Royal London Financial Results - year ended 31/12/2013
1 April 2014
ROYAL LONDON REPORTS STRONG PROFIT PERFORMANCE IN 2013
Royal London, the UK’s largest mutual life and pensions company, presents its audited results for the year ended 31 December 2013.
Adding value for our customers and members
- Bonuses added to with-profits policies £318m (2012 £282m).
- Mutual dividend of £81m (2012 £88m).
- Investment performance on assets backing Royal London Open Fund 10.6%, 1.6% above benchmark.
- Investment performance on default unit linked pension funds (the “Governed Portfolios”) on average 2.1% above benchmark.
Key performance indicators (figures in brackets show movement compared to 2012)
- EEV profit from continuing operations before tax and mutual dividend £551m (+72%), including £150m one-off gain from CIS acquisition1.
- IFRS result from continuing operations before tax and mutual dividend £530m (+17%)2, including £125m one-off gain from CIS acquisition1.
- Continuing new life and pensions business (on a PVNBP basis)3 £3,464m (+18%)
- Group funds under management £73.6bn (+48%), including £20.4bn from CIS acquisition1.
- Surplus regulatory (Insurance Group Directive) capital £2,749m4 (+16%).
1 On 31 July 2013 Royal London acquired the life, pensions and asset management business of The Co-operative Group.
2 2012 IFRS result restated to exclude actuarial re-measurements in relation to the Group’s pension schemes, following revised IAS19.
3 Present Value of New Business Premiums (PVNBP) is the total of new single premium sales received in the year plus the discounted value, at the point of sale, of the regular premiums we expect to receive over the term of the new contracts sold in the year.
4 Regulatory capital surplus includes tier 2 capital.
Phil Loney, Group Chief Executive of Royal London, said:
“A lot changed in 2013, both for Royal London and for financial services in general. Our businesses had to contend with new regulations at the same time as tough market conditions. We did so, for the most part, very successfully by producing one of the strongest profit performances in the recent history of the Group. Just as importantly, the changes we have made to our business have improved our ability to deliver the best experiences and outcomes for our members, customers and intermediary partners.
“Our 2013 EEV operating profit from continuing operations was £346m, including a £150m one-off gain from the acquisition of the life, pensions and asset management businesses of The Co-operative Group (referred to as the CIS acquisition). New business profits increased in the year. A slight decline in existing business profits reflects an increase in strategic investment in the business to support a number of key goals; our auto enrolment programme, our move to operate under a new Royal London Brand and the launch of our direct business later in 2014.
“After reflecting economic variances, our EEV profit before tax was significantly increased on last year. This reflects favourable economic conditions and a positive contribution from the CIS acquisition and also good operating performance in pensions and asset management.
“As a result of our robust operating performance and continued capital strength, we are able to allocate a mutual dividend to relevant policyholders of £81m (2012 £88m), which brings to £406m the amount added to the asset shares of our eligible members since the mutual dividend was introduced in 2007.
“During 2013 we completed two key developments in the support of our strategy; we successfully completed the CIS acquisition and we disposed of our offshore business, Royal London 360o. The CIS acquisition has significantly increased the scale of Royal London in terms of customers (3.5 to 5.3 million) and assets under management (which increased by £20bn at the date of acquisition and is £74bn at the end of 2013). Work is well underway to integrate the CIS businesses into the Group.
“We have also made substantial investments in the strategic development of our business. These include system developments to ensure we can deliver excellent customer service across the Group, the development of a revitalised Royal London brand and building our direct-to-consumer offering, which will bring additional revenues to the group through targeting mass market consumers not served by financial advisers.
“Nevertheless our regulatory capital surplus increased by 16% during the year as a result of good operating performance, improved financial markets and an increase in tier 2 capital, following an exercise to re-finance the Group’s subordinated debt in late 2013. The market’s very positive response to our subordinated debt refinancing is a clear indicator of the high regard for our overall financial strength.
“Although they fall outside the period under review the changes to pensions announced in the Budget are significant. We welcome the removal of the requirement to convert pension savings into an annuity. The increase in the trivial commutation limits is something we have long favoured but the imminent removal of all limits has fundamentally changed the way we think about pensions.
“Greater flexibility is certain to improve the attraction of pensions as a savings vehicle at just the time when more people than ever are joining corporate pensions as a result of automatic enrolment.
“We have a strong track record for innovation in the market for income drawdown and we expect many more savers to choose this option once annuities are no longer compulsory. The Government’s new pension policy will increase the need for good advice in the run up to retirement. We look forward to working with Government and our Regulators to develop imaginative and effective ways of providing such guidance.”
Download: Royal London Financial Results - year ended 31 December 2013 (PDF, 655KB)
For further information please contact:
Gareth Evans, Head of Corporate Affairs
0207 506 6715 07919 170 069
Anna Schirmer, Lansons Communications
0207 294 3605