CompaniesJul 28 2014

One-year ‘annuity’ props up LV sales in first half

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

LV has reported life insurance sales were up to £732m on the back of strong annuity sales in the first half of the year, despite the Budget at-retirement reforms.

In its interim trading update, the company said annuity sales had increased to £232m from £176m for first six months of 2013. Equity release sales were also up to £57m from £37m during the same period in 2013, with these gains offsetting pension sales falling to £277m from £297m.

However, a spokesperson confirmed to FTAdviser figures for annuities include sales of its one-year ‘annuity’, which along with several other life companies LV had launched in the weeks after the Budget and is actually written under drawdown rules.

The products were designed to offer clients a stop-gap solution under full pension freedoms come into force in April 2015, but were criticised in some quarters for offering poor value and were said by Ros Altmann to offer a “very poor rate” of around 0.5 per cent interest in many cases.

Mike Rogers, LV’s group chief executive, also admitted much of the annuity business transacted in the first six months had been at “lower margins”.

He said: “Sales in the life business have been strong despite the unexpected budget changes announced in March affecting retirement solutions.

“In our life business sales are up over £80m compared to this time last year which is a good achievement given the background of budget changes announced in March that affect our retirement business.

“We initially expected annuity sales to be significantly down but sales have held up well and are up over 30 per cent year-on-year albeit at lower margins. In Q2 post-budget we saw sales of £117m, slightly more than Q1 demonstrating our continuing strength in this area.”

In general insurance, LV saw growth in home and SME, with sales up 22 per cent in the latter compared to this time last year.

Mr Rogers said: “We continue to take on more new customers and now have 4.5 million general insurance policyholders across increasingly diverse product lines, 230,000 more than this time in 2013.

“During the first half of the year in protection we further enhanced both our income protection and highly acclaimed critical illness policies to be market-leading and the most comprehensive in the market.

“In addition we launched a product in a new area of the income protection market aimed at people whose jobs typically make them more expensive to insure including tradespeople and drivers.”

Mr Rogers noted the popularity of the group’s with-profits bonds portfolio, with sales up by nearly 60 per cent compared to last year.

“Earlier this month we made our flexible guaranteed funds available via our self-invested personal pension to help advisers and their clients take advantage of these products in the context of the new pensions landscape.”