Sesame fine hits parent company profits in first half

Sesame’s parent company Resolution has reported a dip in profits in its UK and ‘heritage’ businesses in the first half of 2013, in part due to a fine handed down to the adviser network by the Financial Conduct Authority earlier this year.

Resolution’s UK and closed life business units reported a combined operating profit of £129m at the end of June 2013, a drop of around £8m compared to £137m at the end of June 2012.

The result includes £5m of a £6m fine that was handed down to Sesame in June for failures in relation to recommendations to invest in Keydata. The fine was £2m more than the entire £4.1m trading profit the network reported for 2012.

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Resolution said the remaining £1m of the fine was included in the 2012 results.

Sesame Bankhall Group is part of the Friends Life business that forms part of Resolution’s UK arm. In February, SBG confirmed that it had appointed Barclays Capital to carry out a strategic review that could lead to a sale of the business.

Sesame has so far refused to comment on any sale and there is no mention of an impending sale in the results.

Resolution’s half-year results revealed an overall operating profit of £241m, down from £249m at the end of June 2012.

The UK division saw the value of new business jump 41 per cent to £89m, driven by a focus on the most “profitable lines, commission restructuring and a continued focus on cost control”.

At mid-year 2013, the UK and heritage divisions have delivered “run-rate savings” of £119m compared to £86m at the end of December, with a further £35m secured through contractual arrangements with outsource providers.

The cost of investment in new business is down 44 per cent to £38m, with the firm reporting “continued strong performance” in the protection and retirement income businesses and “solid progress” in re-structuring commission arrangements on corporate benefits schemes.

Sales, on an annual premium equivalent, were £324m at the end of June 2013, down from £354m in the first half of 2012.

Resolution said the retirement income business has shown strong growth, whilst volumes for corporate benefits are lower as a result of a deliberate shift in strategy away from high volume low margin business.

Protection sales were broadly flat with lower, post-gender neutral volumes of individual protection business offset by higher volumes of group protection.