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New business sales
The Group's new business performance has delivered a 13% increase in life and pensions PVNBP sales to £16,423m.
The new business performance of our UK financial services division reflects strong growth in the first half of the year, followed by resilient performance in the face of difficult market conditions in the second half.
UK life and pensions sales increased by 17% to £13,324m. This increase represented a strong sales performance across a broad range of products, coupled with strength in service and functionality. A 34% increase in Group pensions sales (including Retail trustee investment plan) was driven by strong levels of new and incremental business. Individual SIPP sales increased by 24%. We continue to innovate in our SIPP proposition, with developments such as a high-yielding cash account and the introduction of online servicing, the launch of the GARS (Global Absolute Return Strategy) fund link, accepting protected rights and the expected launch of a variable annuity offering for the post retirement market. Savings and investments sales also increased by 38% and sales of Offshore bonds were over seven times the level of the previous year and benefited from the launch of our Retail portfolio bond and our distribution agreement with Fidelity. A marginal fall in Investment bond sales was due to weakness in global financial markets and uncertainty regarding proposed capital gains tax (CGT) changes. We await clarity on the CGT proposal. Any sales impact will be monitored and appropriate action taken where necessary.
In a competitive environment and difficult market conditions our banking business successfully maintained a high quality mortgage portfolio and increased gross lending to £3.7bn (2006: £3.0bn). Our healthcare sales rose by 10% to £22m (2006: £20m) despite an increasingly competitive market place.
Sales in Canada fell by 19% in constant currency to £1,654m PVNBP (2006: £2,091m). The decrease was caused by a number of large transactions boosting sales volumes in 2006, a continuing focus on margin over volume and the realignment of our distribution capability. The ongoing rebuilding of our retail sales force and sales already secured has provided a more positive start to 2008.
In Europe, PVNBP sales increased by 35% in constant currency to £1,179m (2006: £866m) reflecting increased popularity of our new products and strengthened distribution. The self investment options in Ireland, inspired by the UK SIPP platform, demonstrate our commitment to drive profit and exploit synergies through joint development across our business.
Operations in Asia continued to experience strong growth with PVNBP increasing by 47%3 in constant currency as branch expansion and agency recruitment continued in our joint ventures in China and India. We expect further growth in Asia Pacific to be driven by new product launches, wider distribution and market expansion.
Continued investment outperformance drove further mandate wins at our investment management business, with third party net new business of £7.9bn (2006: £6.4bn). We have continued to perform well despite volatility in global financial markets in the second half of the year. Despite these challenges third party funds under management increased to £47.7bn (2006: £38.5bn) and total funds under management increased to £143.4bn (2006: £132.1bn). Strong third party inflows, driven by institutional funds, are expected to sustain continued growth in third party funds under management in 2008.
3 The percentage change figures include percentage change figures for India which are computed based on the percentage movement in the new business of HDFC Standard Life Insurance Company Limited as a whole to avoid distortion due to changes in the Group's shareholding in the joint venture during 2006 and 2007.
