Equity release sales fell from £57m in H1 2014 to £33m in the six months to June 2015, figures from its trading statement revealed.
The income derived from LV’s annuity business is used to fund its equity release mortgages.
Following the pension reforms introduced in April giving retirees the freedom to withdraw their pension savings as a lump sum, annuity providers saw sales of the product plummet. LV’s annuity sales fell by 37% from £232m in the six months ended 30 June 2014 to £146m for the same period this year.
Richard Rowney, managing director of LV life and pensions, confirmed that LV was now looking outside of its traditional source of funding which it hoped to secure this year.
“The demand is there for the product,” said Rowney. “Strategically we are working really hard to find alternative sources of funding that will help us satisfy that demand going forward. And on that we are pretty close in a number of advanced talks with different parties to hopefully be able to secure that in the second half of the year. If that does happen you would expect us to be able to write a lot more business. There is certainly the demand there to do it.”
Rowney would not disclose its equity release sales target for the next half of the year but said it was ‘absolutely’ of strategic importance to the business.
The talks have involved educating investors on equity release to help them become familiar with the product and to work out how it will be treated under Solvency II for capital purposes. Rowney said he was confident that once these short-term challenges were overcome people would start to see it as a great investment.
LV’s protection sales grew by 50% from £96m to £144m for the period with all product areas in this category performing well. The provider said the growth in sales was a combination of broker support in the sales process, a strong product suite and improved distribution in the form of new partnerships.