Prudential UK saw new business profit in the first quarter fall by 11 per cent as annuity sales slumped by more than 60 per cent compared to the three months to March 2014 ahead of the Budget retirement freedoms announcements.
Published today (6 May), Pru’s Q1 results show retail new business profit fell by 11 per cent to £34m, primarily due to the reduction in annuity sales and the impact of lower interest rates.
However, retail sales actually rose 8 per cent in the first quarter of 2015, with increased sales of investment products including onshore and offshore bonds, individual pensions and income drawdown more than offsetting the fall in annuities.
Individual annuity sales reduced from £36m in the first quarter of 2014 to £14m in 2015, equating to a decline of 61 per cent. Income drawdown sales nearly trebled to £14m and individual pensions annual sales increased by 125 per cent to £27m.
Bond sales of £76m increased by 21 per cent, and sales on an annual basis from onshore with-profits bonds of £56m were 25 per cent higher, “with particularly strong demand for our non-guaranteed range of Prufunds”.
The group did not conclude any bulk annuity transactions in the first quarter of 2015, although shortly after the quarter end Pru wrote one bulk scheme with an annual premium of £67m and new business profit of £46m.
The results state: “There is significant ongoing demand for our with-profits funds, with customers attracted by both the track record of performance and the benefit of a smoothed return to help manage market volatility.”
Offshore bond sales were 13 per cent higher, which the group says reflecting the “growing popularity” of its with-profits funds.
On 26 February 2015 Prudential added the Prufund range of investment funds to the Prudential Isa, generating additional Isa sales of £32m in the quarter and £95m to the end of April 2015.
In total, Prufund assets under management have increased 9 per cent to £12.6bn since the start of the year.
Corporate annual pension sales of £33m were £7m lower than the first quarter of 2014, which benefitted from higher new entrants as auto-enrolment came into effect for larger employers.
Tidjane Thiam, outgoing group chief executive, said: “Retail new business profit of £34m was 11 per cent lower primarily reflecting reduced volumes of individual annuities following the 2014 Budget changes.
“We continue to operate with discipline in the bulk annuity market, writing no transactions during the first quarter and one sizeable transaction immediately after the quarter end. Overall, we believe our strategy is working well in the new environment as demonstrated by the encouraging signs of progress so far.”
ruth.gillbe@ft.com
