Prudential blames RDR for 14% drop in sales

Prudential has blamed the implementation of the Retail Distribution Review for a fall in its UK sales volumes, which fell by 14 per cent to £355m in the first half of 2013 compared to the same period in 2012.

In its half year results, published today (12 August), Prudential said the effects of the transition to adviser charging, triggered by the RDR, have started to reduce and monthly sales levels have settled “to a more steady pattern”, compared to the first quarter of the year.

However, advisers are still working through the impact of the RDR on their business models and the bancassurance market has continued to contract, the firm said.

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Prudential said the experience for many customers is that in the short term their access points to advice are reduced. As a result, Prudential anticipates that a “degree of market dislocation” will persist and this will “dampen its sales of investment bonds in 2013 compared to the “unusually high level of sales” achieved in 2012.

The results revealed that retail sales, on an annual premium equivalent basis, of £355m were 8 per cent lower than the first half of 2012, as a result of the decrease in with-profits bonds sales that was caused by the implementation of the RDR, lower corporate pensions sales and the “cessation of Department of Work and Pensions rebate business”, which contributed APE sales of £9m in the first half of 2012.

Individual annuities APE sales increased 6 per cent to £111m. External annuities APE sales increased 13 per cent to £44m, while internal vestings were 2 per cent higher at £67m.

In terms of product mix, the half year saw higher sales of with-profits annuities, offset by lower conventional annuity sales. Corporate pensions APE sales of £93m were 11 per cent lower, mainly due to reduced levels of new scheme sales.

Total new business profit of £130m was lower than the £152m earned in the first half of 2012, which included a £22m contribution from the bulk annuity transaction that has not been repeated. Retail new business profit was in line with the first half of 2012, as lower sales volumes were offset by positive effects of mix and pricing activity.

Tidjane Thiam, group chief executive, said: “Our UK life business, which continues to cater to the needs of an ageing British population, delivered IFRS operating profit of £341m, up 1 per cent.

“UK industry sales volumes have been affected by the implementation of the conclusions of the Retail Distribution Review. Prudential UK remains focused on its core business of individual annuities and with-profits products. We believe the strength of our products and brand will position us well once distributors have adjusted to the new environment.”