Challenger expects super industry assets to double over ten years

Despite the significant disruption which impacted Challenger’s 2019 financial results, the company has said that  it expected the assets within the entire superannuation industry to double over the next ten years.

The company reported normalised net profit after tax (NPAT) to be down $10 million to $396 million, with the group assets under management (AUM) to be slightly up on FY18 finishing the year  at $82 billion.

In addition, to that the statutory profit after tax was down $15 million to $308 million due to  negative investment experience, which included fair value movements on Challenger Life’s assets and liabilities, it said.

At the same time, Challenger said it maintained a strong capital position, with $1.5 billion of excess regulatory capital and group cash, which would help better support future growth in the firm’s annuity book.

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“In 2020, our investment of up to $15 million in new distribution, product and marketing initiatives builds on the strong foundations of our business to drive the next phase of growth,” Challenger’s managing director and chief executive, Richard Howes, said.

“These initiatives support our goal to make annuities a mainstream option in retirement by promoting bottom-up customer demand for our products, and better supporting advisers to write annuities.”

As far as Challenger Life was concerned, the total sales were $4.6 billion, down 18 per cent on FY18. This included lower annuity sales, down $0.5 billion to $3.5 billion, and lower Other Life sales, also down $0.5 billion to $1 billion.

According to Challenger, the biggest driver of the decline in annuity sales was MS Primary sales in Japan, which were down 54 per cent due to the higher US interest rates relative to Australia.

At the same time, domestic annuity sales were down marginally at four per cent, or $140 million to $3.3 billion, despite significant disruption to the major advice hubs.

Following this, the mix of the Life book continued to shift towards long-term annuities, with the proportion increasing by four per cent in FY19.

“Increasing the availability of Challenger annuities via superannuation and investment platforms has supported the shift towards a more diverse and dispersed adviser market. During the year, Challenger launched its annuity products on three leading platforms serving the independent advice market, including BT Panorama, HUB24 and Netwealth,” the firm said in a press release.