Partnership has seen a 43 per cent drop in individual annuity sales in the first half of this year, compared to the same period in 2013 due to the radical changes announced in this year’s Budget.
Its half yearly report, published today (14 August), revealed that individual annuity sales dropped to £334m during the first six months of this year, compared to £590m during the same period in 2013, with sales of £135m in Q2 reflecting the impact of the Budget reforms.
In a statement, Partnership said: “Despite the uncertainty that the [Budget] announcement has caused, the majority of people with annuities in our pipeline decided to continue with their purchase after discussion with their advisers.
“However, the announcement has resulted in lower quote volumes and this has resulted in lower completions in the second quarter of the year, with sales now running at below 50 per cent of pre-budget levels as a result.”
The firm stated that it is unclear whether sales will stabilise at this level given the ongoing uncertainty surrounding guidance and regulations, with risk selection and pricing discipline continuing to be prioritised over market share growth.
Steve Groves, chief executive, said that despite the uncertainty, Partnership is continuing to focus on a long term strategy based around core competencies.
“This includes extending our defined benefit de-risking proposition, developing new products to meet the expected ongoing customer need for longevity insurance and progressing opportunities to leverage our unique dataset internationally.”
The firm reported £37m of underwritten DB bulk annuity sales, up from £11m in the first half last year. Care annuities and protection also sales continue to be unaffected by the Budget proposals at £36, and £2m, respectively, compared to £28m and £2m last year.
Mr Groves added: “Significant uncertainty remains regarding the long term impact of the Budget proposals, but I believe our strategy will help ensure Partnership is well-positioned for the evolving retirement market.”
“We have taken decisive action to manage our cost base in light of the disruption and will continue to maintain pricing discipline and only write business that is economically attractive.
Total operating profits were £33m, with only £18m of new business operating profits compared to £38m during H1 2013, representing a new business margin of 4.4 per cent.
Partnership shaved £1m off its underlying operating expenses, down to £42m from the second half of 2013, with actions taken since the Budget more than offsetting the full impact of costs and inflation.
Cuts in June, together with the actions taken immediately post Budget are expected to generate annualised cost savings of £21m against the anticipated 2015 cost base, resulting in total underlying operating expenses of approximately £80m in 2015.
The firm also revealed that it has identified a “significant opportunity” in the US and it is “currently exploring the most appropriate market entry strategy.”
