In the first quarter of 2014 Prudential’s UK arm delivered post-tax new business profit of £91m, up 90 per cent on the start of 2013 primarily as a result of a higher level of bulk annuity activity - and despite a fall of 35 per cent in individual annuity sales in the wake of the Budget.
Total annual premium equivalent (APE) business of £237m increased 28 per cent during the first quarter of this year, principally due to bulk annuity APE of £73m compared with zero in 2013.
Retail APE of £164m was 11 per cent less than the first quarter of 2013, with reduced sales of individual annuities and corporate pensions partly offset by higher sales of onshore and offshore bonds.
Individual annuities APE of £36m was 35 per cent lower, which bosses said reflected the overall downturn in the market which started to emerge through 2013 as policyholders have increasingly chosen to defer retirement.
APE from internal vestings was 25 per cent lower at £24m, and external annuities APE was down 48 per cent to £12m.
The slump in individual annuity sales came as the Budget confirmed from 2015 all individuals aged 55 and over are able to access their entire pension fund as cash, removing the effective requirement to purchase an annuity.
Yesterday, (7 May) Legal & General revealed that its individual annuity sales have already fallen by 40 per cent to £244m, compared with £406m at the start of 2013. Standard Life reported last week that its individual annuity sales had dropped 50 per cent.
Around £15m was lost through cancellations during the extended cooling off period which was offered to customers post-Budget, the group said.
Tidjane Thiam, group chief executive of Prudential, said the implications of the Budget changes are still uncertain.
He said Prudential intends to continue to work closely with the government, regulators and other industry participants to ensure that the new pensions system that emerges in April 2015 produces “appropriate outcomes for our customers.”
Sales of onshore bonds was up 9 per cent to £49m, including with profits bonds APE of £45m that increased by 10 per cent.
Corporate pensions APE of £40m was 25 per cent down, mainly due to a fall in with-profits sales which Mr Thiam said has been impacted by changes to government sector pension schemes and constrained economic conditions.
APE from other retail products, principally individual pensions, PruProtect, PruHealth and offshore bonds, increased by 22 per cent to £39m, with offshore bond sales benefiting from the new business pipeline in advance of the implementation of the RDR in the Channel Islands on 1 January 2014.
M&G delivered more than £1.4bn of net inflows in the first quarter of 2014, but only because high inflows from European investors helped offset outflows in the UK.
