Challenger has announced measures to ensure its life business is sufficiently capitalised to weather the financial market volatility caused by the coronavirus pandemic.

It says in a statement issued today that the measures involve actively managing Challenger Life’s investment portfolio, reducing its capital intensity and maintaining a strong capital position.

“We have positioned our portfolio defensively for the current conditions with a high weighting to Investment-grade fixed income,” CEO and MD Richard Howes said. “Our business is well placed to manage through this volatility with capital strength, robust risk management and leading investment quality.

“We continue to reposition the portfolio so we can be ready to benefit when conditions do ultimately begin to stabilise and relative value opportunities emerge.”

Challenger Life currently has a prescribed capital amount ratio about 1.55 times above the minimum requirement set by the prudential regulator.

Challenger, the holding company, has maintained its earnings forecast of $500-550 million in normalised net profit before tax for this financial year. It says the forecast reflects the changes to the investment portfolio of its life business and lower earnings from its fund management arm.

On Friday, S&P Global Ratings lowered its outlooks on Challenger Life and Challenger to stable from positive.

The ratings agency affirmed its A long-term insurer financial strength and issuer credit ratings on Challenger Life, and BBB+ long-term issuer credit rating on Challenger.

“The stable outlook reflects our view that [Challenger Life] and the broader group will maintain their very strong financial profile and strong business profile amid the COVID-19 market disruption,” S&P says.

“We see the recent actions to de-risk the investment asset portfolio and boost liquidity as bolstering regulatory capital metrics.

“Our previously more optimistic medium-term view is now clouded by the current disruption in financial advice distribution, investment-market volatility, and a likely slowdown in new product sales.”

But S&P says Challenger Life still faces “downside ratings potential” over the next 12 months if the business is affected by the virus pandemic in the form of product demand weakness, advice channel difficulty or further material declines in investment asset value.