10th Nov 2014 12:33
LONDON (Alliance News) - Just Retirement Group PLC Monday said sales expectations for the full year remain intact despite a 42% drop in first-quarter numbers, as the market adjusts to the realities prompted by big pensions reforms in the UK, with the company reporting progress in new defined-benefit sales to make up for the significant pressure on individually underwritten annuity volumes.
In a statement, the FTSE 250 retirement products and services group said new business sales fell to GBP255.1 million in the three months ended September 30, compared with GBP442.0 million in the corresponding period last year, as a 59% drop in individually underwritten annuities to GBP129.3 million more than offset a rise in defined benefit sales to GBP24.8 million from GBP3.2 million.
Fixed term annuities fell by 1% to GBP20.2 million. Just Retirement said the fixed-term annuities fall was not as drastic as the individually underwritten annuities hit because of the success of its one-year fixed-term annuity product launched after the pensions reforms, which allows people retiring now to acquire a short-term income before taking advantage of the new rules next year.
However, Just Retirement's defined benefit figures excluded a GBP75 million deal disclosed to the market in October, as well as a new GBP76 million sale scheduled to complete later in the week. The group said that although the defined benefits business is "inherently lumpy", the pipeline remains strong.
Just Retirement made its first defined-benefit sales before Chancellor of the Exchequer George Osborne's 2014 Budget in March, in which Osborne put an end to the effective requirement on individuals in the UK to buy annuities with their pension pots in order to provide themselves with income in retirement. But the company has since put more emphasis on the defined-benefit products, under which it takes on the obligations of a company's pension plan in return for a premium, seeing them as an area in which it can grow in order to compensate for the hit to individual annuities.
Lifetime mortgage advances fell by 23% to GBP80.8 million, with Just Retirement citing deliberate management action, with volumes being managed in line with total annuity sales. The group also said the decline was due to falling annuity volumes, and therefore reduced funding.
Current sales volumes have continued in line with those seen in the first quarter, according to Just Retirement, with the exception of the increase in its defined-benefit business.
Chief Executive Rodney Cook said the figures compare favourably with realistic expectations following the disruption caused by the Budget, adding that its defined-benefits team's continued deal making will help the group if demand for individually underwritten annuities weakens further ahead of the run up to the new pensions rules coming into force next April.
"Our success in the defined-benefit market also demonstrates that Just Retirement retains the entrepreneurial spirit of a company currently celebrating only its 10th anniversary," Cook said in a statement.
"This gives me confidence that our new generation of post-Budget retirement income products will contribute to revenue momentum in 2015. Our unique medical underwriting skills will be more relevant than ever to those financial advisers with a duty to ensure that their customers do not outlive their savings," Cook added.
Just Retirement shares were up 3.7% at 130.10 pence on Monday.
By Sam Unsted; [email protected]; @SamUAtAlliance; updated by Samuel Agini; [email protected]; @SamuelAgini
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