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.
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