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• Earnings: Higher earnings of $225 million driven by momentum in Life and growth in Funds Management.

• Return on Equity (ROE): Exceeded target, with post-tax ROE increasing 120 basis points to 11.6%.

• Interim Dividend: Increased by 12% to $0.145 per share.

• Normalized Net Profit After Tax: Increased 12% to $225 million.

• Statutory Net Profit After Tax: Increased 28% to $72 million.

• Life Annuity Sales: Record retail lifetime annuity sales, with Japanese annuity sales up 78% to $616 million.

• Funds Under Management (FUM): Closed the half at record levels with $121 billion under management.

• Cost-to-Income Ratio: Improved to 32%, down 110 basis points.

• Capital Position: PCA ratio at 1.61 times the minimum regulatory requirement.

• Funds Management ROE: Expanded 530 basis points to 17.8%.

• Net Flows: Total net outflows of $3.1 billion, driven by lower margin institutional fixed income strategies.

• Warning! GuruFocus has detected 6 Warning Signs with ASX:CGF.

Release Date: February 17, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Challenger Ltd (ASX:CGF) reported a strong first half of 2025 with higher earnings of $225 million, driven by momentum in Life and growth in Funds Management.

• The company achieved a 12% increase in interim dividend, reflecting confidence in the business and alignment with FY25 earnings guidance.

• Challenger Ltd's strategy to remix sales towards longer-duration business has improved the quality of its annuity book, with 80% of total annuity liabilities now for terms of three years or more.

• Funds Management saw a strong recovery in equity flows and private credit offerings, with Fidante achieving 95% outperformance over five years.

• The company is strongly capitalized, maintaining a PCA ratio in the top half of its range, supporting future growth and market volatility navigation.

Negative Points

• The statutory net profit after tax was significantly lower than the normalized result due to non-cash accounting adjustments and property valuation reductions.

• Challenger Ltd experienced a decrease in term sales by 12%, attributed to challenges with longer-duration term sales amid an inverted yield curve.

• The COE margin moderated by 9 basis points to 3.1% this half, reflecting tighter fixed income credit spreads and lower property yields.

• The company faces challenges in the institutional fixed income strategies, resulting in total net outflows of $3.1 billion.

• There is a notable difference between normalized and statutory profits, raising concerns about the sustainability of return assumptions, particularly in the alternatives portfolio.