AXA UK’s Life and Savings business includes AXA Winterthur Wealth Management, Corporate Pensions, Protection, AXA Distribution Services (which trades through the Wrap platform Elevate) and Sun Life Direct (the D2C business). Total revenues (APE*1) were down 18% from £536m in H1 2008 to £441m in H1 2009.
Revenues (APE*1) in Wealth Management are down 37% to £208m due to a combination of a sharp drop in sales of on- and off-shore bonds and personal pensions following the continued market downturn which has impacted consumer sentiment in long term saving across the Wealth Management market. However, recently launched products, such as ‘The One From Winterthur’, awarded the highest rating of 5 stars by an independent financial research company, and ‘Family Sun Trust’ have shown strong early performance. Wealth Management is well placed to build on its dominant position in the pension and investment markets and to benefit from the changes proposed in the FSA’s retail distribution review (RDR). Architas, the multi-manager business, now has £2bn funds under management and continues to develop whole of market investment funds.
AXA Distribution Services has made considerable progress with the distribution of its wrap platform Elevate which has signed up over 200 IFAs, well ahead of plan.
Revenues in Corporate pensions are up 10% to £191m buoyed by winning large group pension scheme business following the strategic decision to focus on larger IFAs and EBCs and to reposition the business away from an initial commission to a fee based model.
The Protection business has performed strongly despite the collapse of the mortgage market – revenue is up 26% in the AXA Protection Account and further revenue growth is anticipated following the launch in July of new on-line underwriting capability for advisers. The strength of the business was once again highlighted by winning seven out of a possible 11 prestigious awards from LifeSearch. Sun Life Direct has also had a strong first half with revenue growth up 28% due to improved response rates from both corporate partners customers and direct advertising campaigns.
A Bancassurance deal with Yorkshire and Clydesdale Banks was completed in February providing a significant source of business for both of the wealth management and protection businesses.
The outsourcing of the traditional business to Capita to administer 3.2 million mature life and pensions policies was successfully implemented on 1 June which enables a rationalisation of IT systems, improvement in customer service and significant cost reduction longer term.
The margin on New Business has held up well and is in line with last year at 14%5 while New Business Value declined to £59m*2, consistent with the fall in new business revenues.
Life underlying earnings were affected adversely by stock market levels which had a negative impact on annual management charges levied on assets under management as well as reducing investment returns on shareholder assets and with-profit bonus rates. However this was more than offset by a one-off profit of £106m derived from the internal restructuring of a portfolio of annuity liabilities. This has resulted in an increase in underlying earnings for the Life and Savings business of 75% from £72m in H1 2008 to £126m in H1 2009.
The Life business is undertaking a strategic review of its operations which will result in the loss of around 350 roles subject to union consultation.
*1 : APE (100% of regular premiums + 10% of single premiums)
*2 : Pre-tax