Significant growth and delivering on retirement opportunity

Strong financial performance with earnings above guidance range²

• Normalised net profit before tax (NPBT)³ $608 million, up 17%⁴
• Statutory net profit after tax (NPAT) $130 million, down 24%⁵
• Group assets under management (AUM) $127 billion, up 21%
• Challenger Life strongly capitalised with PCA ratio of 1.67x⁶
• Full year dividend 26.5 cents per share fully franked, up 10%
• Normalised EPS 60.9 cents per share, up 14%
• Normalised ROE 15.6%, up 290 bps and on track to achieve ROE target⁷ in FY25

Life book quality improving through longer duration, more valuable sales

• Life sales $9.1 billion and Life book growth 3.6%⁸
• Lifetime annuity sales of $1.5 billion, up 110%
• New business annuity sales tenor 8.5 years (FY23 5.8 years)⁹
• 88% of new business annuity sales 2+ years (FY23 74%)¹⁰

Successfully executing growth strategy

• Diversifying Life sales channels
• Expanded asset origination capability
• Extended MS Primary reinsurance partnership and progressed retirement income partnerships
• Simplifying the business - Bank sale now complete
• Scalable platform and capturing ongoing cost efficiencies

Challenger Limited (ASX:CGF) today announced its full-year financial results for 2024, with normalised net profit before tax of $608 million increasing by 17%, which is above the earnings guidance range.

Managing Director and Chief Executive Officer, Nick Hamilton said:

“In FY24, Challenger delivered a very strong financial performance, executed on our growth strategy and made strategic investments around the customer and our capability to support our long-term sustainable growth.

“Our Life business performed exceptionally well and demonstrates our expertise in providing guaranteed income to more Australians, with longer tenor term sales and lifetime annuity sales contributing to Life sales of $9.1 billion.

“The success of our strategy to grow longer tenor, more valuable annuity sales is also supporting stronger returns. New business annuity sales tenor continued to materially improve to 8.5 years, which has led to a reduction in the maturity rate and will support future growth.

“Funds Management continued to demonstrate its investment excellence, with funds under management (FUM) increasing 19% to $117 billion.

“Funds Management also expanded its offering and capability, launching new investment strategies across Fidante, as well as driving private credit origination in Challenger Investment Management to meet growing demand for higher yielding income strategies.

“Reflecting Challenger’s strong performance this year, the Board determined a fully franked dividend of 26.5 cents per share, an increase of 10% on last year.
Mr Hamilton also noted that Challenger’s strategic investments in FY24 will support future growth:

“This year we made key decisions that will see us further strengthen and broaden the potential of our business. In our core retirement business, we commenced our customer uplift program that integrates technology and experience. This will make it easier to do business with us, enable the delivery of more retirement income solutions and position us for growth with customers, advisers, platforms and institutional clients.

“We also prioritised further expanding our asset origination capability, making investments in our fixed income platform, including launching whole loan servicing.

“As we focus on our competitive strengths in retirement, investment management and asset origination, the sale of the Bank is also now complete.

“We are in a very strong position for FY25 and beyond, with momentum across Life and Funds Management. We have a clear growth strategy that is orientated around the customer and leverages our core capabilities, underpinned by a strong balance sheet.

“Pleasingly, work is now underway in Australia to strengthen the retirement phase of superannuation. At the same time, our country’s ageing population is changing how they think about, and what they want from their growing pool of retirement savings. This creates an incredible opportunity for Challenger to provide even more Australians with financial security in retirement.”

¹ All growth rates compare the year ended 30 June 2024 against the year ended 30 June 2023 (the prior corresponding period or pcp), unless otherwise stated.
² 2024 full year guidance range for normalised net profit before tax of between $555 million and $605 million.
³ The normalised profit figures are non-statutory amounts and in Challenger's view better reflect the underlying operating performance of the business. The normalised profit figures exclude asset and liability experience and significant items. Asset experience is calculated as the difference between actual investment gains/losses (both realised and unrealised) and normalised capital growth in relation to assets. Liability experience includes any economic and actuarial assumption changes in relation to policy liabilities for the period, impacts of accounting mismatches within the liability valuation of Life Risk business under AASB 17, and new business strain. New business strain is the requirement to apply the risk-free discount rate plus an illiquidity premium to value annuity liabilities, rather than the actual interest rate paid on annuity liabilities. New business strain is a non-cash item and subsequently reverses over the future period of the contract. The normalised profit also excludes any significant items which represent non-recurring income and expense items for the period. The normalised profit framework has been disclosed in the Operating and Financial Review section of the Directors’ Report in the Challenger Limited 2024 Annual Report. The normalised profit after tax has been subject to a review performed by Ernst & Young.
⁴ Normalised metrics including Normalised profit before tax, Normalised profit after tax, Normalised EPS, Normalised cost to income ratio, Normalised tax rate, Normalised ROE exclude Discontinued Operations (Bank) in FY24. Prior periods are not restated to exclude Discontinued Operations (Bank).
⁵ FY23 Statutory net profit after tax, Statutory EPS and Statutory Return on Equity have been restated to reflect the application impact of AASB 17.
⁶ PCA ratio represents total Challenger Life Company Limited (CLC) Tier 1 and Tier 2 regulatory capital base divided by the Prescribed Capital Amount (PCA) and is as at 30 June 2024.
⁷ Normalised ROE (pre-tax) target of RBA cash rate plus a margin of 12%.
⁸ Book growth percentage represents net flows for the period divided by opening book value for the financial year. Book growth calculations prior to adoption of AASB 17 from 1 July 2023 have not been restated.
⁹ Based on new business annuity sales, including term annuities and lifetime sales, excluding reinvestments.
¹⁰ Based on new business annuity sales, including term annuities and lifetime sales, excluding reinvestments and Japanese sales.