12th May 2014 08:01
LONDON (Alliance News) - Just Retirement Group PLC Monday unveiled a reorganisation to cut costs, as the specialist life insurer grapples with the fall in demand for individual annuities since government plans were unveiled in March to give people in the UK more freedom over how they invest their pension pots.
In a third-quarter statement, Just Retirement said individual underwritten annuity sales increased to GBP287.5 million in the three months ended March 31, compared with GBP214.3 million in the corresponding quarter of 2013. Total annuity sales rose to GBP338.1 million, from GBP230.6 million a year earlier, helped by GBP37.0 million in defined benefit de-risking sales.
Overall new business sales rose by two-thirds, amounting to GBP497.3 million, due to "buoyant" demand for lifetime mortgages, as well as the comparative quarter in 2013 being hit by regulatory changes.
Just Retirement shares have lost about 40% of their value since Chancellor of the Exchequer George Osborne unveiled proposals under his 2014 Budget that removed the effective requirement on individuals to buy annuities.
The annuities provider said Monday the reforms, which were announced on March 19, had a "materially negative impact" on the last two weeks of the quarter.
Just Retirement said its reorganisation will produce annual cost savings of GBP14.0 million in its next financial year, but will result in "one-off costs" of GBP5.0 million in the current one.
An additional GBP5.0 million of investment will be made over the next financial year, according to Just Retirement. Its said it is making the investment in order to "respond to the changing market place" in the wake of the Budget.
"Together, these steps will ensure that we are ready with appropriate new product and distribution offerings in April 2015 when the new regime begins," Just Retirement said in a statement.
"Although operating conditions have become much tougher since the Budget, with sales at around half of pre-Budget levels, we are rapidly adapting our model to the new environment," Rodney Cook, chief executive, said in a statement.
"Our flexibility is exemplified by our recent launch of a one-year fixed-term annuity. This will help customers retiring now to make use of the new rules when they are introduced next year, and further product launches will be announced in due course," the CEO said.
"We expect distribution shifts to give us access to a growing proportion of retirees, particularly if the Government's guidance concept is successfully implemented," Cook said.
Just Retirement shares were Monday quoted at 166.00 pence, up 5.5%.
By Samuel Agini; [email protected]; @samuelagini
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