Market Release

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CHALLENGER LIMITED HY2011 RESULTS

Record growth - retail Life sales up 57% to $713 million Record net profit after tax of $120 million EPS up 16% Interim dividend up 17%

Upgraded FY2011 targets – retail Life sales growth of 50% Upgraded FY2011 Life cash operating earnings guidance - from $375 million to $390 million

21 February 2011, Sydney – Challenger Limited (ASX:CGF) today announced a record normalised net profit after tax (NPAT) of $120 million for the six months to 31 December 2010. More settled investment markets resulted in statutory NPAT approximating normalised NPAT, with a result of $118 million for the half.

Normalised earnings per share (EPS) rose 16% to 25.2 cents. Challenger’s EPS has grown at a compound annual rate of 19% over the last five years. The interim dividend is 7.0 cents unfranked, an increase of 17% on the pcp.

Chief Executive Officer Dominic Stevens said the market’s acceptance of Challenger’s new annuity products and continued sales growth across all categories demonstrate strong consumer demand for guaranteed fixed income products, particularly among the retiree demographic.

“We’re very pleased with the result for the half and the improved outlook for the full year. Total Life sales were $732 million, retail Life sales rose 57% to $713 million and more than 28% of these were of products introduced in the last 12 months or so. Given the strength of this trend we are upgrading our full-year growth targets to 50% for retail sales and approximately 10% for retail net book growth.

“By 2025 the post-retirement market will be worth more than $1 trillion, and guaranteed income products currently account for only a very small percentage of that market. We’ve verified the opportunity for these products and last night kicked off the next phase of our growth strategy with the launch of a multi-million dollar advertising campaign”, he said.

Labelled “Real Stories”, the national campaign will be the largest consumer advertising programme in the company’s history and marks the first time that simple annuity products have been advertised to Australian consumers. It portrays the impact of the global financial crisis on four individual’s retirement plans and will run on free-to-air and subscription television, cinema, radio, print and on-line.

Mr Stevens said: “We’re seeking to bring balance to a discussion that for too long has focused on the benefits of share market investing while rarely, if ever, mentioning the risks. Equities are well-suited to accumulation but over-exposure can have dire consequences in retirement, as thousands of retirees experienced during the GFC”.

In addition to an unprecedented advertising push, the next phase of Challenger’s growth will be assisted by the recently announced restructure of reporting lines such that the product, distribution and marketing functions now form a distinct division reporting directly to the CEO. Other marketing and distribution

Further enquiry: Suzanne Evans, Head of Investor Relations, Challenger Limited, 02 9994 7125 Stuart Barton, Head of Corporate Marketing and Communications, Challenger Limited, 02 9994 7008

Challenger Limited A.B.N 85 106 842 371

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initiatives include a doubling in the number of financial adviser national roadshows and the introduction of new research and software tools for advisers and consumers.

Institutional marketing efforts over the half-year resulted in the creation of Challenger’s first ‘white-label’ annuity product for an industry superannuation fund. This term product will be open to members in both accumulation and retirement phases. In addition, Challenger was awarded $700 million of aligned investment mandates from sovereign wealth and industry funds.

The first six months of the financial year also saw Challenger establish two new boutique funds management firms, Alphinity Investment Management and Novaport Capital, bringing to ten the number of part-owned specialist ‘alpha’ businesses. Strong net inflows to the boutiques as well as market-linked movements lifted Funds Management’s average FUM by 10% for the half-year to $21.1 billion.

“Our funds management business was largely transformed throughout 2010, so this year we are focusing on consolidation and organic growth”, said Mr Stevens.

Challenger’s total assets under management rose 8% to $25.8 billion from $23.9 billion at 30 June 2010.

Challenger Life’s assets under management increased to $7.6 billion at 31 December while cash operating earnings were $192 million, an increase of 25% on the pcp. As at 31 December 2010, Life held more than $725 million in surplus capital over its regulatory minimum.

Guidance for Life’s FY2011 cash earnings has been upgraded to $390 million, an increase of $15 million on previous guidance and more than 15% higher than FY2010’s result.

Challenger’s normalised cost to income ratio fell for the third consecutive reporting period to 37% despite continued business re-investment.

Gearing remains at zero with nil recourse debt.

Further enquiry: Suzanne Evans, Head of Investor Relations, Challenger Limited, 02 9994 7125 Stuart Barton, Head of Corporate Marketing and Communications, Challenger Limited, 02 9994 7008

Challenger Limited A.B.N 85 106 842 371