10 August 2020

Royal London continues to support customers through challenging times

4 min read

Meera Khanna, Consumer PR Manager
Meera Khanna

Corporate PR Manager - Protection


Interim Results Announcement 2020

Financial Highlights

    Six months ended
30 June 2020
Six months ended
30 June 2019
UK GAAP1 Operating profit before tax2 £36m £90m
  (Loss)/profit before tax3 £(181)m £397m
New business Life and pensions new business sales4 £4,747m £5,822m
Flows Gross inflows5 £14,419m £12,618m
  Net inflows5 £997m £5,473m
    30 June 2020 31 December 2019
Funds Assets under management6 £139bn £139bn
Capital cover ratio (Solvency II)8 Regulatory View7 149% 159%
  Investor View8 212% 219%
  • UK GAAP operating profit before tax2 decreased to £36m (H1 2019: £90m), reflecting reduced new business sales and increased digital investment.
  • Loss before tax3 of £(181)m (H1 2019: profit of £397m) following falls in real asset values and a reduction in bond yields.
  • Life and pensions new business sales4 18% lower reflecting difficult trading conditions experienced during lockdown in Q2 2020, as companies deferred decisions to move pension scheme providers and individuals delayed investment decisions.
  • Net inflows5 were £997m in H1 2020 (H1 2019: £5,473m) as strong internal flows and growth in demand for sustainable funds were partially offset by external Institutional outflows, particularly in the segregated fixed income and cash funds.
  • Assets under management6 stable at £139bn (31 December 2019: £139bn).
  • Group Regulatory View capital cover ratio7 of 149% (31 December 2019: 159%) and Investor View capital cover ratio of 212% (31 December 20198: 219%).

Barry O’Dwyer, Group Chief Executive, commented:

“Our focus has been on supporting customers and advisers through the challenges associated with Covid-19. In particular, we have supported policyholders who have difficulty paying premiums due to their personal circumstances by encouraging them to contact us to arrange a practical way forward to maintain cover. There has been no disruption to our award-winning customer service which was due to the immense effort from colleagues.

“Despite market volatility and economic uncertainty assets under management were stable at £139bn. Our capital position remains strong. New business sales for protection products grew by 15%, which was partly as a result of the pandemic reminding customers of the importance of life insurance, critical illness and income protection. Pension sales were lower as a consequence of the disruption to advisers’ ability to do business during lockdown.

“In the first half of the year and despite the pandemic, we made progress on our strategic agenda, with the agreement to sell our platform business, Ascentric. We were also pleased to announce that Police Mutual would become part of Royal London. Both transactions are subject to regulatory approval.

“Covid-19 will inevitably continue to have an impact on new business prospects. Looking further ahead, our strong capital position and unrivalled reputation with advisers and customers will stand us in good stead as we continue to help customers meet their protection, investment and long-term savings needs.”

Kevin Parry, Chairman, commented:

“Royal London has successfully transitioned to 98% of our people working from home, enabling us to continue to provide our normal high level of service to customers. We remained open for business without needing to ask customers to delay interaction with us and we did this without taking any Government support.

“The professionalism of our people has been outstanding. A phased return to work has been introduced for a small number of key workers and we continue to put plans in place so more of our people can revert to office based working in a safe and measured way.

“We have paid out claims to the families of more than 1,200 customers as a result of deaths attributable to Covid-19. Our thoughts are with all our customers and their families at this time.

“Recognising the important role we play in protecting the UK and Irish population, we made total charitable contributions of £400,000 to the National Emergencies Trust in the UK and to Feileacain, our local partner in Ireland. The amount will support people throughout the United Kingdom and Ireland who suffer hardship due to Covid-19.”

Financial review


New business sales were down 18%, primarily due to reduced pensions volumes particularly in Q2. Pension volumes decreased as economic uncertainty, stock market volatility and the national lockdown caused disruption to the services provided by intermediaries to their clients. Workplace pension volumes were also lower as companies deferred decisions to move scheme providers. Intermediated Protection new business sales increased 15% in H1 2020 following investments in our proposition and service as well as more customers seeking financial protection as a result of the pandemic.

Operating profit reduced to £36m in H1 2020 (H1 2019: £90m), primarily driven by the reduction in new business volumes and increased investment in digital infrastructure. Loss before tax of £(181)m in H1 2020 (H1 2019: profit of £397m) due to lower investment returns in the period and a reduction in discount rates used to value long-term business provisions leading to higher liability valuations.

There has not been any material adverse experience in the first half of the year as a result of the Covid-19 pandemic. A £10m reserve for Covid-19 related claims was charged in the first half of the year to allow for potential higher claims in the future. There remains uncertainty over the eventual impact of the pandemic including both future rates of mortality, as well as the wider health impacts from the deferral of non Covid-19 related medical treatments.

Financial reporting

The Group has previously communicated that it would discontinue reporting under European Embedded Value (EEV), consistent with most UK insurers. In addition, the Group has changed its statutory reporting basis from International Financial Reporting Standards (IFRS) to UK GAAP with effect from 1 January 2020. Accordingly, the interim results for the six months ended 30 June 2020, including the related comparatives, are prepared in accordance with UK GAAP.

To facilitate comparison of the Group’s performance, an Alternative Performance Measure (APM) ‘UK GAAP operating profit before tax’2 is included within the key financial highlights. Appendix 1 provides further information on the measurement differences arising on the transition to UK GAAP.


The Group has changed the ‘Investor View’ capital metric to equal the Royal London Main Fund (RL Main Fund) capital position, which excludes the ring-fenced funds’ capital position. This definition is considered more appropriate as ring-fenced closed funds are run on a standalone basis. The 31 December 2019 Group Investor View comparatives have been restated. Consistent with previous periods, we continue to report the Group Regulatory capital cover ratio which restricts the closed funds’ surplus to the value of the solvency capital requirement of that fund.

Key metrics 30 June 2020 31 December 2019
Regulatory solvency surplus7 £2,509m £2,632m
Regulatory capital cover ratio7 149% 159%
Investor view solvency surplus8 £2,509m £2,632m
Investor view capital cover ratio8 212% 219%

The Group’s capital position remains strong with an estimated Solvency II Group Investor View capital cover ratio of 212% (31 December 2019 restated: 219%) and solvency surplus of £2,509m (31 December 2019 restated: £2,632m). The estimated Solvency II Regulatory capital cover ratio was 149% at 30 June 2020 (31 December 2019: 159%). The Group’s use of equity and interest rate hedging strategies has operated as intended and has allowed the Group to maintain its strong capital position despite the market turmoil in H1.

Life and Pensions

Life and Pensions new business sales on a PVNBP4 basis decreased 18% to £4,747m in 2020 (H1 2019: £5,822m), reflecting reduced sales volumes and contracting markets, particularly within pensions. This was partially offset by Intermediated Protection new business sales, which increased 15% in H1 2020.

Life and Pensions new business margins were 2.0% (H1 2019 restated: 2.2%) in part reflecting a change in mix of pensions new business sales from Individual to Workplace. We continue to take actions across the business to manage costs whilst maintaining our levels of customer service during the uncertainty caused by Covid-19.

  New business contribution   PVNBP3   New business margin4  
  6 months ended
30 June 2020
6 months ended
30 June 2019
6 months ended
30 June 2020
6 months ended
30 June 20194
6 months ended
30 June 2020
6 months ended
30 June 2019
  £m £m £m £m % %
Pensions 71 98 4,103 5,162 1.7% 1.9%
Intermediated Protection 21 18 407 354 5.1% 4.9%
Ireland Protection 5 7 63 65 8.6% 10.7%
Consumer (4) 7 174 241 (2.0)% 2.9%
Life and pensions business 93 130 4,747 5,822 2.0% 2.2%


  • Individual Pensions new business sales have decreased with PVNBP reducing by 18% to £2,662m (H1 2019 2019: £3,232m). The reduction is mainly due to the impact of reduced new business volumes as individuals delay investment decisions.
  • Workplace Pensions new business sales have decreased with PVNBP down by 25% to £1,441m (H1 2019: £1,930m). Total volumes of new regular contributions in H1 2020 are comparable to those in H1 2019 however transfer activity was reduced. New scheme activity is now increasing as the economy slowly progresses out of lockdown.
  • Pensions new business margin fell to 1.7% (H1 2019: 1.9%) primarily due to a change in mix.
  • The business was again voted “Company of the Year” by financial advisers at the 2020 Money Marketing Awards. Royal London also received “Provider of the Year 2019” at the SimplyBiz Group’s Annual Partnership Event 2020 in May 2020 and in February 2020 the Group’s Pension Portfolio and Retirement Solution Group Personal Pension products maintained their 5 star ratings from Defaqto. Pensions continued to be rated Gold for customer service, with an overall satisfaction score of 83%.

Intermediated Protection

  • Intermediated Protection new business sales increased by 15% to £407m (H1 2019: £354m) following the investments we have made in product proposition and service delivery, and more customers seeking financial protection as a result of the pandemic. The growth in sales combined with a focus on cost management increased the new business margin to 5.1% (30 June 2019: 4.9%).
  • The Group remained committed to offering cover to as many people as possible and put in place a number of temporary changes to the proposition, such as the introduction of a premium deferral option to help customers retain their cover; increasing underwriting non-medical limits so that more customers could obtain protection without medical evidence, thus avoiding placing an additional burden on the NHS; and offering free access to mental and physical wellbeing apps to all customers through the Helping Hand service.
  • Intermediated Protection’s reputation was recognised by the award of “Protection Provider of the Year 2020” by Money Marketing.

Ireland Protection

  • New business contribution decreased to £5m (30 June 2019: £7m) as the market contracted following Covid-19 restrictions. Notwithstanding the reduction in sales volumes, PVNBP of £63m (H1 2019: £65m) benefitted from a higher proportion of sales of longer-term products. New business margin has decreased from 10.7% to 8.6%.
  • Royal London won the "2019 Service Excellence Award" at the Brokers Ireland Excellence Awards. This service dedication has continued into 2020 with services to both customers and brokers remaining fully operational throughout the Covid-19 restrictions. Royal London also won "Best Value Mortgage Protection" and "Best Value Term Insurance" awards at both the National Consumer Awards 2019 and the Association of Irish Mortgage Advisers Awards 2019.


  • New business sales were negatively impacted by the pandemic with both direct and partner sales slowing during Q2 2020, reflecting the interruption from Covid-19 and that our partners’ businesses experienced reduced activity during lockdown. Total PVNBP decreased by 28% to £174m (30 June 2019: £241m). New business margin reduced to (2.0)% (30 June 2019: 2.9%) as a result of lower volumes. Through a review of our propositions and costs, actions have been taken to improve profitability of new business in H2 including changes to our core products.
  • Support was provided to existing customers experiencing temporary financial difficulty through the premium holiday feature. The opportunity to defer payments for a period whilst maintaining protection has provided much-needed additional financial security for our customers.

Royal London Asset Management (RLAM)

  Gross inflows5   Net inflows5  
  6 months ended
30 June 2020
6 months ended
30 June 2019
6 months ended
30 June 2020
6 months ended
30 June 2019
  £m £m £m £m
Internal flows 4,325 4,478 1,531 1,540
External flows 10,094 8,140 (534) 3,933
Total 14,419 12,618 997 5,473
  • Internal net inflows remained stable in H1 2020 at £1,531m (H1 2019: £1,540m).
  • External net outflows of £534m in H1 2020 (H1 2019: inflows of £3,933m) were largely driven by Institutional outflows of £1.9bn, partly mitigated by the Sustainable Fund range in the Wholesale sector performing well in in the first half, generating £1.3bn of net inflows. These flows follow the delivery of strong fund sales in Q2, resulting in achieving top position for net retail sales9.
  • Assets under management remained at £139bn at 30 June 2020 (YE19: £139bn) with net inflows of £997m offset by adverse market movements of £492m.
  • 60%10 of active funds outperformed their three-year benchmark (H1 2019: 97%). Our multi asset funds were not positioned for the sharp correction in equity markets and this has impacted performance in terms of adverse asset allocation in the first half.
  • Investment performance in RLAM’s actively managed OEICS in H1 2020 of 82%11 (H1 2019: 82%) was above their respective medians over a three year period, on a money-weighted basis. This helped RLAM win a number of industry awards during H1 2020 with the Sustainable Fund range continuing to receive plaudits, and in particular the Royal London Sustainable World fund winning the best ethical/socially responsible investing (SRI) mixed asset award for the seventh year running at the Money Observer Fund Awards, while the Royal London Sustainable Leaders Trust won Best UK Equity Fund at the Morningstar UK Fund Awards.

Investment Funds Direct Limited (IFDL)

  • Marketed as Ascentric, IFDL is the Group’s wrap platform, supporting approximately 4,000 financial advisers in managing c.95,000 customers’ pensions and savings in tax-efficient wrappers.
  • Assets under Administration decreased 4.3% to £15.5bn (YE19: £16.2bn) primarily due to volatile market conditions arising from the Covid-19 pandemic.
  • In May 2020 the sale of IFDL to M&G plc was announced. The sale is expected to be completed in H2 2020, subject to regulatory approval.

Non-adjusting events after the balance sheet date

The transfer of Police Mutual Assurance Society Ltd (PMAS) into the Group and the sale of IFDL are both expected to complete in the second half of 2020 following regulatory approval. Both transactions are non-adjusting post balance sheet events and, subject to the required approvals being obtained, are expected to be accounted for and disclosed in the 2020 Annual Report and Accounts.

For further information please contact:

Meera Khanna, Corporate PR Manager - Protection

Notes to editor

  1. The interim financial results of the Group (The Royal London Mutual Insurance Society Limited (RLMIS) and its subsidiaries) have been prepared in accordance with UK accounting standards, under FRS 102 ’The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland’ and FRS 103, ’Insurance contracts’. The Group previously reported under International Financial Reporting Standards (IFRS). Comparative information has been presented on a UK GAAP basis where appropriate. Key measurement differences between UK GAAP and IFRS are set out in Appendix 1.
  2. UK GAAP operating profit before tax is represented as profit (transfer to Fund for Future Appropriations before Other Comprehensive Income) excluding: short-term investment return variances and economic assumption changes; amortisation and impairment of goodwill and other intangibles arising from mergers & acquisitions; ProfitShare; tax; and one off items of an unusual nature that are not related to the underlying trading of the Group. Profits arising within the closed funds are held within the respective closed fund surplus; therefore UK operating profit represents the result of the RL Main Fund (including transfers to RL Main Fund from the closed funds). This key performance indicator is an Alternative Performance Measure (APM) which replaces European Embedded Value (EEV) operating profit. A comparison between the UK GAAP and EEV operating profit APMs is set out in Appendix 1.
  3. Loss before tax represents the ‘(Loss)/profit before tax and before (deduction from)/transfer to the fund for future appropriations’ in the statement of comprehensive income.
  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 30 June 2020 swap curve calculated in accordance with specification provided by the European Insurance and Occupational Pensions Authority (EIOPA). New business contribution and margin for 2019 have been restated to reflect the removal of the tax gross up of 19% that was applied in EEV reporting. Removing the tax gross up reduced H1 2019 new business contribution by £16m as set out in Appendix 1.
  5. Gross and net inflows incorporate flows into 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 (net of reinsurance). Given its nature, non-linked Protection business is not included.
  6. 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. Figures are stated as at 30 June, and exclude assets administered through IFDL, the Group’s platform business.
  7. The ‘Regulatory View’ capital cover ratio restricts each closed funds’ surplus to the value of the Solvency Capital Requirement (SCR) of that fund.
  8. The Group has changed the ‘Investor View’ capital cover ratio metric in 2020 to equal the Royal London Main Fund (RL Main Fund) capital position (excluding ring-fenced funds). The definition is considered to be more appropriate given the RL Main Fund is the primary source of capital for the group, and that the closed funds are ring-fenced and run on a standalone basis. The 31 December 2019 Group Investor View comparatives have been restated, excluding the capital surpluses of the closed funds of £3.2bn reported in 2019. The 31 December 2019 Group Investor view comparatives have been restated from £5,810m solvency surplus to £2,632m and the capital cover ratio from 231% to 219%. All Group capital figures are stated on a Partial Internal Model basis.
  9. RLAM achieved top position for net retail sales in Q2 2020, according to the Pridham report. Established in 1997, the report is produced on a quarterly basis in order to give valuable industry insight into trends and peer performance. This achievement is an important barometer of success among asset managers.
  10. Investment performance has been calculated using a weighted average of active assets under management. 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.
  11. Percentage of OEICS performing above their median has been calculated using a weighted average of active assets under management. Each OEIC in scope is ranked against their respective peer groups using Lipper benchmarking data over a three year period to 30 June 2020, reflecting their mix of assets to ensure direct comparison. If an OEIC does not have a peer group with a direct comparison they are out of scope for the calculation.
  12. Figures presented in tables throughout are rounded. The capital cover ratios and new business margins are calculated based on unrounded 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.