets under management (AUM) surpassed $100 billion for the first time, increasing by 8 per cent over the quarter.
Funds under management (FUM) in the fundie arm grew by 9 per cent to $99.7 billion, including $7 billion of net flows.
Challenger’s multi-boutique business Fidante Partners ended March with an FUM of $78.8 billion, up by 10 per cent for the quarter. Meanwhile subsidiary CIP Asset Management saw its FUM grow by 8 per cent to $20.9 billion
Challenger managing director and chief executive Richard Howes commented Challenger’s performance had been boosted by its strategy focusing on revenue diversification.
“We have been investing in our distribution, product and marketing capability over recent years which is extending our customer reach and diversifying our product offering and distribution channels,” Mr Howes said.
“Challenger remains on-track to achieve its normalised profit guidance, however, reflecting the tighter credit spread environment now expects to be at the bottom of guidance range. We are responding to the investment conditions through our annuity pricing to reflect the tighter credit spread environment.”
Total life net flows for the quarter were $1.3 billion, including annuity net flows of $879 million and other life net flows of $498 million.
Higher annuity and Challenger Index Plus sales had led to total life sales of $2.4 billion, more than doubling from the previous corresponding period (up by 155 per cent).
Challenger had mostly benefited from new institutional partnerships and client relationship in its annuities segment, with domestic institutional term annuity sales coming to $1 billion.
Annuities also benefited from the retail advice market, with domestic retail term sales swelling by a third (32 per cent) to $366 million.
Challenger recently acquired bank MyLife MyFinance from Catholic Super for $35 million, indicating that it will expand its offerings to the retiree market in term deposits.
