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Sliding sales unsurprising

The first quarter results season kicked-off with pretty dismal performances all-round. But this is not exactly a surprise.

Friends Provident took the biscuit in terms of plunging new business values. Chief executive and fellow Aussie, Trevor Matthews, reported a 40 per cent fall in UK life and pensions sales on Tuesday.

But he managed to deflect most of the bad press with the announcement of a potentially lucrative protection deal with Tesco’s personal finance arm.

To be fair, Friends has ditched its less profitable product lines and pulled out of initial commission since the first quarter of 2008 so comparing like for like is a little tricky.

Meanwhile, Standard Life saw its first quarter life and pensions sales plunge 27 per cent compared to the same time last year.

Standard acknowledged that its Q1 sales, which sunk from £3.4bn to £2.5bn, suffered a blow after the shock revaluation of its pension sterling fund in January seriously annoyed investors and advisers alike. The firm says, since injecting £100m to restore the fund value, sales have picked up.

Standard’s individual Sipp new business fell a significant 21 per cent to £841m, with net inflows dropping from £743m to £441m.

Many analysts predict Sipp-focused insurers will feel the full force of the Budget proposals to restrict higher rate tax relief for people earning over £150,000, but Standard is bullish.

It claims a major part of its strategy involves consolidating and managing existing pension pots, where tax relief on contributions has already been secured. A glass half full attitude if ever there was.

Analysts have also raised concerns about Standard’s net outflow for Q1 2009 of £258m. This compares to a net inflow for the previous year of £634m.

Standard puts the massive discrepancy down to its decision not to renew bulk investment bond deals and maturing endowment polices. JP Morgan warns the outflows could cause profitability issues if sustained.

Royal London’s life and pensions new business actually bucked the trend, increasing by 27 per cent from £416.8m to £528.5m in the first quarter of 2009.

The firm has put this down to acquiring Scottish Provident, which brought £55.1m to the table and a stellar performance from Bright Grey which increased sales by 18 per cent to £44.8m. But Scottish Life’s sales were down 13 per cent from £337.3m to £293m for Q1.

Aviva UK life and pensions business fell a relatively small 12 per cent from £2.8bn to £2.5bn in Q1 2009, chief executive Andrew Moss revealed on Monday.

The firm added another £500m to its capital surplus since the end of the year boosting it to £2.5bn. Other insurers’ capital positions remained fairly stable.

The former Norwich Union, or soon to be, was battered on the protection front though, with sales falling 24 per cent to £245m as a result of the Competition Commission’s payment protection insurance ban. Annuity sales fell by 8 per cent to £475m from £518m.

Despite all this the life sector is on a high today, with shares up around 4.5 per cent.

Stay tuned to for the rest of the Q1 results over the coming weeks.

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  1. Sliding sales unsurprising
    Not surprising at all ~ all these offices have cynically betrayed their once strong IFA relationships by cutting commissions unilaterally, particularly on pensions, to levels that render the business already on our books entirely profitless. If they all close for business next week, it’ll serve them right. I shall shed no tears.

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