Scottish Widows profits boosted by bulk annuity deal

Toby Strauss, Scottish Widows

Scottish Widows’ first bulk annuity deal helped boost underlying profits up 27 per cent, the insurer’s half-yearly statement shows.

Profits at the Lloyds Banking Group subsidiary rose from £461m in the first six months of 2014, to £584m this year.

This was driven by £98m from a bulk annuity deal transacted with the insurer’s own with-profits fund.

If not for this deal, the life and pensions division would have seen sales on a present value of new business premiums basis fall by 26 per cent. However, the transaction meant sales increased 25 per cent, from £4.7bn to £5.8bn.

A Scottish Widows spokesman says: “Scottish Widows now pays the annuities, rather than them sitting in the with-profits fund.

“The with-profits fund has paid Scottish Widows a £98m fee to derisk itself.”

Corporate pensions assets grew 5 per cent, from £27bn to £28.4bn, driven by growing contributions from auto-enrolment schemes.

However, protection sales fell due to the removal of face-to-face protection sales delivered in branch. Widows plans to launch an intermediary protection business later this year.

The firm launched a retirement planning website to coincide with the launch of the pension freedoms. Over 150,000 customers have visited the site in four months, Widows says.

In February 2015 Scottish Widows announced it would be launching a bulk annuity business to help offset the decline in individual annuity sales following the 2014 Budget.

Jeff Sayers was appointed bulk annuities and investment strategy managing director in May.

Scottish Widows chief executive Toby Strauss says: “In a challenging market, against a backdrop of unprecedented industry change, we have simplified our business and continued our 200-year history of helping customers plan for a secure future.

“Throughout the rest of the year, we will focus on improving the way we engage with our customers and continue to invest in the future of the business.”