Financial highlights
Continued focus on writing profitable new business delivered total operating profits of £64 million comprising:
-
£39 million of new business operating profits, representing a new business margin of 4.9%. Our focus on carefully selecting risks based on our unique Intellectual Property (‘IP’), prioritising margin over sales volumes and implementing cost management actions helped offset the impact on profitability of lower new business sales
-
£9 million of in-force operating profits and £16 million return on surplus assets, representing a yield of 4% on a larger pool of surplus assets relative to comparable period
Total new business premiums of £791 million maintained at two thirds of FY13 levels including:
-
£466 million of individually underwritten annuities
-
A near threefold increase in medically underwritten Defined Benefit (‘DB’) bulk annuity sales to £247 million in 2014, including the largest individually underwritten DB deal in the UK to date
-
15% increase in care annuity sales to £76 million following an intensive adviser education campaign
-
MCEV per share increased 14p/11% to 144p at 31 December 2014
-
Proforma estimated economic capital surplus of £232 million, representing coverage of 159%, at 31 December 2014 after taking into account £100 million bond issued via private placing also announced today
-
2014 final dividend of 1p per share
Operational highlights
-
Strengthened Defined Benefit proposition delivered strong results in 2014 and now established as a key strategic area. All transactions to date have been medically underwritten, creating a sustainable competitive advantage. The recently announced £206m top-slicing transaction demonstrates Partnership’s ability to utilise its unique IP across the whole spectrum of pension scheme sizes within this expanding market
-
Targeted FY15 run rate for operating expenses already achieved. Additional £5m reduction in FY15 cost base now targeted, bringing cost base target down to £75 million vs. £80 million target previously announced. Core technical expertise maintained to allow identified growth opportunities to be seized effectively
-
Customer focussed proposition continues to be recognised with awards for ‘Best Retirement Provider’(2) and ‘Best Enhanced Annuity Provider’(3) for the fifth consecutive year
-
Work ongoing to develop innovative new products and enhance our existing individual underwritten annuity proposition to meet customer needs post April 2015
-
Good progress made on ongoing discussions with potential partners for launch of immediate needs care annuity in the US
Capital structure and capital management
-
Capital structure diversified and strengthened in Q1 2015 through £100 million bond issued via private placing to funds managed by Cinven Capital Management. Further details of the bond issue are set out in separate announcement also released today
-
Partnership’s Solvency II programme is progressing well and based on Partnership’s interpretation of the current draft regulations, the Group is expected to remain well capitalised
Current trading and outlook
-
Structural growth drivers of at-retirement market remain intact and positive long-term outlook for individually underwritten annuity market supported by Financial Conduct Authority’s (‘FCA’) Additional Protection for consumers and the Pension Wise guidance service
-
In the near term, disruption to Partnership’s core individually underwritten annuity market is expected to continue. Deferrals are likely to increase during Q1 2015 as the April 2015 implementation date for pension taxation changes approaches
-
Given the typical two month lead time from quote to conversion, an increase in individual annuity sales is expected to be gradual and is unlikely to begin before H2 2015
-
Based on the current pipeline, we anticipate DB transactions in 2015 of at least £200 million, but the timing of completions remains unpredictable and will be subject to changes in economic conditions. Updates will be provided throughout the year
Steve Groves, Chief Executive Officer, commented:
“Partnership has now weathered most of the difficult period of market dislocation prior to the implementation of the Pensions Reforms next month. We have generated highly profitable new business through careful risk selection and a conscious decision to prioritise margin over sales volumes while continuing to deliver better outcomes for our customers in this disrupted market.
“Although our core individually underwritten annuity market has been impacted significantly, consumer and adviser research continues to show the importance of an income guaranteed for life. I strongly welcome the FCA’s retirement income market reform proposals, which should enhance our market opportunity by providing further encouragement for all retirees to shop around.
“I am pleased to report that investment in our DB proposition is delivering results with £247 million of bulk annuity sales for 2014, a near threefold increase on the prior year and a strong high quality pipeline going into 2015. We have also made tangible progress during 2014 in the development of our US expansion plans, selecting a reinsurance-based market entry strategy and progressing discussions with a short list of potential partners regarding the launch of our care annuity in the US.
“As Partnership celebrates its 20th anniversary, I look forward with confidence to the future. I believe our clear strategy to diversify our business model, based on leveraging our unique proprietary Intellectual Property and doing our best for customers within the UK Retail, DB and US Care markets, positions us well to deliver profitable growth and long-term shareholder value.”
|
