Tim welcomed everyone to the meeting and began by reflecting on the scale and consequences of the global economic turmoil of the recent past. He confirmed that Royal London has come through the challenging period in good shape. As a result of the improved conditions a mutual dividend has been allocated this year.
He discussed activity from governments and regulators across the globe, which has been triggered by the financial crisis of 2008. In particular he noted that although Royal London welcomes measures put in place to avoid another crisis, it’s important that they do not damage the well-functioning parts of the sector.
It was confirmed that discussions are still taking place with Royal Liver, although there is no guarantee of a transaction taking place. Royal Liver is the sixth largest mutual insurer in the UK with assets at the end of 2009 of £3.2bn and gross written premiums of £192m.
Tim thanked Tom Ross, who retired from the Board at the AGM, and Trevor Bish-Jones, who left the Board in April, for their contributions to the company. He welcomed Duncan Ferguson, who had been appointed to the Board as a Non-Executive Director at the beginning of April. Duncan has a considerable amount of experience in the senior management of insurance companies and as a consulting actuary.
Group Chief Executive
Mike reported that overall the present value of new long-term business premiums amounted to £2.5bn, an increase of 10% over the 2008 result. The Group’s operating profit was £171 million, which was a good result given the difficult economic and market conditions.
Mike then looked at highlights for each of the individual businesses.
Net new assets of £589m in 2009
Manages over £37bn of assets
£167m of new business in 2009
Intermediary market share of around 8%
New business at £1,578 million, up 4% from 2008
Won numerous industry awards
Scottish Provident / Royal London Retail
£203 million of new business in 2009
Retail distribution arrangement contributed £105m of new business in 2009
Royal London 360°
New business in 2009 amounted to £237 million
Assets under administration reached £1.15 billion in 2009
New assets up by 111% compared with 2008
High-quality administration service for over two million customers.
Mike advised that for the first quarter of 2010 new life and pensions business was 56% higher than for the same period in 2009. In addition there were strong new business results from RLAM and Ascentric.
Mike went on to discuss the new visual image for Royal London – based on 'Financial Sense' – which was used for the first time in the 2009 Annual Report and Accounts and AGM mailing. He highlighted that the website now also uses the new image and that it will be used more extensively as stocks of other materials are used up. It was confirmed that there will not be an expensive advertising campaign promoting the new style but that it will instead be gradually rolled out in a cost effective way.
However, there is more to ‘Financial Sense’ than just a new image. The brand has been created as something which captured the essence of what the Group is all about; something that is relevant to all the diverse businesses which make up the Group; and something which could help guide the Group in future.
He then highlighted what Financial Sense means:
- For our members and other customers ‘Financial Sense’ makes a firm commitment that we will always have their best interests at heart.
- It’s a promise that we will always support clear, sensible financial advice.
- It reflects Royal London’s stability and financial stature as well as underlining the strength of our commitment to our intermediary partners.
- And in ‘Financial Sense’ we believe we have captured two words which provide a reality check for all who work for Royal London.
The challenging market conditions and legislative and regulatory change ahead were discussed. Mike emphasised that Royal London is preparing for the effects of those changes and that we remain positive about the benefits most of these may bring.
Group Finance Director
Stephen began by emphasising that as a mutual, the primary responsibility is to deliver value to our members and policyholders whilst providing them with financial security and stability.
He explained that the primary focus of 2009 had been to protect the Group’s capital position and that capital strength had improved since the beginning of 2009. The improvements in the working capital have been delivered through realising the benefits of taking certain management actions in the year as well as from strong investment returns.
Stephen drew attention to one of those actions, which involved a review of the investment strategy and introduction of Lifestyling for the Royal London open With-Profits Fund and the Refuge and United Friendly closed funds.
He commented that markets are still volatile but the second half of 2009 showed signs of stability. The investments backing the asset shares of the Royal London With-Profits Sub Fund delivered a pre-tax return of 12.4% in 2009, 1.8% above benchmark.
Stephen then explained other ways of adding value for members, including acquisitions. Last year the open businesses of Resolution were acquired, including a book of in-force business as well as the infrastructure for generating potential future profitable sales. Closed fund acquisitions can add value by providing profits from administration services and profits from investment management.
He then advised that the Group continues to grow, and for 2009 new business profits saw a strong contribution from the businesses acquired which produced £26m of the £80m total. New business profits have again grown year on year, doubling from £40m in 2005 to £80m in 2009. The good investment returns and continued growth of our business resulted in an overall profit for the year of £410m.
He concluded that against a backdrop of a very difficult year for the UK life and pensions industry, the Royal London Group has delivered a good set of results.
Whilst the immediate future is uncertain and the economic recovery appears to be fragile, we remain confident in our ability to deliver long-term benefits to our members and customers.
Chairman of Remuneration Committee
David gave a summary of the Royal London Remuneration Committee Report, which is set out in full on pages 50 to 53 inclusive of the Annual Report. A summary of the Committee’s report is also included on pages 10 to 12 of the Summary Financial Statement.
He outlined the approach for designing the remuneration practices and indicated that a review of this process is taking place during 2010.