Challenger plans to raise up to $300 million to strengthen its life business as it looks to weather the ongoing disruption caused by the virus pandemic.

The business said today that it aims to raise $270 million from a fully underwritten institutional placement and up to $30 million from a share purchase plan.

The funds raised will increase the regulatory capital position of its life business – Challenger Life Company (CLC) – from 1.63 times to 1.78 times of the prescribed capital amount set by the Australian Prudential Regulation Authority.

It also intends to “prudently and progressively” deploy the capital in investment-grade fixed income opportunities that are accretive in terms of return on equity for shareholders.

“Challenger is in a strong capital position with the raising further strengthening CLC’s balance sheet, and providing the opportunity to seek out compelling return on equity accretive investment opportunities over time,” CEO and MD Richard Howes said.

“Raising additional capital will support our business to remain strongly capitalised so we are well-placed to withstand and respond to further market volatility.

“At the same time it will provide us with flexibility to take advantage of selective investment grade opportunities with attractive returns.”