12 August 2019

Royal London interim results show robust performance

4 min read

Meera Khanna, Consumer PR Manager
Meera Khanna

Corporate PR Manager - Protection


  • Net inflows 31% higher at £5.5bn (H1 2018: £4.2bn).
  • New business sales (PVNBP4 basis) 4% lower at £5,824m (H1 2018: £6,077m).
  • European Embedded Value (EEV) operating profit before tax of £187m (H1 2018: also £187m).
  • IFRS profit before tax 116% higher at £411m (H1 2018: £190m) due to strong market performance for equities and debt securities.
  • IFRS post tax transfer to eligible policyholders increased to £247m (H1 2018: £196m).
  • Assets Under Management7 (AUM) at a record level of £130bn (31 December 2018: £114bn) due to market growth of £10.5bn and net inflows of £5.5bn.
  • Outstanding investment performance with 97%8 (H1 2018: 58%) of active funds outperforming their benchmark over a three year period.
  • On a Standard Formula basis, estimated Group Investor View solvency surplus of £4.7bn and a Group Investor View capital cover ratio of 202% (1 January 2019: £4.4bn and 197% respectively).
    30 June 20191 30 June 2018 Change2
Flows Gross inflows3 £12,618m £9,589m +3,029m
  Net inflows3 £5,473m £4,177m +1,296m
EEV Life and pension sales PVNBP4 £5,824m £6,077m £(253)m
  EEV operating profit5 before tax £187m £187m -
IFRS IFRS profit before tax6 £411m £190m +£221m
  IFRS post tax transfer to
eligible policyholders6
£247m £196m +£51m
    30 June 2019 31 December 2018 Change2
Funds Assets Under Management7 £130bn £114bn +£16bn
    30 June 201910 1 January 20199 Change2
Capital (Solvency II) Group solvency surplus
(Investor view)9
£4.7bn £4.4bn +£0.3bn
  Group capital cover ratio
(Investor view)9, 12
202% 197% +5% points

Kevin Parry, Chairman, commented:

“First half trading was robust. RLAM won new mandates on the back of strong investment performance across asset classes. New business in Pensions was marginally lower reflecting the industry-wide reduction in defined benefit transfers, offset by higher Workplace sales. Consumer and Protection traded in line with expectations, making excellent progress in the Irish market.

“Royal London is well prepared for Brexit and will continue to monitor carefully any developments that might affect our business and customers. We will keep customers informed of significant developments relevant to their policies.

“We continue to maintain a robust capital foundation to allow us to invest in our future core products and propositions whilst also innovating to deliver better outcomes for customers in underserved markets.

“The Board looks forward to welcoming Barry O’Dwyer as Group Chief Executive on 23 September 2019.”

Financial Review

Gross inflows increased to £12.6bn (H1 2018: £9.6bn) driven by external institutional business wins and strong flows into Royal London Asset Management’s (RLAM) wholesale range of credit and sustainable funds. Net inflows increased to £5.5bn (H1 2018: £4.2bn).

EEV operating profit before tax was £187m in line with the prior period (H1 2018: £187m). The result includes strong growth in RLAM external business, offset by the expected reduction in Individual pensions. Life and pension sales (PVNBP) decreased 4% in H1 2019 to £5,824m (H1 2018: £6,077m) primarily due to a reduced level of defined benefit transfers, partially offset by higher Workplace pension sales from new entrants to existing schemes and new scheme wins.

IFRS profit before tax increased to £411m (H1 2018: £190m) and IFRS post tax transfer to eligible policyholders increased to £247m in H1 2019 (H1 2018: £196m). The IFRS results reflect positive investment returns of £8.1bn (H1 2018: £0.5bn) following strong performance in the global and UK equity markets. This was offset by an increase in the value of policyholder benefits and claims of £7.4bn (H1 2018: £0.6bn) driven by a fall in yields used to discount liabilities.

RLAM achieved record AUM of £130bn as at 30 June 2019 (31 December 2018: £114bn) through positive investment returns and net inflows.

  Group Parent
Key metrics £m 30 June 201910 1 January 20199 30 June 201910 31 December 201811
Solvency surplus (Investor View) £4,692m £4,411m £4,801m £4,542m
Capital cover ratio (Investor View)12 202% 197% 206% 201%
Solvency surplus (Regulatory View) £1,839m £1,761m £1,948m £1,891m
Capital cover ratio (Regulatory View)12 140% 139% 143% 142%

On a Standard Formula basis, the Group had an estimated Investor View solvency surplus of £4,692m (1 January 2019: £4,411m) and an estimated Investor view capital cover ratio of 202% at 30 June 2019 (1 January 2019: 197%). The Parent company had an Investor View solvency surplus of £4,801m (31 December 2018: £4,542m) and an Investor view capital cover ratio of 206% at 30 June 2019 (31 December 2018: 201%). Our solvency surplus and capital cover ratios have improved largely due to positive movements in bond and equity markets in the first half of 2019.

We use an internal capital model for the purposes of managing our capital. We have submitted an application to the Prudential Regulation Authority (PRA) to use an Internal Model, compliant with Solvency II requirements, to calculate our capital requirements for regulatory purposes from Q4 2019. We expect to hear whether our application has been approved by the end of Q3 2019.

Download the full 2019 interim financial results investor presentation.

Download the full 2019 interim financial results press release.



For further information please contact:

Meera Khanna, Corporate PR Manager – Protection

Mona Patel, Group Head of External Communications                      

Notes to editor

  1. The results in this announcement are prepared on two bases: International Financial Reporting Standards (IFRS) and European Embedded Value (EEV). The results prepared under IFRS form the basis of the Group's statutory financial statements. The supplementary EEV basis results have been prepared in accordance with the amended European Embedded Value Principles dated April 2016 prepared by the European Insurance CFO Forum. Royal London adopted IFRS 16 ‘Leases’, replacing IAS 17 from 1 January 2019, which recognises more leases on the balance sheet.
  2. Change is increase or decrease of H1 2019 compared to H1 2018, unless otherwise stated. Figures as at 30 June 2019 are compared to 31 December 2018. All balances presented are for the six months ended 30 June, or as at 30 June unless otherwise stated.
  3. Gross and net inflows incorporate RLMIS and RLAM. Net inflows from RLMIS represent the combined premiums and deposits received (net of reinsurance) less claims and redemptions (net of reinsurance). Given its nature, non-linked Protection business is not included. RLAM net inflows represent external inflows less external outflows, including cash mandates.
  4. 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 H1 2019 swap curve calculated in accordance with specification provided by the European Insurance and Occupational Pensions Authority (EIOPA).
  5. The definition of EEV operating profit follows the same principles as IFRS operating profit with the exception of those items which are recognised under IFRS but are excluded from EEV as they cannot be recognised for regulatory purposes, and certain items which are included in EEV but not recognised in IFRS. Most notably, EEV operating profit includes the revaluation of the Value of In-Force business (VIF) arising on the asset management and service subsidiaries, and IFRS operating profit includes accounting amounts such as amortisation of intangible assets which are excluded under EEV as they are not permitted to be recognised for regulatory purposes.
  6. IFRS profit before tax is ‘Result before tax and before transfer to the unallocated divisible surplus’ (UDS) in the statement of comprehensive income. IFRS post tax transfer to eligible policyholders is ‘Transfer to the unallocated divisible surplus’ in the statement of comprehensive income, and represents the IFRS result after tax for the period before taking into account other comprehensive income (OCI). OCI comprises actuarial gains and losses from changes to actuarial assumptions in the valuation of the Group pension schemes. As a mutual, the transfer to the UDS is a key measure of accumulation of funds available for us to share, at our discretion, with eligible customers and members.
  7. Assets Under Management represent the total of assets actively managed by, or on behalf of, the Group, including funds managed on behalf of third parties. It excludes assets administered through Ascentric, our platform business.
  8.  Investment performance has been calculated using a weighted average of our active assets under management. Benchmarks differ by fund and reflect their mix of assets to ensure we are comparing like with like. Passive funds are excluded from this calculation as, whilst they have a place as part of a balanced portfolio, we are believers in the long-term value that active management can add.
  9. The ‘Investor View’ does not restrict the surplus in the closed funds. The ‘Regulatory View’ includes the restriction on closed funds’ surplus in excess of the SCR, which is treated as a liability and is excluded from total available own funds. Comparative figures for 2018 are not available for the Group capital position as Royal London became an insurance Group for Solvency II purposes with effect from 1 January 2019.
  10. 30 June 2019 Parent capital figures are based on Q2 2019 regulatory returns and Group capital figures are based on an estimated Q2 2019 position.
  11. The 31 December 2018 figures have been restated in line with the final regulatory returns which were presented in the 2018 Solvency and Financial Condition Report published in April 2019.
  12. Figures presented in tables throughout are rounded. The capital cover ratios and new business margins are calculated based on exact figures.

About Royal London:

Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.