Bulk annuities boost Just Retirement profits ahead of merger

Cook-Rodney.Just-Retirement.2013

A surge in bulk annuity deals and a slight rise in individual annuity sales helped boost Just Retirement’s pre-tax operating profit by 43 per cent in the second half of 2015.

The last set of results before the merger with Partnership show profits rising to £49.8m, up from the £34.9m recorded in the same period of 2014.

Total sales increased by 52 per cent, from £820m to £1.2bn, driven by a doubling in sales of bulk annuities to defined benefit schemes from £355m to £701m.

Following the devastating impact of the 2014 Budget on sales, individual annuity sales grew 2 per cent – to £271.2m.

However, drawdown sales fell off a cliff as the firm closed its capped drawdown product and launched its flexible pension plan.

In the second half of 2014 drawdown sales hit £35.3m – they dropped to just £7.2m in the same period of 2015.

Margins earned on new business increased by 2.9 per cent to 4.7 per cent. The firm says this is as a result of “an improving business mix, higher absolute sales and helpful asset yields”.

In addition, acquisition costs – include commission payments – increased from £9.6m to £13.4m – while other expenses increased by £21.5m.

Just over £16m of this relates to the merger with Partnership – which made a loss in 2015 – and is expected to complete in April 2016.

The providers are aiming to make £40m of cost savings following the deal.

Just Retirement chief executive Rodney Cook says: “We are pleased with our progress to date in the evolving pensions landscape and changing regulatory environment.

“For the future, the DB market offers significant potential and today’s figures show that we have real traction in this area.

“Meanwhile, the individual guaranteed income for life market has stabilised and we expect to see a return to longer-term growth here too.

“The merger with Partnership provides us with a further source of earnings growth, and it will enable us to drive significant cost efficiencies, underpinning our value-for-money products.”