Challenger Limited (ASX: CGF) has posted a strong third quarter update, with annuity sales leading the charge and a clear focus on quality over quantity as it continues to reshape its retirement income business.
Annuities gaining length and strength
Total Life sales hit $1.4 billion for the quarter, buoyed by strong demand for longer-term annuities. Retail lifetime annuity sales climbed 22% to $246 million, while Japanese annuity sales jumped 33% to $240 million. Fixed term annuities also had a solid quarter, up 15% to $505 million.
CEO Nick Hamilton credited the sales mix shift toward longer-duration products, which he says is improving the “quality and value” of the book. That’s reflected in the annuity maturity rate, which moderated to 5% for the quarter—a key metric as Challenger looks to lock in longer-term income streams.
Funds under pressure, but capital position strong
It wasn’t all smooth sailing, though. Funds Management FUM fell 5% to $115.2 billion, driven by market movements (-$3.7 billion), net outflows (-$1.9 billion), and client distributions. The Group’s total AUM dropped 4% to $125.6 billion.
Still, Challenger Life remains in a solid capital position with a PCA ratio of 1.62x, up slightly for the quarter, which reflects retained earnings offsetting dividend and coupon payments. Its $24.5 billion investment portfolio held steady, with the alternatives allocation continuing to do its job by adding diversification and dampening correlation to public markets.
Tech upgrades and new partnerships on the way
Challenger’s also pushing ahead with a tech overhaul, having completed the build of its new customer registry system. The platform is now in testing and is expected to streamline annuity sales by making integration with advisers and funds far easier.
There was also a new deal on the partnerships front—NGS Super has signed on to include Challenger’s longevity solution in its Retirement Income Strategy from 2026. It’s a nice win for Challenger as it positions itself as the go-to for guaranteed retirement income.
Looking forward
The company’s “Index Plus” product brought in $446 million for the quarter, and Challenger’s landed a new multi-year mandate worth up to $500 million, expected to be funded across Q4 and early FY26. That should give sales some extra firepower in coming quarters.
Challenger also welcomed a heavyweight investor in TAL Dai-ichi Life, who’s come on board as a material shareholder—a vote of confidence in the company’s strategy and its place in Australia’s growing retirement income space.
