Life annuity provider Challenger has recorded a drop in sales as fallout from the Hayne royal commission disrupts the financial advice market.

Australian annuity sales fell 7% to $607 million in the third quarter as the number of people seeking financial advice declined and adviser churn increased, the insurer says.

Total book growth for the quarter dropped 1.2%, with total life net outflows at $170 million.

Total annuity life sales dropped by $99 million compared with the corresponding period last year, with the Australian annuity sales drop totalling $45 million.

Japanese annuity sales fell 49% due to higher US interest rates relative to Australia, reducing the demand for Australian-dollar products in Japan.

Annuity sales by the big four banks declined by 24%. MD and CEO Richard Howes says strong growth in sales by independent financial advisers partially offset the decline.

MS&AD Insurance Group will provide Challenger ¥50 billion ($637.26 million) of reinsurance annually for the next five years, in an expansion of their strategic relationship.

The reinsurance – provided through subsidiary MS Primary – will support Challenger’s Australian and international growth plans.