Earnings Update – Challenger Ltd (CGF)

Date: 18/02/2025

*** GENERAL ADVICE ONLY***

Key Financial Highlights

• Normalised NPAT: $225 million, up 12% YoY.
• Statutory NPAT: $72 million, up 28% YoY.
• Normalised EPS: 32.8 cents, up 12% YoY.
• Statutory EPS: 10.5 cents, up 28% YoY.
• Return on Equity (ROE):
  • Normalised ROE (post-tax): 11.6%, up 120bps.
  • Statutory ROE (post-tax): 3.7%, up 80bps.
• Total Life Sales: $4.6 billion, down 12%.
• Annuity Sales: $2.9 billion, down 13%.
• Funds Under Management (FUM): $121 billion, up 3%.
• Cost to Income Ratio: 32.0%, reduced by 260bps.
• Interim Dividend: 14.5 cents per share (fully franked), up 12%.

Abnormal Items & One-Offs

1. Asset & Liability Experience Losses:

   • $96 million asset experience loss (after-tax):
     • Due to alternative investments underperformance and a reduction in office property valuations.
     • Partially offset by gains on the fixed income portfolio due to credit spread tightening.
   • $53 million liability experience loss (after-tax):
     • Caused by accounting mismatch under AASB 17 and new business strain​.

Comparison with Analyst Expectations

Strategic Takeaways & Outlook

• Operational Efficiency Gains:
  • Cost reductions in IT and investment operations helped stabilize expenses.
• Capital Strength:
  • PCA Ratio at 1.61x, ensuring strong capital reserves​.
• Market Challenges:
  • Annuity net book growth of just 1% indicates slow institutional demand.
  • Life sales were down 12%, impacted by market dynamics and sales mix shift.
• FY25 Guidance Reaffirmed:
  • NPAT guidance range of $440-$480M, implying 10% growth.