Investment group Challenger says its life annuity sales in the first quarter grew 46% to $1.23 billion from a year earlier.

The increase was driven by strong Australian sales and robust contributions from its partnership with MS Primary in Japan, Challenger said last week in an investor update for the September quarter.

Australian annuity sales increased 35% to $842 million, underpinned by strong growth in both term and lifetime products. Sales through the MS Primary partnership surged 79% to $391 million.

However, overall life sales fell to $1.58 billion from $1.78 billion a year, dragged down by lower institutional volumes.

The business reaffirmed its normalised earnings guidance for this financial year, with pre-tax profit projected in the range of $390-440 million.

“Challenger’s performance in the first quarter demonstrates the success of our strategy to diversify our business geographically and across customer segments,” CEO and MD Richard Howes said.

“Our record annuity sales reflect strong growth in the contribution from Japan as well as domestic institutional and retail annuity sales.”

Challenger says the Life division made significant progress during the quarter redeploying about $800 million of cash and liquids into higher-yielding investments that will generate returns in excess of 20%.