** Analysts at Morningstar raise fair value estimate for Australia's Challenger Ltd CGF.AX to A$8 from A$7.6

** Morningstar expects Challenger's earnings growth to be driven by strong annuity volumes and favourable product mix in its Life business, which contributes ~90% to normalised NPAT

** Co on Thursday posted Q1 total Life sales of A$2.5 billion ($1.62 billion), up 4% YoY

** Morningstar expects constraints to market share gains due to competition and likely reduction in key interest rates could diminish product appeal

** Adds that despite upgraded sales forecasts and slower annuity maturities from shift to longer-term products, shares remain overvalued

** Increasing proportion of institutional sales, instead of retail sales could lower margins, Morningstar says

** YTD, CGF up 52.4%

($1 = 1.5437 Australian dollars)

(Reporting by Keshav Singh Chundawat in Bengaluru)

((Keshav.singhchundawat@thomsonreuters.com))