Does coil splitting reduce output?
No. Splitting coils halves your pickups DC resistance. Of course output is going to drop. I suggest trying wiring your pickups to have a series/parallel switch instead.
What does coil splitting do?
Coil splitting refers to humbucking pickups, in which two coils of wire and two magnets are used together. These coils and magnets are of opposite polarity, which cancels (“bucks”) unwanted noise and hum and produces higher output and a thicker, heavier sound.