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NU warns firms face squeeze in run-up to A-Day

Norwich Union is warning that increasingly strong competition in the life and pension market will threaten margins in the run up to A-Day.

Worldwide profits for the company rose by 21 per cent in the first half of this year compared with the same time last year. Almost two-thirds of group profits now come from overseas markets and NU says UK profits are likely to reduce further as a percentage of its business.

Group operating profits were 1.32bn in the first half compared with 1.076bn last year. New business margins have risen from 2.5 per cent for the whole of 2004 to 2.6 per cent this year.

UK chief executive Gary Withers says this increase is a direct result of cutting commission on less favourable business such as stakeholder. He warns that the second half of the year is likely to see margins squeezed due to an anticipated price war in the life and pension market. Last month saw a U-turn by NU as it increased stakeholder commission, which Withers says has yet to come through in the results.

UK life and pension sales slipped by 1 per cent from 4.299bn to 4.244bn in the first half, on a European embedded-value basis.

Withers says the personal pension launched by NU late last year has failed to take off due to ongoing adviser concerns over RU64.

NU enjoyed strong growth in investment sales but admits disappointment at a slip in equity-release sales from 197m to 179m over the period.

Withers says: “We are happy with the fall in life and pension sales as it reflects our focus on higher margin business but the equity-release market has been slower than expected. Our international business continues to grow rapidly and the UK proportion of our business is getting smaller.”

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