16 August 2018

Royal London maintains strong trading results

CEO urges government to ‘put consumer first’ by saving the pensions dashboard

15 min read

Mona Patel, Group Head of External Communications
Mona Patel

Group Head of External Communications


Commenting on the results, Royal London CEO Phil Loney said:

"Sluggish economic growth and the ending of the auto enrolment roll out provided a challenging backdrop for pensions and investment companies in the first half of 2018. I’m pleased to report that Royal London has consolidated its record 2017 trading position with EEV pre-tax profit up 9% to £358m, reflecting an operating profit of £187m in the first six months of the year."

Phil Loney also urged the Government to save the proposed ‘pensions dashboard’ project: 

"The UK pensions system is highly fragmented and auto enrolment will add further to the number of people with pensions scattered across multiple schemes and providers. In many other countries citizens can see all of their pensions – state, workplace and private – all in one place, and there is no reason why UK citizens should not be able to do so. The industry has already shown its commitment by spending time and money preparing a prototype dashboard. We need Government to take a lead, both in ensuring that state and public sector pension data is available and also in requiring all pension schemes and providers to supply data. Only the Government can do this. It is time to put the consumer first and press ahead with the dashboard project, and we stand ready to work with the Government to drive this project forward."

Key numbers






Life and pensions sales  PVNBP1


£6,078m (£1m)
New business margin 1.8% 1.8% -
EEV operating profit  before tax £187m £185m £2m
EEV profit before tax £358m £327m  £31m
Flows Gross inflows3 £9,589m £9,095m £494m
Net flows3 £4,177m £3,657m £520m
IFRS IFRS transfer to the UDS  before other comprehensive income £196m £192m £4m
    30-Jun-18  31-Dec-17  Change2
Funds Funds under management




(Solvency II)

Solvency surplus (Investor View)5 £5.4bn £5.5bn (£0.1bn)
Capital cover ratio (Investor View)5 225% 235% (10pp)

Trading, financial and capital highlights

Royal London announces increased half year EEV operating profits of £187m (+1%) and EEV pre-tax profit of £358m (+9%).

  • Consistent EEV operating profit achieved in difficult trading conditions;
  • Increases in Personal Pension and Life Assurance new business sales1 largely offset reduced Group Pension sales resulting from the end of the auto enrolment roll out;
  • Increased net flows across the Group;
  • Our capital position remains strong with a Solvency II Investor View5 solvency surplus of £5.4bn and a capital cover ratio of 225%; and
  • The business is well placed to deliver its future financial goals.
Four square sweets

Our businesses


  • Overall Pensions new business sales1 remained strong at £5,399m (HY 2017: £5,465m), achieved against a challenging market background. The strong performance demonstrates our ability to provide compelling propositions to support customers continuing to accumulate pension savings, and also simultaneously provide solutions for those closer to retirement with ambitions to prepare effectively for the next phase of their life.
  • We welcomed over 86,000 new entrants to our Group Pension schemes and have an attractive offering for new savers and those wishing to make incremental contributions alike. Our drawdown offering maintains one of the leading market positions and the performance of our governed investment portfolios has made our pension products popular with customers and advisers in the pension transfer market. We continue to focus on offering value for money products underpinned by a great service and our unique profit sharing approach which helps to boost investment returns for our pension members. 
  • Individual Pensions and Drawdown new business sales1 were up by 23% to £3,577m (HY 2017: £2,916m) as greater numbers of customers and advisers selected Royal London as the pension provider of choice. 
  • The ability to remain competitive across all these market sectors is down to our underlying business agility and foresight to position our propositions appropriately in the market place. As an example, we have recently launched our scheme health check tool which shows employers how their scheme is performing against their expectations and will assist advisers in attracting new business and offering an ongoing service to existing clients. 
  • Intermediary UK Protection new business sales1 increased by 14% to £383m (HY 2017: £337m) fuelled by increased adviser confidence in our propositions as a result of improved new business processes, strong and effective underwriting and a commitment to innovation. Despite strong competition, we have increased market share6 to 11.2% at Q1 2018 (31 December 2017: 11.1%) through our continued focus on adviser relationships and customer service. We continue to work on solutions that make our products more flexible and attractive to a wider range of customers. In January 2018 we introduced Enhanced Children’s Critical Illness cover and in June 2018 we launched our new Diabetes Life Cover product, following the success of the pilot launched in April 2017. Diabetes Life Cover is most suitable for people with Type 1 and less well controlled Type 2 diabetes who find it more difficult to access protection. 
  • Our Irish Protection business continues to grow; new business sales1 increased by 4% to £48m (HY 2017: £46m) driven by our continued service transformation and regular proposition enhancements. Broker market share7 increased to 17.3% at Q2 2018, up from 16.9% at 31 December 2017. Our new mortgage protection offering, launched in late 2017, has been positively received and we were the first provider in Ireland to offer funeral prepayments to policyholders impacted by delays in the Irish probate system.


  • Consumer new business sales1 were up by 8% to £248m (HY 2017: £229m). This was as a result of continued organic growth in our core Royal London branded Over 50s product line. In addition, we have seen an increase in sales through our partnership with Post Office Money Services following expansion of our Over 50s marketing activity with a successful TV campaign in the first quarter of the year, as well as the launch of a new simplified Life Insurance proposition, Easy Life, which streamlines the customer sales process. In January we launched our new partnership with CYBG Plc, owner of Clydesdale Bank and Yorkshire Bank, who now offer our Over 50s life cover to their customers.
  • We enhanced our Consumer protection portfolio with the launch of an innovative Serious Illness rider on our Term proposition, with the response from consumers exceeding our expectations. We also expanded our later life offering and in April 2018 introduced a Royal London Funeral Plan which has also secured a five star rating from Fairer Finance.

Royal London Asset Management (RLAM)

  • RLAM has continued to perform well in 2018 attracting external net inflows of £2.2bn (HY 2017: £2.1bn) from Institutional and Wholesale markets, with Wholesale net flows increasing 33% to £1.2bn (HY 2017: £0.9bn). RLAM achieved some large investment mandate wins during the first half of 2018, gross and net flows for our wholesale business continued to be strong, as we broadened our coverage of wealth managers and financial advisers.
  • Funds under management4 increased to £117bn (31 December 2017: £114bn) driven by strong net flows.

Royal London Platform Services (RLPS) 

  • RLPS supports a range of platform offerings including Ascentric, Succession Investment Platform and wrap offerings for Royal London Group companies. RLPS Gross inflows remained stable at £1.4bn (HY 2017: £1.4bn), as did net flows at £612m (HY 2017: £612m). Assets under administration8 increased by 5% to £15.1bn (31 December 2017: £14.4bn). In the first half of 2018 RLPS migrated the first phase of Ascentric advisers to its new platform solution, Sonata.

Review of financial performance 

EEV operating profit

Royal London has performed well in difficult markets, increasing EEV operating profit before tax by 1% to £187m (HY 2017: £185m) and consolidating the record performance achieved in 2017. The prior year comparative included a one-off £30m benefit arising from the restructuring of a reinsurance agreement. Excluding this item from the comparative, the operating profit growth would be 21%, reflecting the strong operating performance of the business and lower strategic development costs.

Profit contribution from new business reduced by 5% to £142m in the six months to 30 June 2018 (HY 2017: £149m) as increased sales from Personal Pension and Insurance products largely offset the inevitable reduction in new Group Pension sales following the culmination of the auto enrolment roll out.

The overall new business margin remained in line with the prior period at 1.8% (HY 2017: 1.8%). The new business margin on Pensions business remained robust at 2.2% (HY 2017: 2.3%) despite the large level of change experienced within the pensions market. The Protection margin increased to 5.8% (HY 2017: 4.4%), with one of the attributable factors being an increase in new business volumes with a focus on maintaining a stable cost base. The margin for the Consumer business was (1.8)%, a reduction from the previous period (HY 2017: 0.4%). The reduction has been driven by very low interest rates and changes to assumed investment returns. We are actively redesigning our products where necessary in response to current trading headwinds. Our Consumer business was launched four years ago and is making good progress towards achieving the critical scale needed for profitable trading.

Profits from managing existing business of £78m (including expected return on opening net worth) have reduced by 4% from £81m. This mainly consists of a higher expected return of £61m (HY 2017: £52m) driven by a higher value of in-force business, as a result of strong fund performance and prior year new business sales. In addition, positive experience variances of £8m (HY 2017: £16m) arose due to a higher rate of retention of business within RLAM.

Strategic development costs and other items reduced to £33m (HY 2017: £41m) with the prior year comparative including a £30m benefit arising from the restructuring of a reinsurance agreement. Excluding this item from the comparative, strategic development costs and other items reduced by £38m. Current year costs primarily relate to expenses incurred in the development of various new IT systems across the Group which we believe will enable us to deliver a market leading digital proposition and deliver better outcomes and experiences for customers.

IFRS transfer to unallocated divisible surplus

The IFRS transfer to the unallocated divisible surplus for the six months ended 30 June 2018, before other comprehensive income, was £196m (HY 2017: £192m). Consistent with EEV, our IFRS result benefits from the strong trading performance of the Group. Investment returns have reduced to £500m (HY 2017: £2,159m) through lower unrealised fair value gains, as a result of lower equity market returns.

The credit of £10m (HY 2017: charge of £91m) within premiums ceded to reinsurers arose through the downward revaluation of a reinsurance agreement of £160m (HY 2017: £56m), with a corresponding charge included within investment returns.

Other comprehensive income included the positive movement in the surplus in the Group’s pension schemes of £45m (HY 2017: £32m), with the RLGPS surplus increasing by £38m. Including other comprehensive income, the total transfer to the unallocated divisible surplus for the six months to 30 June 2018 was £241m (HY 2017: transfer to the unallocated divisible surplus of £224m).

IFRS balance sheet

Our balance sheet remains robust. Our total investment portfolio, including investment property, was £89.4bn at 31 December 2017 and increased by 1.5% to £90.7bn at 30 June 2018. Our financial investment portfolio continues to be well balanced across a number of financial instruments, with the majority in equities, debt and fixed income securities.

The accounting policies applied are consistent with those set out in the Group’s Annual Report and Accounts for the year ended 31 December 2017, with the exception of the adoption of IFRS 15, ‘Revenue from contracts with customers’, which is applicable for the first time in 2018. Further detail is set out in Appendix 2.

Net flows3

Net flows of £4,177m (HY 2017: £3,657m) comprise internal net flows of £1,952m (HY 2017: £1,523m) and external net inflows of £2,225m (HY 2017: £2,134m). Higher internal net flows have been driven by increased Individual Pension product sales and a greater retention of our closed book products. External net inflows have been driven by a number of large investment mandate wins in RLAM.

Investment performance

Global equity markets have experienced an increased level of volatility in 2018, driven by continued political and economic uncertainty as well as talk of trade wars. Despite this uncertainty, the investments backing the asset shares of the Open Fund achieved a return of 1.20% in the six months to 30 June 2018 (HY 2017: 3.30%). This is against a benchmark of 1.23% (HY 2017: 2.84%), which is constructed from market indices weighted to reflect the asset mix of each sub fund.


Our capital position remains strong with additional detail set out in section 3.

Download 2018 Interim Results Announcement

Download investors presentation

For further information please contact:

Mona Patel, Group Head of External Communications

Neil Millard, Manager Director, Rhizome Media Group              

  • Email: neil@rhizomemediagroup.com 
  • 07803 560 331


Editor's notes

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in-force and 3,745 employees. Figures quoted are as at 30 June 2018.

1) 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 the Group expects to receive over the term of the new contracts sold in the year. The rate used to discount the cash flows in the reported results has been derived from the swap curve.

2) Change is increase or decrease compared to 30 June 2017 or 31 December 2017.

3) Gross and net flows incorporate The Royal London Mutual Insurance Society (RLMIS) and Royal London Asset Management (RLAM). Net flows from RLMIS represent the combined premiums and deposits received (net of reinsurance) less claims and redemptions (net of reinsurance). Given its nature, Protection business is not included. RLAM net flows represent external inflows less external outflows, including cash mandates but excluding Chanel Islands cash mandates.

4) Funds under management represent the total of assets managed or administered by the Group on behalf of Institutional and Wholesale clients, and on behalf of the Group. It excludes assets administered through RLPS our platform business.

5) We have presented a Total Company (‘Investor View’), which comprises the Royal London Open Fund, into which all new business is written, and seven closed ring-fenced funds from previous acquisition activity. The Investor View includes the surplus from the closed funds. Total Company (‘Regulatory View’) includes a restriction of £3.0bn (31 December 2017: £3.1bn) as a deduction from total Own Funds of £9.7bn (31 December 2017: £9.6bn), because excess capital in the closed funds is ultimately for the benefit of those closed fund policyholders. Therefore closed funds report a zero surplus, with Total Company surplus equal to the Open Fund surplus. After the £3.0bn restriction, the Total Company (‘Regulatory View’) reported a capital cover ratio of 156% at 30 June 2018 (31 December 2017: 159%).

6) Market share based on Q1 2018 Royal London and Association of British Insurers figures.

7) Market share based on Q2 2018, Royal London Ireland analysis of Milliman Temperature Gauge results.

8) Assets under administration represent the total assets administered on behalf of individual customers and Institutional clients through our platform business. It includes those assets for which the Group provides investment management services, as well as those that the Group administers when the customer has selected an external third-party investment manager.

9) Financial calendar: 

  • 13 November 2018 - RL Finance Bonds No 3 plc subordinated debt interest payment date 
  • 30 November 2018 - RL Finance Bonds No 2 plc subordinated debt interest payment date

Royal London will hold an investor conference call to present its 2018 interim financial results on Thursday 16 August 2018 at 09:00 - Interested parties can register at here.

10) Forward-looking statements:

This document may contain forward-looking statements with respect to certain of Royal London’s plans, its current goals and expectations relating to its future financial position. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Royal London’s control. These include, among others, UK economic and business conditions, market-related risks such as fluctuations in interest rates, the policies and actions of governmental and regulatory authorities, the impact of competition, the timing, impact and other uncertainties of future mergers or combinations within relevant industries.

As a result, Royal London’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Royal London’s forward-looking statements. Royal London undertakes no obligation to update the forward-looking statements.