Focus on long-term strategy delivers increase in profits

Royal London interim results 2024
Published  02 August 2024
   5 min read

Barry O'Dwyer, Group Chief Executive Officer, commented:

"Customer satisfaction with Royal London continues to rise, particularly over the last year. The support that we provide customers through high value, quality products and services to help them build their financial resilience has never been more important. The strength of our relationships with financial advisers and businesses offering workplace pension schemes has underpinned a 13% increase in Group operating profit for the first half of 2024. When we perform well our customers benefit and, in April, we shared over £163 million with over two million eligible customers through our ProfitShare scheme.

"With an estimated £3 trillion invested in UK pensions, it is understandable pensions are viewed as being able to play a powerful role in supporting UK economic growth. However, it is important to remember the primary role of pensions is to fund customers’ retirement. The new Government has an opportunity to build on the success of automatic enrolment by creating a long-term plan that would have a positive impact on retirement outcomes while also generating investment to help finance growth."

Highlights

  • Continued growth in Workplace Pensions, welcoming 510 (H1 2023: 479) new workplace pension scheme employers and over 113,000 (H1 2023: 120,000) new workplace pension customers.
  • The Governed Range, our flagship offering, attracted net inflows of £1.5bn (H1 2023: £1.7bn), with assets under management (AUM) reaching £66bn (31 December 2023: £60bn).
  • 52% increase in number of completed Workplace Pensions transfers (versus H1 2023) following the launch of our online transfer hub, making it easier for customers to consolidate their pension with Royal London.
  • Continued to enhance our digital functionality to support customers with making good financial choices, with 320,000 customers now registered to use the My Royal London portal, up by nearly 200,000 in 12 months.
  • Customer Satisfaction (CVS) index3 score up 12.3 percentage points since pre-COVID with a year-on-year increase of 4.7 percentage points, an average of 44% of customers rate Royal London 9 or 10 out of 10 across each of seven key measures.
  • Successfully completed the Part VII transfer of Aegon UK’s closed individual protection book on 1 July 2024, increasing the total number of advised UK protection customers we now look after to over 1.4 million.
  • Paid 98.9% (H1 2023: 99.1%) of protection claims in the first half of year, paying £355m (H1 2023: £343m) to approximately 36,000 customers, making a difference to families across the UK and Ireland facing the worst kinds of life shocks.
  • Continued to diversify our investment portfolio, including in UK life sciences through real estate infrastructure and our first investment into agriculture and natural capital following the acquisition of 21,000 acres of prime farmland.
  • Investment performance of actively managed funds over three years remains strong with 94% of funds outperforming their three-year benchmark (H1 2023: 95%)4.
  • Continued to build our bulk annuity capabilities following the completion of the two initial buy-in transactions with Royal London pension schemes and remain on track to enter the market in the second half of the year.

Financials 

 

Six months ended
30 June 2024

Six months ended
30 June 2023

UK GAAP Operating profit before tax5 £144m £127m
Transfer to the fund for future appropriations6 £312m £161m
New business Life and pensions new business sales7 £5,048m £4,865m
Inflows Gross inflows8 £16,317m £14,977m
Net inflows8 £77m £3,214m
  30 June 2024 31 December 2023
Funds Assets under management9 £169bn £162bn

Capital10
(Solvency II)

Regulatory View solvency surplus £2.9bn £2.9bn
Regulatory View capital cover ratio 201% 206%
Investor View solvency surplus £2.9bn £2.9bn
Investor View capital cover ratio 211% 218%
  • Operating profit before tax5 increased by 13% to £144m (H1 2023: £127m) supported by a growing book of in force business and higher Workplace Pensions new business contribution.
  • Transfer to the fund for future appropriations (FFA)6 of £312m (H1 2023: £161m) reflects the improvement in operating profit and investment returns being above our longer-term expected return assumptions.
  • Life and pensions new business sales7 were up 4% to £5,048m (H1 2023: £4,865m) with the growth in Workplace Pensions offsetting the continued decline in defined benefit transfer business.
  • Gross inflows8 rose to £16.3bn (H1 2023: £15.0bn). Net inflows8 were impacted by £1.7bn of external net outflows from Global Equity strategies following the departure of a number of members of the Global Equities team. Overall net inflows fell to £0.1bn (H1 2023: £3.2bn).
  • Assets under management9 increased to £169bn (31 December 2023: £162bn).
  • Capital position remains robust with our hedging programmes continuing to ensure the stability of our capital position. The Investor View and Regulatory View10 ratios were 211% (31 December 2023: 218%) and 201% (31 December 2023: 206%).

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Notes to editor

  1. The information in this announcement relates to The Royal London Mutual Insurance Society Limited ('RLMIS' or 'the Company'), and its subsidiary undertakings, together referred to as 'Royal London' or 'the Group'.
  2. The Group assesses its financial performance based on a number of measures, some of which are not defined or specified in accordance with relevant financial reporting frameworks such as UK GAAP or Solvency II. These measures are known as alternative performance measures (APMs). APMs are disclosed to provide further information on the performance of the Group and should be viewed as complementary to, rather than a substitute for, the measures determined according to UK GAAP and Solvency II requirements. Accordingly, these APMs may not be comparable with similarly titled measures and disclosures by other companies.
  3. The Royal London Customer Value Statement (CVS) model tracks seven key pillars of importance across nearly 3,000 Royal London customers twice a year; these are Communication, Membership, Resolution, Be Personal, Pay out, Investment and Reputation. The results are reported by each factor and through an overarching CVS Index which is weighted and represents the percentage of customers rating the company 9 or 10 out of 10 overall.
  4. Investment performance has been calculated using a weighted average of active assets under management for funds with a defined external benchmark. Benchmarks differ by fund and reflect their mix of assets to ensure direct comparison. Passive funds are excluded from this calculation as, whilst they have a place as part of a balanced portfolio, Royal London believes in the long-term value added by active management.
  5. Operating profit before tax represents profit before transfer to the fund for future appropriations excluding: short-term investment return variances and economic assumption changes; goodwill (charge)/credit arising from mergers and acquisitions; ProfitShare; ValueShare; tax; and one-off items of an unusual nature that are not related to the underlying trading of the Group. Profits or losses arising within the closed funds are held within the respective closed fund surplus; therefore operating profit before tax represents the result of the Royal London Main Fund (RL Main Fund).
  6. Transfer to the fund for future appropriations represents the statutory UK GAAP measure 'Transfer to the fund for future appropriations' in the technical account within the Consolidated statement of comprehensive income.
  7. Life and pensions new business sales represent life and pensions business only and excludes Asset Management, other lines of business and bulk annuity buy-ins transacted with the Group’s defined benefit pension schemes. New business sales are presented as the Present Value of New Business Premiums (PVNBP), which is the total of new single premium sales received in the period plus the discounted value, at the point of sale, of the regular premiums the Group expects to receive over the term of the new contracts sold in the period. The rate used to discount the cash flows in the reported results has been derived from the opening swap curve at the start of the financial period for all new business except annuities where the rate used is the future yield (less an allowance for downgrade and default risk) on assets expected to back these annuitant liabilities over the lifetime of the contracts.
  8. Gross and net inflows incorporate flows into Royal London Asset Management (RLAM) from external clients (external flows) and those generated from RLMIS (internal flows). External client net inflows represent external inflows less external outflows, including cash mandates. Internal net inflows from RLMIS represent the combined premiums and deposits received (net of reinsurance) less claims and redemptions paid (net of reinsurance). Given its nature, non-linked protection business is not included.
  9. Assets under Management (AUM) represent the total of assets actively managed by the Group, including funds managed on behalf of third parties.
  10. The capital cover ratio is calculated as the Group’s Own Funds, being the regulatory capital under Solvency II, divided by the Solvency Capital Requirement (SCR). The 'Investor View' equals the RL Main Fund capital position (excluding ring-fenced funds). The 'Regulatory View' solvency surplus and capital cover ratio exclude the closed funds’ surplus as a restriction to Own Funds. All capital figures are stated on a Group Partial Internal Model basis.
  11. Figures presented throughout are rounded. The capital cover ratios, new business margins and period on period percentage changes are calculated based on exact figures.

About Royal London

Royal London is the largest mutual life, pensions and investment company in the UK, and in the top 30 mutuals globally*, with assets under management of £169 billion, 8.5 million policies in force and over 4,400 employees. Figures quoted are as at 30 June 2024. Learn more at royallondon.com.

*Based on total 2022 premium income. ICMIF Global 500, 2024