United Kingdom
Norwich Union continued to consolidate its market-leading position with total sales (including investment sales) for the nine-month period of £5,480 million, up 11% (2003: £4,925 million). Norwich Union’s market share, at the end of June 2004, was 12.1%. Total sales on an APE basis grew by 8% to £931 million (2003: £862 million). Our focus continues to be on profitable growth with a 6% increase in life and pensions sales on an APE basis to £849 million (2003: £802 million) and an 8% increase in corresponding new business contribution to £195 million (2003: £180 million).
Investor confidence in equity markets continues to build gradually and Norwich Union is benefiting from this. Norwich Union offers a wide range of funds, enabling our customers to build balanced investment portfolios. As a result, total bond sales increased by 24% to £1,681 million (2003: £1,352 million). We are encouraged by the strong pick-up in bond sales during the third quarter, however it is too early to judge if this is a sustainable trend. Collective investment sales were up 34% to £664 million (2003: £496 million). The recently announced launch of our improved fund of funds proposition will further strengthen the range of funds we can offer to our customers.
Total pension sales were flat at £1,951 million (2003: £1,950 million). Sales of individual pensions increased 15% to £1,472 million (2003: £1,278 million) offset by lower sales of group corporate pensions of £479 million (2003: £672 million), reflecting continued market movement away from final salary pension schemes. In line with our strategic focus on the defined contribution group pensions market, combined sales of group money purchase and group personal pensions grew by 33% to £337 million (2003: £254 million).
Norwich Union is in the process of repositioning its individual pension product proposition. Commission levels were reduced on individual stakeholder pension business from 4 October 2004 and a new ‘non-stakeholder’ pension product will be launched early in 2005 with a charging structure designed to support the provision of full advice. The impact on fourth quarter sales is difficult to predict at this stage.
Sales of protection business grew by 14% to £282 million (2003: £247 million) reflecting an increase in mortgage protection and creditor business. Following the recent launch of our online underwriting system 40% of protection sales through IFAs are now transacted electronically.
Annuity sales were higher at £902 million (2003: £880 million). The market remains competitive and we continue to set prices to protect profitability.
Total sales for the nine months from our joint venture1 with The Royal Bank of Scotland Group were lower at £544 million (2003: £652 million). However, we are starting to see the benefits of the closer integration of the salesforce with the bank network, with sales for the discrete third quarter 10% ahead of the second quarter at £185 million reflecting the strengthening of the overall product offering.
Norwich Union continues to reposition itself for market change. We recently announced further increase in our stake to 70% in the ‘Lifetime’ wrap service provider, an IT service that allows financial advisers to manage and transact a range of different client investments. We believe that wraps will be a significant market in the future and Lifetime as a potentially leading platform will be well placed to take a large proportion of this. In addition to the multi-tie agreements announced in August with Bankhall, Sesame and Portman Building Society, confidential discussions continue with the major distributors in the lead-up to depolarisation next year. Longer-term fundamentals remain strong in the UK and Norwich Union is very well-placed to take a very significant position given its brand, distribution and product strengths.
In the immediate term there are some early signs of a recovery in the UK market, but this will be gradual. We have consistently maintained a strong position in the market through a broad product mix and good distribution so that we are well positioned to capitalise on market growth.
New business contribution was £195 million (2003: £180 million), with new business margin of 23.0% (full year 2003: 22.6%), in line with our philosophy of pricing for value.
1 Aviva’s share of these total sales and sales by product mix is shown in supplementary analysis 3.
