The Challenger Ltd (ASX: CGF) share price is in focus after the annuity business announced its FY26 half-year result.
Challenger is Australia’s leading annuity business, which enables retirees to turn their nest egg into a guaranteed source of income.
Challenger FY26 half-year result
Here are some of the highlights from the report for the six months to 31 December 2025:
- Record annuity sales grew 32% to $3.8 billion
- Annuity book growth of 7.4%
- Normalised net profit after tax (NPAT) rose 2% to $229 million
- Normalised earnings per share (EPS) grew 2% to $0.333
- Statutory net profit grew 30% to $339 million
- Normalised return on equity (ROE) of 11.4%
- Interim dividend per share hiked by 7% to $0.155
- Share buyback of up to $150 million
What numbers drove this report?
Challenger reported that total life sales increased by 11% to $5.1 billion, driven by domestic annuity sales growth of 37% to $3.1 billion.
The ASX share said there was strong growth in both fixed term and lifetime annuity sales, driven by continued demand for guaranteed income solutions and attractive investment opportunities.
Offshore reinsurance annuity sales increased by 13% to a record $695 million.
Life normalised net profit grew 1% to $226 million. The life cash operating earnings margin decreased 16 basis points (0.16%) to 2.95% primarily because of “the tighter credit spreads environment and a higher allocation to cash and liquid assets”.
In the funds management division, normalised net profit grew 7% to $29 million thanks to higher net fee income and lower costs, reflecting operational efficiencies. Funds under management (FUM) rose 3% to $116.2 billion.
Operational developments
The annuity ASX share noted a few developments that happened in the last several months.
During the period, Challenger’s Fidante acquired a minority stake in London-based Fulcrum Asset Management, a leading liquid alternatives manager.
It also established partnerships that will help drive future growth.
Challenger partnered with Insignia Financial Ltd (ASX: IFL) for the launch of the superannuation component MLC Retirement Boost on MLC Expand, in August 2025.
It partnered with BT to launch a range of lifetime income solutions on its wealth platform, giving advisers more tools to turn client superannuation savings into income for life.
Challenger also partnered with two advice technology platforms – Iress Ltd (ASX: IRE) XPlan and Informed Financial Future (IFF) – as part of its plans to improve accessibility to annuity products.
Outlook for the Challenger share price
The company reaffirmed its earnings guidance for FY26, targeting normalised EPS of between $0.66 to $0.72. Its half-year EPS of $0.333 suggests it’s on track with this guidance.
However, it doesn’t seem very likely to hit the high end of guidance.
The business is clearly doing well at capitalising on demand for its annuities, however its normalised profit is not growing very quickly.
It will be key for the business to deliver good investment returns for clients and shareholders, whilst achieving a pleasing double-digit ROE, to ensure good long-term returns. It will be interesting to see how Challenger’s acquisition attempt of Pepper Money Ltd (ASX: PPM) turns out.
I hope Challenger performs well into the future considering its importance for Australia’s retirement system, but it’s not one of the ASX dividend shares I’d buy for my own portfolio because of the exposure to asset market and interest rates, and how that could mean volatility in the future.
Prior to this update, it was up 37% in the past year, so it’s not cheap as it was 12 months ago.
