Sesame Bankhall Group chairman John Cowan says the business is “facing up to legacy issues” after it revealed a pre-tax loss of £19m for 2013.
The company was forced into a loss from the £4.3m pre-tax profit it made in 2012. The loss follows a past business review after the advice firm was fined £6m by the FCA for suitability and systems and control failures in July last year.
The review covers Keydata sales and pension transfers carried out between July 2010 and September 2012.
Friends Life, the parent company of Sesame, has made an undisclosed provision in relation to this review. The insurer says a strategic review of Sesame, which it put up for sale in February 2013, is “ongoing”.
Speaking to Money Marketing, Sesame Bankhall Group chairman John Cowan says: “It has clearly been a challenging year. What we are doing here is facing up to legacy issues of the past and in that sense the way we think about it is we are behaving financially prudently by making provisions for those past misdemeanours. They are exceptional costs.
“The underlying business here is running fine and is quite strong but we have within the network legacy issues and we are dealing with them.”
Sesame told members in January they have six months to move to its new restricted offering, become directly authorised under Bankhall or leave the company altogether.
The network has 2,200 individual members. Sesame has spoken to half its members about their plans, and so far 67 members have decided not to be part of the restricted network. Cowan estimates less than 10 per cent will leave Sesame Bankhall Group altogether.
Cowan says: “We said it would be a six-month rolling programme and we have had very few people leave Sesame. Just over 90 per cent of the people that have said they wished to be directly authorised have signed up to join Bankhall. So a handful of businesses have gone elsewhere.”
Ablestoke managing partner Lee Wells says: “Sesame was not originally set up to be a restricted network so the problem it has is akin to trying to construct the plane while it is in flight.”
Separately, Friends Life’s UK division has announced a pre-tax profit of £40m for 2013, overturning the £32m loss reported in 2012. UK sales were up 8 per cent year-on-year from £669m to £724m.
Corporate benefits sales grew 7 per cent from £535m to £574m, as the provider staged 274 schemes for auto-enrolment. But Friends Life says “significant” numbers of employers are paying the minimum pension contribution of 1 per cent.
Retirement income sales surged 50 per cent from £44m in 2012 to £66m in 2013, with the proportion of existing customers choosing to purchase an annuity from Friends Life increased from 25 per cent in 2011 to 34 per cent in 2013.
Protection sales were down 15 per cent from £90m in 2012 to £84m last year.
Friends Life chief executive Andy Briggs says: “The restructuring of the business is now complete. We have a sustainable business with a profitable base for future growth.
“We will continue to seek to maximise value from each part of the group while retaining its focus on rigorous financial discipline. We remain focused on generating growth in both cash and returns while maintaining our strong capital base.”