MARK Carney’s decision to introduce long-term guidance on interest rates is a major boost for British business, the board of FTSE 100 insurer Resolution said yesterday.
“Were rates to rise then we would stand to profit,” chief financial officer Tim Tookey told City A.M. “It’s very helpful for the UK economy for the Bank of England to give clarity.”
“With rates being two per cent lower than when our performance targets were set then [this will be] something that comes through in longer-term results.”
Resolution yesterday announced a 17 per cent rise in first-half operating profit to £191m, partly driven by sales of annuities to retiring baby boomers. This reassured investors who are looking for proof that the company’s new direction is working.
Founded in 2008, it was intended to be an acquisition vehicle that bought life insurers and combined them into a more profitable whole. But last April it was forced to abandon this plan and instead target improved returns from existing assets and grow new business.
Yesterday chief executive Andy Briggs said there was more growth to come, especially in the annuity business where Friends Life has traditionally underperformed.
“The UK annuity market was worth £14bn last year and we expect that to triple by the end of the decade,” he said.
“Historically we only retained 25 per cent [of pension savers], now we’ve got that up to 32 per cent. We’re building capability with a specialist team of 40 to engage with customers as they come up to retirement.”