Challenger has reported a record sale of annuities for the year ending June 30, up 34%.

But the total sales figure was boosted by the transfer of $444 million from the closure of Challenger’s High Yield Fund.

Based on year-on-year sales, excluding the internal transfer, Challenger’s annuity sales were up 2.7%, but the insurer still sold more product than in previous years.

Annuity sales in 2012 were $1.95 billion compared with $1.9 billion during the 2011 financial year.

Institutional life sales were up from $59 million in the last financial year to $703 million in the 12 months to June 30 this year.

This pushed Challenger Life’s total sales to $2.65 billion.

The insurer had a retail annuity book of $6.55 billion at June 30, compared with $5.62 billion last year.

The life business reported a pre-tax net profit of $172.6 million, compared with $307.8 million in the previous 12 months.

Challenger CEO Brian Benari says ongoing volatility has affected Challenger Life’s statutory profitability because of insurance accounting standards, which now require statutory normalised profit after tax to include realised and unrealised movements in the value of assets and liabilities.

“In volatile periods like we’ve experienced during the last five years, statutory profit may be significantly more than or less than normalised profit,” he said.

After-tax profit for the parent was $297 million for the financial year, up 20% on the previous year’s figure of $149 million.

“We’re very happy with top and bottom-line performance and continue to reap the benefit of the organic sales engine we created in our annuities business,” Mr Benari said. 

“Like everyone else in the sector, we’ve been mindful to watch our cost base – but are fortunate that our assets under management, sales and profits have been growing.”

He says the life business is expected to keep growing.

“We’re uniquely placed to benefit from the structural changes occurring in the retirement savings market,” Mr Benari said.

“For 2013 [financial year] we’re targeting 15% retail annuity sales growth and $440-$450 million in cash earnings for the life company.”