Life Insurance  

Pru profits propped up by bulk annuity sales

Pru profits propped up by bulk annuity sales

Prudential’s UK life business saw operating profits rise 7 per cent to £752m, with bulk annuity transactions taking the edge off a fall in individual annuity business.

According to the group’s full year results, published today (10 March) the growth was principally due to a £105m profit contribution from bulk annuity transactions, up from £25m in 2013.

Meanwhile, retirement market reforms announced this time last year triggered a “dramatic market-wide decline” in sales of individual annuities, with a £53m decline in profit from new retail annuity sales from £110m in 2013 to £57m in 2014.

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The results also reveal group chief executive Tidjane Thiam is to step down from his role after agreeing to join Credit Suisse as chief executive. Pru said the succession process has already examined a range of external and internal candidates.

Despite market disruption, overall retail sales of £686m were only 2 per cent lower than 2013 and increased by 3 per cent in the second half of the year compared with the same period in 2013. Retail new business profit was 23 per cent lower at £165m.

Pru said it earned £23m from the 25 per cent share of the PruHealth and PruProtect businesses which was disposed in November for £155m, generating a profit on disposal of £86m.

“This transaction enabled Prudential UK to realise its investment at attractive terms and creates strategic flexibility for future participation in the UK protection market.”

Nic Nicandrou, chief financial officer, explained that the UK market continues to be heavily influenced by a high level of regulatory and legislative change.

While the reforms impacted individual annuity sales, he stated that the changes also opened up opportunities for alternative retirement solutions, including income drawdown.

“In December 2014 we launched a flexible drawdown product ahead of the introduction of the April 2015 pension reforms.

“Retail sales growth across our range of investment products reflected the strength of our distribution capability, particularly our intermediary channel, as we responded to the challenges and opportunities created by the pension reforms.”

Sales in this segment, which includes onshore and offshore bonds, individual pensions and income drawdown, together delivered sales growth of 41 per cent.