During 2009 we have continued to implement the strategy outlined in 2008 and accelerated many of these initiatives. The focus has been on increased net cash flow and profit rather than higher sales volumes. Product mix has shifted towards modern, less capital intensive products to achieve this objective. Significant cost savings have been made across the business in 2009 and underlying net cash flow has improved.
There has been continued improvement in financial management; reducing commissions paid to intermediaries, increasing fees on some products and withdrawing products which had high reserving costs. As anticipated, the steps taken to reduce reliance on products with high levels of commission and long payback periods has resulted in a reduction in sales of unit linked bonds and stakeholder pensions.
SAVINGS – NET CASH GENERATION
£33m
(2008: loss of £23m)
Alongside this product redesign strategy, a cost rationalisation programme was rolled out in 2009. Year on year operating costs were reduced significantly through a reduction in headcount and a review of all non value adding expenditure.
Overall, net fund flows for retail investments increased substantially to £2.1bn versus £0.4bn in 2008, with Assets under Administration (AuA) growth of 43% to £13bn.
Interest in capital protected products has increased as customers search for security in response to a less certain financial landscape. This has included significant increases in the sale of With-profits bonds, up 96% to £55m (2008: £28m).
There has been a substantial growth in unit trust sales which have increased by 69% at £269m [APE] and an increase in [ISA] sales of 51% to £106m APE. The strong growth in sales reflects the continued success of our distribution arrangement with Nationwide Building Society and our campaign to sell more products via specialist IFAs and direct sales channels.
SAVINGS – IFRS OPERATING PROFIT
£55m
(2008: £7m restated)
The charging structures of some products have been changed to reward and encourage customer loyalty. This is an example of alignment of what is best for the customer and what is best for the business, reducing costs whilst encouraging long term investment.
We continue to hold a 25% stake in Cofunds, the UK’s largest independent investment platform. We now also have scale on our own platform which has seen significant growth throughout the year and now holds £1 to £1.5bn of assets. Our fund of funds products also continue to perform well.
Unit linked bond sales were 48% lower at £68m (2008: £131m), reflecting the impact of the strategic decision to reduce the capital strain of sales. Tax changes continue to reduce customer appeal for this product.
Individual [SIPP] sales grew by 9% in 2009. SIPP sales now represent 75% of all non profit individual pension sales. However, total APE sales of non profit pensions were 17% lower at £273m (2008: £328m) reflecting management action to limit volume in the older style stakeholder products.
Sales in Group SIPP products have remained resilient with sales 6% higher than last year and new business tender activity has been strong. Changes have been made to initial commission structures, with increased sales volumes coming via fee based intermediaries.
Overall sales of With-profits products were flat year on year at £191m. However, With-profits bonds sales remain strong, rising 96% in the year.
The awards Workplace Savings won at the 2009 Pensions Management awards reflect the Group’s commitment to a high performing culture and positive customer experience. They are a strong external endorsement of the way we support our customers, deliver on our promises and give a positive customer experience on a complex savings product.
At the same awards ceremony Suffolk Life, part of the Specialised Savings division, won the award for Income Drawdown and Phased Retirement provider of the year and were also commended as runners up in the Bespoke [SIPP] category.
our performance
(Download XLS:)  |
|
New business APE £m | |||
|---|---|---|---|
|
|
|
|
|
|
|
2009 |
2008 |
% Change |
|
Retail investments |
375 |
229 |
64% |
|
Non profit |
341 |
459 |
(26%) |
|
With-profits |
191 |
191 |
0% |
|
Total savings |
907 |
879 |
3% |
|
|
|
|
|
|
Assets under administration £bn | |||
|
|
|
|
|
|
|
2009 |
2008 |
% Change |
|
Retail investments |
13.0 |
9.1 |
43% |
|
Non profit |
20.4 |
17.3 |
18% |
|
With-profits |
21.4 |
19.4 |
10% |
|
Total savings |
54.8 |
45.8 |
20% |
