18th Sep 2014 12:56
LONDON (Alliance News) - Just Retirement Group PLC Thursday reported a 6% increase in new business sales, as its entry into the defined-benefit de-risking space and strong lifetime mortgage volumes offset weak individual annuity sales, following the shake-up of the market in the wake of the Budget.
In a statement, Just Retirement reported GBP1.75 billion of new business sales in the year ended June 30, compared with GBP1.65 billion last year.
Individually underwritten annuities fell to GBP1.11 billion from GBP1.27 billion in the wake of the pension reforms introduced in Chancellor George Osborne's Budget that removed the effective requirement for individuals in the UK to buy annuities to provide income in retirement. The group sold GBP92.1 million of defined benefit de-risking, meaning taking on liabilities of pension schemes from employers, while a new immediate-needs annuity product launched towards the end of 2013 saw GBP2.2 million of sales.
Chief Executive Rodney Cook said operating conditions have become much tougher since the Budget, with individually underwritten annuities sales at "slightly below" half their pre-Budget levels. However, Cook said the group will further develop its defined-benefit de-risking offering in order to accelerate its penetration into the sector.
"We have increased our emphasis on defined benefit de-risking post-budget," Cook told journalists, in response to a question from Alliance News. "Critically it was a business we built over the last two years and launched into the market just over a year ago. The unique point here is that we're actually underwriting sections of these schemes of pensioners - not all the members, but what we can do is select the top twenty, underwrite those, and cover about 80% of the liabilities," Cook said.
Lifetime mortgage (LTM) advances increased by 54% to GBP476.4 million, stimulated by house price rises, a continued low interest-rate environment, and increasing numbers of retirees with inadequate pension savings. The increase in LTM advances includes a wholesale deal under which lifetime mortgage loans amounting to GBP59.6 million were issued to a corporate entity owned by Grainger PLC.
The CEO also told journalists that defined-benefit annuities are actually an even better match for lifetimes mortgages than individual annuities because the majority are index-linked.
Cook summed up the last financial year as one of "extraordinary" highs and lows.
"The successful completion of our initial public offering [in November 2013] and the strong momentum our model delivered in the first nine months of the year were overshadowed by the effect of the Budget reforms on our final quarter. The fact that we still delivered record results speaks volumes for the quality of our business and our people," Cook said in a statement.
Cook said he looks forward to the launch of new customer propositions next year, as Just Retirement looks to respond to the challenge of the reforms.
"Our development programme is on track, and I believe that we have used our outstanding distribution relationships to ensure that we will be in the vanguard of the reformed secure retirement income market," Cook said.
Although Cook is focused on preparing Just Retirement for the new pensions landscape, he also said the group had focused on protecting the profitability of the current generation of products by implementing GBP14.0 million of annual cost savings.
Just Retirement reported a GBP92.8 million pretax profit in the group's last financial year, up from GBP78.3 million last year, as it reported higher net premium revenue and investment income. Claims and expenses rose to GBP1.35 billion from GBP892.5 million.
The group is to pay a 2.2 pence final dividend. It didn't pay an interim dividend.
Just Retirement shares were Thursday afternoon quoted up 1.5% at 140.90p.
By Samuel Agini; [email protected]; @samuelagini
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