Nick Hamilton, Challenger

Challenger Limited says inking deals with super funds to provide guaranteed income products to members remains a priority.

The ASX-listed life company on Tuesday reported normalised net profit after tax of $521 million in FY23, representing a 10 per cent lift on the previous financial year but sending its shares down almost 3 per cent to $6.76 a share.

Financial year results lodged with the ASX showed institutional sales of $5.4 billion in the half, of which the bulk ($4.2 billion) was attributed to the Challenger Index Plus product.

But Challenger CEO Nick Hamilton indicated he saw super funds as an “emerging channel” for annuity and other longevity product sales. These institutional clients are now compelled by law to assist members prepare for retirement, which some stakeholders believe means they need to either offer a retirement income product or can at least offer advice or refer to an adviser who can recommend one.

“With the Australian savings market firmly focused on retirement, there is a significant growth opportunity for us to support superannuation funds to develop retirement income solutions to help meet their members’ needs,” Hamilton said.

“Through our new strategic partnerships with Aware Super and TelstraSuper, we will leverage our expertise and market-leading investment capability to develop retirement and longevity solutions for their members. As we look to the future, we are uniquely positioned to seize the growth opportunity ahead.”

Biggest buy-in

TelstraSuper, which was formerly restricted to employees of the telco giant and their families but opened to the general public in 2021, signed a partnership with Challenger during the year believed to be the first by an APRA-regulated super fund to offer a comprehensive retirement income solution.

Separately, Challenger announced last month it had been selected to provide a “de-risking solution” for Aware Super’s ageing defined benefit fund. The $160 billion mega-fund has handed a $619 million mandate to provide the group lifetime annuity policy to about 3000 members. Both Aware and Challenger have claimed it is the largest annuity buy-in in Australian history.

“Through this innovative de-risking solution, we are protecting our defined benefit pension members from investment, inflation and longevity risks and locking-in future cash flows, providing greater certainty to their retirement income,” said Aware Super chief investment officer Damian Graham in July. “It is a win for all our stakeholders.”

The Aware deal will contribute to Challenger’s lifetime annuity sales in FY24.

The financial results come as funds have been castigated for slow progress in assisting their members prepare for retirement. A joint review by regulators ASIC and APRA found too many were displaying “insufficient urgency” on retirement issues, 12 months after the covenant took effect.

Of the 15 trustees assessed by the regulators, seven offered some form of longevity risk or guaranteed income product to members.

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