Strong defined benefit bulk annuity sales have meant that Just Retirement’s overall annuity sales are just 4 per cent down on the pre-Budget comparison period.
The group’s interim results for the six months ended 31 December 2014 showed annuity sales of £661.2m, with DB scheme sales largely offsetting anticipated weak individual volumes.
In particular, DB strength meant second quarter total annuity sales were up 39 per cent on the prior period, assisted by the sale of two larger schemes of £75m and £76m.
Other annuity providers have also seen individual annuity sales buoyed by bulk deals since the Budget, with the likes of Partnership and Legal and General both sealing large transactions in the second half of 2014.
However, Just Retirement’s underlying operating profit before tax still only amounted to £42.6m, down 10 per cent due to lower new business volumes and margins.
Group embedded value did increase to £1.03bn (205p per share), up 7 per cent on 30 June 2014.
Individual annuity volumes rose 5 per cent in Q2 compared to Q1, although the company admitted there may be further volatility as new products are launched in April.
Meanwhile, lifetime mortgages worth £159m were advanced in the half year, back in line with a circa 25 per cent of annuities longer term target.
Rodney Cook, the group’s chief executive, said that this first set of results in the post-Budget environment showed resilient profits and the early signs of a return to growth in sales.
“Around half of our underlying operating profit came from new business in H1 14/15, while the significant value of our back book supported total earnings. Net inflows after annuity payments and expenses are strongly positive, which underpins the growth in our back book.”
He stated that the firm welcomed the Financial Conduct Authority’s proposed reforms announced in December.
“Further encouragement for all retirees to shop around will give us access to a larger customer base and means that a fully brokered, medically underwritten individual annuity market could finally be achievable.
“The FCA has also confirmed that for retirees with modest pension pots, the right annuity purchased on the open market offers good value for money relative to alternative drawdown strategies.”
He noted that Just Retirement has no legacy issues relating to past sales of annuities or pre-2000 pension products.
We have had a very good first half and whilst it remains to be seen what the second half will bring, we face the future with confidence that demand for our new products, underpinned by our medical underwriting skills, will be strong.”
peter.walker@ft.com
