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  5. Royal London continues to share profits with customers as assets under management hit record levels

Royal London continues to share profits with customers as assets under management hit record levels

Meera Khanna
Senior PR Manager

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Published  04 March 2022
   5 min read

Barry O’Dwyer, Group Chief Executive, commented:

“In 1861, Royal London was established by working people to help families to protect themselves from the shame of suffering a pauper’s funeral.  Although our business has grown and developed over the years, our purpose as a mutual has never been more relevant.  We help families in the UK and Ireland to protect what they have today and invest in a better tomorrow.  We are responsible stewards of our customers’ money.  As a mutual, our customers get to share in our success.

“2021 was a good year for Royal London.  Sales and profits are both up on last year.  We have maintained very strong flows into our asset management business, helping assets to hit record levels.  Our Governed Range remains a hugely popular choice amongst independent financial advisers and this range alone accounts for over £50bn of our customers’ investments.  The action we have taken to reduce the carbon intensity of the equity investments in this range shows that a well-run portfolio can generate excellent returns in a responsible way.”

Kevin Parry OBE, Chairman, commented:

“We are committed to our mutual status and are strong advocates of the role mutuals play in financial services. This year we will share £169m with 1.8 million eligible customers. Since we introduced ProfitShare in 2007, Royal London has returned more than £1.2bn, which is only possible because we are a mutual.

“In the last 10 days, the conflict in Ukraine has significantly increased the human and socio-economic risks in Europe and the World. We are closely monitoring all developments and have made an emergency charitable donation of £250,000 to the British Red Cross Ukraine Crisis Appeal that is providing humanitarian relief in Ukraine.”

Highlights

  • ProfitShare3 allocation rates maintained, with total ProfitShare increasing by 15.8% to £169m (2020: £146m) in line with the growth in the aggregate value of eligible policies.
  • Governed Range surpassed the £50bn AUM milestone for the first time.
  • Consistent fund performance, with 99% of actively managed funds outperforming their three-year benchmark (2020: 95%)4.
  • Transitioned £23bn of indexed equities in our Governed Range to improve their carbon intensity, helping to reduce the equity components’ carbon intensity by 16% by the end of 20215.
  • 3.2 million long-standing policies now migrated onto new technology, improving the quality and ease of customers’ servicing experience.
  • Provided certainty of estate distribution for policyholders in four closed with-profits funds, consolidating them into the Royal London Main Fund while uplifting their policy value.
  • Annuity proposition launched for long-standing customers with pension policies that have guaranteed annuity rates enabling them to take their retirement benefits with Royal London.
  • Acquired Wealth Wizards, a market leading fintech business, to address the growing need for high quality, technology-enabled solutions in the provision of financial advice.

Financials

    Year ended 31 December 2021 Year ended 31 December 2020
UK GAAP Operating profit before tax6 £133m £41m
Profit before tax7 £192m £131m
ProfitShare £169m £146m
New Business Life and pensions new business sales8 £9,588m £8,544m
Inflows Gross inflows9 £26,432m £26,407m
Net inflows9 £5,287m £3,870m
    31 December 2021 31 December 2020
Funds Assets under management10 £164bn £148bn

Capital13

(Solvency II)

 Regulatory View solvency surplus11 £2.8bn £2.3bn
Regulatory View capital cover ratio11, 12 173% 147%
Investor View solvency surplus11 £2.8bn £2.3bn
Investor View capital cover ratio11, 12 216% 190%
  • Operating profit before tax6 of £133m returned to higher levels following the impacts of Covid-19 in 2020 (2020: £41m) and reflects increased contributions from all of our businesses. Profit before tax7 increased to £192m (2020: £131m).
  • Life and pensions new business sales8 were up 12% at £9,588m (2020: £8,544m), due to continued strong adviser support for our Protection range in the UK and Ireland and growth in demand for UK Pensions, particularly in Workplace Pensions.
  • Net inflows9 increased to £5,287m (2020: £3,870m) driven by ongoing demand for our sustainable fund range and Institutional net new business.
  • Assets under management10 increased to a record high of £164bn (31 December 2020: £148bn), due to positive market movements and increased net flows.
  • Capital position remains robust with key capital metrics improving and the Investor View capital cover ratio increasing to 216% (2020: 190%) following the recovery in economic conditions and management actions taken including additional equity hedging.

A copy of the full release can be found here

A copy of the investor presentation can be found here

 

For further information please contact:

Royal London Press Office

Notes to Editors

  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. ProfitShare is a discretionary enhancement to eligible customers with unit-linked or with-profits policies. The allocation is considered annually and depends on a number of factors including financial performance, capital position, the risks and volatility of financial markets and the Group’s outlook.
  4. 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.
  5. 16% reduction is Weighted Average Carbon Intensity (scope 1 & 2) for the equity funds. The total amount of all equity funds managed by Royal London Asset Management (RLAM) on behalf of RLMIS that have been “tilted” to achieve a reduced carbon intensity is £23bn, as at 31 December 2021.  This includes equity investments underlying the Governed Range and other RLMIS funds. The main equity fund used in the Governed Range, RLP Global Managed, constituted 47% of all Governed Range assets, as at 31 December 2021.
  6. Operating profit before tax represents 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 and 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 operating profit represents the result of the Royal London Main Fund (RL Main Fund).
  7. Profit before tax represents the statutory ‘Profit before tax and before transfer to the fund for future appropriations’ in the consolidated statement of comprehensive income.
  8. Life and pensions new business sales represent life and pensions business only and excludes Asset Management and other lines of 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 31 December 2020.
  9. 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 paid (net of reinsurance). Given its nature, non-linked Protection business is not included.
  10. Assets under management (AUM) represent the total of assets actively managed by the Group, including funds managed on behalf of third parties.
  11. The ‘Regulatory View’ solvency surplus and capital cover ratio restricts each closed funds’ surplus to the value of the Solvency Capital Requirement (SCR) of that fund. The ‘Investor View’ equals the RL Main Fund capital position (excluding ring-fenced funds, which are run on a standalone basis).
  12. All capital figures are stated on a Group Partial Internal Model basis.
  13. Figures presented 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, pensions and investment company in the UK, with assets under management of £147 billion, 8.7 million policies in force and 4,232 employees. Figures quoted are as at 31 December 2022. 

Learn more at royallondon.com