Sunday 19 November 2017

Fall in life and pension sales slows down as buyers return

Laura Noonan

Laura Noonan

THE collapse in life and pension sales slowed to just 6pc in 2010, but experts last night warned that the industry's recovery has already begun to fade.

The commentary comes after actuarial consultants Milliman circulated draft data to insurers showing €1bn of new business was written in 2010.

The figures chart a significant improvement in an industry that saw new business plunge by about 30pc in 2008 and 2009, as chaotic markets and recessionary times spooked punters.

Senior industry sources, however, pointed out that while 2010 had started strongly, figures for the second half of the year had been far weaker.

In the six months to June, the total market was down just 1pc as strong performances from savings products and single premium offerings kept the market up.

Sales went on to fall 10pc in the six months to year-end, even though the Budget changes in December triggered a surge in pension activity.

"Unfortunately, the longer-term trend here is the decline in the market in the second half," said one senior executive.

Others pointed to the challenges looming in 2011, as tax changes make pensions less affordable and economic conditions choke savings demand.

Some also fear that there will be far fewer early retirees this year, since the pension changes, which put a €200,000 cap on tax-free pension lump sums from January 1, 2011, prompted an unprecedented number of people to cash out before the end of 2010.

"There is a bright spot for investment products though," said one source. "The interest rates being offered by the banks are a lot lower now than they were at the peak, so we're getting uplift from that.

"And some people think their money is safer in an insurance bond."

The detail of 2010's data shows that single premium life insurance products were the strongest performers in the year, with sales for the full year rising by 30pc. Single premium pensions also performed strongly in the first half of the year, as sales rose by 10pc, but the full-year figure came in down 3pc.

Regular premium pensions were the hardest hit, with sales falling 14pc, reflecting lower numbers employed, while regular premium life insurance was down 6pc.

NCB financials analyst Ciaran Callaghan said the figures were "broadly in line" with his projections.

"Single premium sales are remaining resilient, consistent with trends evident at the half-year," he said. "However, the tough economic conditions appear to be still taking their toll on corporate and retail sales of annual premiums."

The overall total of €1bn includes savings and pensions products, but not "investment only" business.

The draft data doesn't include PRSA figures as they have not yet been supplied by all insurers, but these are not expected to materially impact the year's trends.

The €1bn is the industry benchmark annual premium equivalent (APE) which includes the full contribution from all regular premium products and 10pc of all single premium sales.

Irish Independent

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