In our first full year of Defined Benefit De-risking ("DB") business, sales were up more than five fold at £609m, largely offsetting the decline in Individually Underwritten Guaranteed Income for Life ("GIfL") sales.
GIfL and Care Plan sales fell 56% year on year, as expected given a largely pre-Budget prior year. However, fourth quarter sales were up modestly compared to the third quarter showing the ongoing customer need for these key retirement planning products.
Total Retirement sales of £1,148m were achieved, down 9.9% against a largely pre-Budget comparative period. Margins improved from 2.9% in the first half to 3.3% in the full year.
IFRS underlying operating profit before tax amounted to £86.4m, down 11% mainly due to lower new business volumes.
Group embedded value of £1.02bn (204p per share). Economic capital ratio 176%.
Solvency II progress is on plan, we have submitted our internal model application and continue to engage actively with our regulators.
Final dividend of 2.2p.
DB De-risking Solutions became our biggest product in 2014/15, less than two years since we wrote our first contract. The pipeline continues to grow and we are optimistic that medical underwriting will become the norm for smaller pension schemes looking for both security and value for money
Demand for individual guaranteed retirement income solutions has stabilised, and quotation levels have improved significantly since April. The product continues to serve a real need for retirees, and our medically underwritten model provides superior value for many of them. Together with continued DB momentum, sales appear to be recovering. Fourth quarter total Retirement sales were up 10% compared to Q4 13/14 and up 28% compared to Q3 14/15
The proposed merger with Partnership Assurance Group announced on 11th August will accelerate our existing strategy and is expected to deliver at least £40m of cost synergies in 2018.
Commenting on the results Rodney Cook, Group Chief Executive, said:
"This is our first full year set of results since the Budget 2014 pension reforms, and I hope our resilient performance will not be forgotten amid the excitement of the proposed merger with Partnership Assurance Group. Our response to the pension reforms has largely enabled us to replace lost Individual Guaranteed Income for Life business with DB De-risking premiums.
Individual retirement income enquiries are now growing in number, and the increase in quote activity that we highlighted on 11th August is beginning to turn into sales. We expect GIfL sales in the quarter ending 30 September to be approximately 25% up on the prior quarter and higher than the same period last year. At the same time our pipeline of DB De-risking business continues to strengthen and we are pleased to revise our expectations with respect to sales for the first half year to £400m, a 33% increase from £300m.
We have adapted rapidly to the changing individual market by launching modern Individual Guaranteed Income for Life products and a Flexible Pension Plan enabling customers to mix-and-match guaranteed and flexible benefits to secure the best of both worlds. In addition, we have launched the first retirement focused simplified advice service to support the customers of our corporate partnerships, and have started writing business in South Africa. This vigorous response to the Budget gave us real confidence in our standalone prospects. However, the proposed merger with Partnership Assurance Group will accelerate the execution of our existing strategy and generate significant further value for shareholders in the form of at least £40m of targeted cost synergies.
Our priority now is to ensure that we achieve the expected benefits of the proposed merger, while at the same time, not being distracted from the recovery in momentum we are beginning to see as a standalone business. We remain a young, agile company, so I am confident that we can deliver on both fronts. In fact the Just Retirement story has just become that much more exciting."