CompaniesMay 7 2013

Prudential blames RDR for onshore bond sale drop-off

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ByDonia O’Loughlin

Prudential has blamed the Retail Distribution Review for an 18 per cent drop in onshore bond sales in the first quarter of this year, which led to a 2 per cent fall in its total APE sales when compared to the first three months of last year.

In its first quarter results, published today (7 May), Prudential said that its fall in onshore bond sales to £45m in the UK largely reflected the “anticipated reduction” in sales of with-profits bonds as a consequence of the implementation of the RDR regulations at the end of 2012.

First quarter with-profit bond sales were 21 per cent lower than the first quarter of 2012 despite benefitting from a “significant” pre-RDR pipeline.

The company said it anticipates market dislocation will persist in the short term as consumers and distributors adjust to the new environment and that it therefore expects sales of investment bonds in 2013 to remain down compared to 2012.

Overall in Q1 2013, Prudential UK generated new business profit of £63m, in line with that achieved in 2012 for the same period. The UK business continues to focus on the retirement savings and income markets, Pru added.

Total sales of £185m were 2 per cent lower than the first quarter of 2012, principally due to lower sales of with-profits bonds and individual pensions which were partly offset by higher sales of individual annuities.

Individual annuities sales of £55m were 15 per cent higher than for the first quarter of 2012, although below volumes seen in the fourth quarter of 2012, which were boosted by sales ahead of the change to gender neutral pricing on 21 December 2012.

Prudential UK said it continues to see strong demand for its with-profits Income Choice Annuity, with sales increasing by 69 per cent to £22m.

Corporate pensions sales of £53m was 8 per cent higher than the same period last year, mainly due to higher with-profits sales.

Sales of other products, principally individual pensions, PruProtect, PruHealth and offshore bonds, of £30m were 19 per cent down on the first quarter of 2012, mainly due to the end of contracting out of the state second tier pension for defined contribution pension schemes.

Prudential said in a statement: “We continue to manage our UK business by focussing on our strengths of individual annuities and with-profits products to meet the needs of our 7m UK customers.”