Challenger delivers 3% profit lift, upsizes buy-back to $450 million in FY26 results
In its FY26 full-year results for the period ending 30 June 2026, Challenger Limited (ASX: CGF) reported normalised net profit after tax (NPAT) of $468 million, up 3% and in-line with earnings guidance.
Managing Director and Chief Executive Officer Nick Hamilton framed the year as one of successful strategy execution, with growing momentum across the business. Australia’s leading retirement income business also lifted returns to shareholders, declaring a fully franked full-year ordinary dividend of 31.5 cents per share (up 7%) plus a 1.5 cents per share special dividend, and upsizing its on-market share buy-back to a total of $450 million.
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FY26 financial results at a glance
Challenger delivered growth across its headline measures during the reporting period. Normalised NPAT rose 3% to $468 million, while statutory NPAT increased to $506 million from $192 million in FY25, supported by higher normalised earnings and positive asset and liability experience.
Normalised earnings per share (EPS) grew 3% to 68.1 cents, and normalised return on equity (ROE) of 11.6% remained above the 10.9% target, though this represented a decrease of 20 basis points from FY25’s 11.8%. Annuity sales climbed 19% to $6.2 billion, driving annuity book growth of 10.7%.
| Metric | FY26 | FY25 | Change |
|---|---|---|---|
| Normalised NPAT ($m) | 468 | 456 | 3% |
| Statutory NPAT ($m) | 506 | 192 | 163% |
| Normalised EPS (cps) | 68.1 | 66.3 | 3% |
| Normalised ROE (%) | 11.6 | 11.8 | (20 bps) |
| Total Life sales ($bn) | 9.6 | 8.6 | 12% |
| Annuity sales ($bn) | 6.2 | 5.2 | 19% |
| Full-year ordinary dividend (cps) | 31.5 | 29.5 | 7% |
| CLC PCA ratio (times) | 1.38 | 1.60 | (0.22) |
Nick Hamilton, Managing Director & CEO
“Our FY26 result reflects the successful execution of our strategy and the growing momentum across our business. We delivered strong earnings, increased annuity sales and continued to invest in the strategic priorities that will support Challenger’s future growth.”
Life and Funds Management drive the result
Record annuity sales power the Life business
The Life segment recorded normalised NPAT growth of 2% to $471 million, reflecting higher normalised cash operating earnings from growth in average investment assets, which rose 6% to $26.2 billion. Total Life sales increased 12% to $9.6 billion, supporting Life book growth of 9.2%.
Domestic annuity sales grew 17% to $4.9 billion, driven by a 19% increase in fixed term annuity sales and a 13% increase in lifetime annuities. CarePlus, a lifetime annuity designed for aged care, achieved its highest yearly sales since launching in 2015.
Offshore reinsurance annuity sales reached a record $1.2 billion, up 25%, reflecting the continued growth of the partnership with Mitsui Sumitomo Primary Life Insurance Company in Japan. The normalised COE margin decreased 13 basis points to 3.06%, primarily reflecting lower yields on fixed income securities in the tight credit spread environment.
Funds Management builds origination partnerships
Funds Management normalised NPAT increased 1% to $53 million, supported by higher net fee income and reduced expenses. The company expanded its asset origination capabilities through new partnerships with Bank of Queensland, Finbase and Spark NZ across Australia and New Zealand.
The BOQ equipment finance partnership, secured earlier in 2026 through a $3.7 billion whole-of-loan sale and a 12-month forward flow arrangement, is one concrete expression of that asset origination push, adding a diversified pool of SME credit assets to support annuity book funding.
Challenger also announced the proposed merger of its multi-affiliate funds management business Fidante with Channel Capital. Subject to regulatory approval, the merger is expected to complete in 1H27, with Challenger owning 45% of the merged entity at completion. Funds Management net flows improved to -$4.1 billion, narrowing from -$11.6 billion in the prior year.
What annuities mean for investors
An annuity is a financial product that converts a person’s accumulated retirement savings into a stream of guaranteed, reliable income, either for a fixed term or for life. Challenger’s “annuity book” represents the total pool of these income commitments on its balance sheet.
The 10.7% annuity book growth recorded in FY26 was supported by record annuity sales across the domestic and offshore segments.
This growth is supported by a structural tailwind, as more Australians move into retirement and seek dependable income solutions. Several factors reinforce demand for the company’s offering:
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A demographic shift, with an ageing population and rising numbers entering retirement.
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Partnerships with superannuation funds seeking retirement income solutions for members.
Capital strength funds bigger shareholder returns
Challenger remained strongly capitalised ahead of APRA’s new capital standard framework for longevity products, which came into effect on 1 July 2026. The company reported a PCA ratio of 1.38 times the minimum regulatory requirement (1.50 times pro forma under the new capital standards), with $1.1 billion of capital in excess of APRA’s minimum requirement.
The APRA capital framework overhaul, finalised earlier in 2026 and effective from 1 July, lowered required capital levels and reduced cyclical risk to Challenger’s position during periods of market stress, providing the regulatory tailwind that underpins the board’s confidence in returning capital at this scale.
Reflecting this position, the Board determined a fully franked full-year ordinary dividend of 31.5 cents per share (up 7%) plus a fully franked special dividend of 1.5 cents per share. The share buy-back was upsized to a total of $450 million, comprising two components:
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The $150 million on-market share buy-back announced in February 2026, of which approximately $90 million has been completed to date.
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A further $300 million on-market buy-back announced today (18 August 2026), subject to market conditions and regulatory approval.
New reporting framework and FY27 outlook
From FY27, Challenger will move to a new Group reporting framework intended to better represent how the business operates and creates value. Under the framework, Core Earnings will comprise Spread Income and Fee-related income net of Operating Expenses, removing all assumption-based normalised accruals for income and capital growth.
For FY27, the company provided Core Basic EPS guidance in a range of 45 to 49 cents per share. The mid-point of 47 cents per share is 6% higher than the FY26 Core EPS of 44.2 cents per share.
The outlook also referenced the $6 billion Challenger Annuity-Backed Notes (CABN) program launched in July 2026, which provides a new institutional funding channel to support annuity book growth and diversification.
Nick Hamilton, Managing Director & CEO
“We enter FY27 with strong momentum and focus on our growth trajectory, reinforcing Challenger’s leadership position in retirement income and creating long-term value for shareholders.”
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