UK
Norwich Union continues to leverage successfully its strong brand, wide product offering and multi-distribution network to achieve profitable growth. Total sales, including investment sales increased by 13% to £7,399 million (2003: £6,550 million), with total sales on an APE basis up 6% to £1,221 million (2003: £1,150 million). During 2004, Norwich Union has continued to focus on delivering value and has achieved a strong new business sales performance given pricing actions in pensions, annuities and protection business. Norwich Union continues to have a market leading position, with an increased market share at the end of the third quarter of 12.3%.
Total bond sales increased by 21% to £2,260 million (2003: £1,866 million) driven by strong sales of unit-linked bonds which continued in the fourth quarter albeit at lower levels than in the third quarter, as expected. Norwich Union is benefiting from investors continuing to choose providers with strong brands and products. The broad range of investment products and funds on offer from Norwich Union give customers flexibility and the option to build balanced investment portfolios. Property and guaranteed investment funds continue to be popular. Collective investment sales were up 26% to £859 million (2003: £680 million).
Total pension sales increased 3% to £2,635 million (2003: £2,556 million), with sales of individual pensions up 16% to £2,007 million (2003: £1,727 million) and sales of group corporate pensions lower at £628 million (2003: £829 million), as employers continued to move away from final salary pension schemes. Within these numbers, combined sales of group money purchase and group personal pensions increased by 31% to £448 million (2003: £341 million), reflecting Aviva's strategic focus on the defined contribution group pensions market. Annuity sales increased by 17% to £1,278 million (2003: £1,091 million) in a flat market.
Norwich Union took a number of actions during the final quarter to reposition its pension product offering. This began with a reduction in commission levels on individual "stakeholder" pensions in October 2004. In mid December, a new "non-stakeholder" personal pension for the individual full advice market was launched, giving customers the choice to pay for their advice through fees, commission or a combination of both. The impact from these changes is difficult to predict but there may be a slight reduction in sales in the first quarter on the products where commission has reduced. However, the launch of this new product and similar competitor action on commissions is expected to compensate for any reduction in individual pensions business, over the course of 2005.
Overall, protection business sales were higher at £367 million (2003: £357 million), driven by an increase in creditor business. Norwich Union re-priced its term assurance business in January 2005 in order to make its product more competitive.
Total sales for the full year from the joint venture1 with The Royal Bank of Scotland Group (RBSG) were lower at £777 million (2003: £847 million). There has been some benefit to sales during the fourth quarter, due to the closer integration of the salesforce with the bank network. However, Norwich Union continues to work with RBSG to deliver improved future sales growth, in line with expectations. Additional products will be added to the range in 2005 together with an increase in branch-based advisers. Delivering improved sales is high on RBSG's priorities.
Norwich Union is well placed for the changes taking place in distribution as a result of depolarisation. Distribution agreements with Bankhall, Sesame (protection only) and Portman Building Society have already been announced. In addition to this, Norwich Union has also secured agreements with another major network, a national intermediary (Millfield) and a number of other distributors. Discussions with a number of key distribution groups are in the advanced stages and will represent an opportunity to further strengthen Norwich Union's distribution portfolio. Further details of these arrangements will be released in the first quarter. Wraps2 are expected to be a major distribution feature of the UK long-term savings market and Norwich Union is well advanced with its plans to launch the Lifetime wrap platform.
In 2004 Norwich Union consolidated its market-leading position and starts 2005 with a greater degree of confidence in the market. Some further market growth is expected over the next 12 months with a stronger pick up beyond then and Norwich Union is confident that its multi-distribution capability, strong brand and wide product range will enable it to capitalise on this.
1 Aviva's share of these total sales and sales by product mix
is shown in supplementary analysis 4.
2 A wrap is an IT service that allows financial advisers to manage
and transact a range of different client investments.
