Life and pension sales decline 23%

SALES OF life and pensions products dropped 23 per cent in the second quarter of the year, continuing their fall this year, new figures show, as investors chose to hold cash and avoid declining stock markets.

The data compiled by Dublin actuarial consultants, Life Strategies, shows that annual premium equivalent (APE) value of new business - the benchmark measurement used to gauge activity in the industry - dropped to €819.4 million in the second quarter of this year, from €1 billion for the same period last year.

APE comprises annual premiums, such as protections and savings products, and a tenth of the value of single premiums.

Sales of single premium or lump sum life and pensions products fell 43 per cent to €2.7 billion in the same three-month period.

APE sales in the life business fell 45 per cent during the second quarter period from April to June, while pensions dropped 6 per cent.

Life Strategies does not break down the sales by company.

Investors have moved away from life and pension investments linked to the equity and property markets due to falling share prices and declining property values.

The value of Irish shares has fallen 35 per cent since the start of the year and by 55 per cent since the Iseq peaked in February 2007.

Irish stocks have shed €67 billion in the last 17 months.

Single premium sales in the life business were down 57 per cent in the second quarter, while single premium sales in pensions fell 19 per cent. Annual premiums fared a little better - falling 8 per cent to €544 million, although annual premiums sales fell 25 per cent in the life business side of the industry. Investment-only pensions dropped 54 per cent to €1.2 billion.

PRSA single premium sales fell 36 per cent to €55.9 million in the second quarter, though the annual premium equivalent on PRSA was down 6 per cent to €60.4 million.

APE for the first half of the year was down 22 per cent, compared to the corresponding period last year, while single premium sales had fallen almost 42 per cent over the same six-month period.

Sebastian Orsi, analyst at Merrion Capital, said the peak in SSIAs maturing in the first half of last year skewed the declines in life and pension sales this year.

He said that the downturn in sales in the second quarter of this year also reflected "the continuing weakness in the property and equity markets".

Irish Life & Permanent, which has the largest share of the market, said last month that it expected profits in its life division, which account for two-thirds of the company's business, to fall by "a low single-digit per cent" this year. It expects life sales to be down about 10 per cent this year.

The company said life sales hit a "record high" in the first half of last year as 70 per cent of SSIAs matured during the six months.

Insurance group Hibernian, which announced last month that 580 jobs would be relocated to India, had a 1.4 per cent profit margin on its life business in 2007 but this has fallen slightly this year. It said the profit margin in its life business is the lowest in the global operations of its parent company, UK insurance firm Aviva.