George Osborne’s pension reforms hit Aviva annuity sales
PUBLISHED: 13:08 15 May 2014 | UPDATED: 10:07 19 May 2014
Aviva has branded its performance as “calm and stable” despite a slump in annuity sales and a marked decline in its UK life insurance business.
A double hit from the government’s announced pension shake-up, and a decision by the group to sell fewer high-margin products, has caused annuity sales to fall 21pc during the first quarter, while the value of new business (VNB) for annuities was 43pc lower at £40m.
But group chief executive Mark Wilson hopes that targeting the market for mid-sized bulk purchase annuities will help soften the impact of the reforms set out in the chancellor’s budget that allow retirees to access their pension pots without buying an annuity.
It came as strengthening demand overseas offset a sluggish UK performance for the EDP Top100 company, with total VNB up 13pc to £228m, as the UK slumped 22pc to £89m while Asia surged ahead at 96pc and Europe continued to rise at 45pc.
Mr Wilson said a “polar vortex” in Canada had dealt a £40m blow to the general insurance business which also paid out £60m in the UK, as the storms and floods took their toll during January and February.
“Aviva’s overall performance in the first quarter was reassuringly calm and stable in marked contrast to the weather and regulatory developments,” he said.
“Aviva still faces challenges both in the external environment and in the business as we progress our turnaround,” he added. “The regulatory environment is constantly changing and soft conditions persist in certain general insurance lines.
“As a business we remain focused on cash flow, expense efficiency and the clinical allocation of capital to areas where we can maximise returns. There is still much to do.“
Reporting its first quarter results, Aviva revealed an operating capital generation of £0.4bn as it continues to push forward with its expenses reduction programme.
Since March, the insurer has weilded the axe on a number of its overseas ventures – disposing of its Turkish general insurance business, the US asset management boutique River Road, and a South Korean joint venture, while also carrying out a significant restructure of its Italian business.