In a market where businesses are regularly preceded in the media by words such as “troubled”, “embattled” and “beleaguered”, Britannic Group stands out.
Its decision last week to close Britannic Retirement Solutions to new business came after it closed its life insurance division to new business in March and sold its mortgage arm Britannic Money to Paragon for £19m just six months after buying a 40 per cent stake in the business for £56.5m.
BRS shone brightly against this backdrop, not only because it more than doubled sales in 2002 to £362m from £166m in 2001 but because it had also started to cement a highly regarded IFA brand.
Nevertheless, BRS was forced to close its doors to new business with the loss of around 200 jobs, apparently because return on capital was not sufficient to justify continuing to write these impressive levels of business.
IFAs are reacting with sadness and regret to the demise of what they felt was an innovative and consumer-led company. Hargreaves Lansdown retirement planning manager Danny Cox says: “BRS always seemed to be the one company extolling the importance of transparency and that the open market option should be more clearly understood. It is a shame that it will not be around to reap the rewards of its efforts but fair play to it for flying the flag.”
Annuity Bureau managing director Peter Quinton feels that the disappearance of a small innovative player is bad news for the market in general. He says: “It is very sad it has left the market. It brought a great of knowledge to the impaired-life annuity field. I think it was BRS chief executive Mike Fuller – with BRS's previous incarnation as Stalwart and then Evergreen – who introduced one of the first smokers' annuities in the UK.
“It is small players that brought bigger players such as Prudential and Norwich Union into the market. It is unfortunate that BRS has gone. It will be missed.”
BRS made its presence felt in a relatively short time due in no small part to its tireless and successful lobbying on issues such as telling annuitants clearly about their right to exercise the open market option and the full regulation of equity release.
These efforts were spearheaded by the spirited double act of corporate development director Bob Bullivant and in-house lobbyist Jim Boyd. The impact of the company's work in the area of equity release, in particular, will be felt for some time to come.
As BRS shut up shop to new business, the Treasury published its consultation document seeking views on whether the sale of home-reversion plans should be regulated by the FSA. BRS had been lobbying hard in favour of regulation and had helped unite the ABI, Aifa, the Conservatives, Liberal Democrats and charities for the elderly to call for regulation.
What will be the lasting impact of the closure of the business? Some advisers are concerned that the shelving of a successful business communicates an undesirable message to consumers.
Cox says: “My initial reaction was that this was both a real shame and quite a surprise as the impaired-life annuity business is the underwritten and therefore safer end of the market. Usually, it is the poorer players that get wheedled out of markets. It is a pity and fairly unusual that a good player has been unable to stay in the game through no fault of its own.”
Intelligent Pensions director Steve Patterson says: “This sends a very contradictory message. Even the press release announcing the closure was contradictory, explaining that BRS was shutting up shop and that it had been doing extremely well. It looks to those outside that it has been made to reconsider its position in the market for reasons not immediately obvious, where a successful business has been undermined by deep-seated problems at the parent company.”
Patterson is joined by others in his concern that the closure adds to consumer uncertainty about the insurance sector. Quinton says: “There was no black hole in the business's finances but annuities are very capital-intensive and you need a lot of backing to continue to write business. What we need is innovative companies such as BRS. Its closure is not good news for the market.”
Now BRS has gone, many advisers see bigger players mopping up the impaired annuity market and perhaps more mainstream annuity providers competing for their piece of the enhanced rates' pie.
Cox says: “The closure of BRS is probably indicative of what will happen to the rest of the market, with smaller players consolidating or falling by the wayside because of capital issues. Generally speaking, it has been Britannic, Prudential and GE Life that have tended to come out as having the best rates.
“In the impaired market specifically, Pru, GE & Pension Annuity Friendly Society will probably do the best out of the closure of BRS but I think we will see more and more mainstream players move into the market.”
The closure of BRS to new business is being seen by all interested parties as a big loss. It will now be down to smaller players to tough it out and for all providers to build on the fruits of the company's lobbying labours to make the post-retirement markets more transparent for consumers.