Protection, equity release and heritage businesses helped to partially offset the “significant” impact of the Budget on LV’s retirement new business profits, the provider said, as it reported a fall in overall operating profit.
Its annual results, published today (11 March), revealed overall operating profit fell to £86m last year from £105m, while the group’s life business decreased to £17m from £29m, mainly due to a £13m fall in enhanced annuity sales following Budget changes to just £3m.
The group’s full year results revealed that the outflow in the life business of £11m, compared to a £9m inflow in 2013, reflected lower cash generation from annuities as volumes and margins fell during the year.
Pension sales were strong at £636m, up from £587m in 2013. Equity life sales also increased from £93m to £105m, protection sales increased from £195m to £217m and savings and investment sales rose from £101m to £168m.
In the life insurance sales space, only annuity sales fell, from £457m to £387m in 2014.
Philip Moore, group finance director, explained that as a result of these Budget at-retirement reforms, investment was increased in new retirement business propositions during the year, from £3m to £8m.
In terms of protection, new business contribution before investment in new propositions increased to £10m, from £6m the year before.
The firm recently revealed its plans to launch a Retirement Account proposition for advisers in April, enabling easy quotation and purchase of multiple products together, alongside some simple tools that bring to life clients’ retirement income choices.
The report also noted the development of capabilities in the bulk annuity market, which it views as attractive following the Budget changes.
Mike Rogers, group chief executive, pointed out that the life business achieved an underlying operating profit of £17m despite the pension freedoms announced in the last Budget.
“Whilst we are excited about the potential going forwards, we saw significantly lower new business volumes and profit contribution from enhanced annuities as customer behaviours started to change and retirees deferred making decisions until changes come into force in April 2015.
“The impact on enhanced annuities was however partially offset by strong performance in other business lines, particularly equity release and protection.”
Mr Rogers said that LV had “maintained its position as market-leader” in advised income protection, increasing the breadth of product range with the launch of Personal Sick Pay, a new tailored income protection product designed for riskier, more manual occupations.
Finally, the return on its main with-profits fund narrowly beat their 11.3 per cent benchmark with a return of 11.4 per cent for 2014.
peter.walker@ft.com
