Shares in Challenger were the top performer on the ASX 200 index after it announced a solid first-half result despite a challenging environment.

The stock jumped 14% on Tuesday after CEO Richard Howes said the life annuity provider is on track to achieve earnings at the top of its guidance range of $500-550 million for the full year.

In the Life business, strong Japanese and local institutional sales helped offset weak domestic sales.

Challenger has been battling disruption in the Australian financial advice market since the Hayne royal commission prompted a fall in the number of financial advisers, especially at major bank-aligned advice groups.

“This has impacted life’s domestic annuity sales, which fell by 24% in the first half,” Challenger said.

Changes to the age pension mean test rules introduced in July also discouraged sales while advisers weighed up the implications, and lifetime annuity sales more than halved to $210.9 million in the first half from a year earlier. Domestic term annuities sales fell 16% to $1.3 billion.

Challenger, which has a market share of around three-quarters in annuities, does not have its own advice business and relies on third party retail financial advisers to recommend its products to clients.

“Lower domestic sales continue to be impacted by ongoing industry disruption,” Challenger said.

Still, Challenger’s result and guidance was better than expected by market analysts.

Japan annuity sales rose 169%, driven by an expanded reinsurance agreement with MS Primary. Other life insurance sales jumped 97% to $1.2 billion, reflecting strong demand from institutional clients for guaranteed returns as interest rates languish at low levels.

That pushed Challenger Life Total Life sales up 15% to $3.1 billion.

Challenger is focusing on more direct engagement and expanding its capabilities to partner with institutional clients.

“We see a significant opportunity in engaging more directly with prospective customers and increase support for advisers to better meet customer needs,” it says.

Challenger will invest up to $15 million this year in a range of distribution, product and marketing initiatives to capture growth as the retirement incomes market evolves.