Interim results - Worldwide long-term savings new business – Three months to 31 March 2006
United Kingdom:
Norwich Union made an excellent start to 2006 with total sales, including investments, up by 34% to £3,207 million (2005: £2,392 million). This result is the fourth successive quarter of growth, and the highest quarterly results on record. The new business margin of 2.8% is ahead of the margin achieved in the second half of 2005 of 2.7% as focus on managing margin, volume and business mix has continued.
Norwich Union’s bancassurance partnership with the Royal Bank of Scotland Group (RBSG) delivered a very strong performance with total sales of £414 million, 92% ahead of the first quarter of 2005 (2005: £216 million). Norwich Union’s share was £297 million, 118% ahead of last year (2005: £136 million). This excellent performance further demonstrates the potential of the strategic partnership, and the commitment of Norwich Union and RBSG to growing this important distribution channel.
Individual pension sales, which include group personal pensions, were exceptionally strong, up 65% to £1,001 million (2005: £607 million). This performance, primarily through the IFA channel, follows the re-alignment of commission in the second half of 2005 and an increase in transfer business in the run up to A-Day. Corporate pension sales were up 21% to £271 million (2005: £224 million), reflecting strong performance in group money purchase products, benefiting from consolidation in the sector, and good sales of group life policies. This excellent result reflects Norwich Union’s successful preparation for A-Day and its strong pension product range, recently extended with the launch of its new SIPP.
Bond sales in the first quarter increased significantly by 27% to £787 million (2005: £620 million). This strong performance included sales of unit-linked products of £593 million, 30% ahead of the first quarter of 2005, benefiting from the continuing improvement in equity markets and investor confidence; and sales of with-profit products at £138 million, up 12% for the quarter (2005: £123 million), with strong interest in the new with-profit guarantee launched in February 2006. During the first quarter, property and guaranteed investment funds continued to be popular.
Norwich Union’s continued focus on collective investments, together with strong equity markets, resulted in an exceptional start to the year, with sales more than doubling to £444 million (2005: £209 million). Norwich Union has strengthened significantly its collective investment portfolio. The company has recently launched a property ISA, to take advantage of regulatory changes, and announced two new equity based funds.
Protection sales were 15% higher at £272 million (2005: £236 million). Norwich Union has competitively priced its products throughout the quarter to maintain a strong presence in this important volume-driven sector.
Total annuity sales of £347 million were lower by 16% (2005: £413 million) as the company priced for value and customers delayed their purchase of annuities ahead of A-Day. Norwich Union has begun quoting for bulk purchase annuity business, following confirmation earlier this year of its intention to enter the market in 2006 and expects volumes to grow progressively through 2006 and 2007. However, Norwich Union’s overall risk appetite for annuities has not changed and these sales will complement the existing individual annuity portfolio.
During the quarter, equity release sales were £85 million (2005: £83 million) as the equity release market remained relatively subdued. Norwich Union is confident that the market will grow over the medium term. The company is supportive of the Government’s proposed regulation of home reversion plans, which it expects will further increase confidence in the market and raise standards across all providers.
The first quarter saw strong performance across all of Norwich Union’s distribution channels. Distribution reach has been strengthened further by the successful launch of a bond under an exclusive distribution agreement with Co-operative Insurance Society (CIS) giving Norwich Union access to its 1,500 advisors.
Norwich Union confidently expects year on year growth to continue in 2006. This reflects an improvement in investor confidence and continued market activity in the early weeks following A-Day. Norwich Union is well prepared for these opportunities having successfully implemented its A-Day strategy and broadened its product offering to include bulk purchase annuities, guaranteed whole of life protection and pension term assurance. The company will also continue its
