Tim began by highlighting that in 2010, a year in which the UK tentatively emerged from recession, we strengthened the Group’s capital position and grew new business profitably. This contributed to a Mutual Dividend of a record-breaking £85 million being allocated.
He noted that Royal London celebrates its 150th anniversary this year and that our mutual status is as relevant now as it has ever been. To commemorate this milestone we have launched The Royal London Foundation to allow members to nominate local community causes to apply for awards.
An update was provided on the Royal Liver transaction, with confirmation that their delegates have voted in favour. Subject to regulatory approvals, the transfer of Royal Liver’s assets and liabilities to Royal London is expected to be completed on 1 July 2011.
Tim gave an update on Corporate Responsibility activities across the Group during 2010. Key highlights include 458 employees taking part in our volunteering programme, ‘stepforward’; CO2 emissions being reduced by 7% and £110,000 being donated to Macmillan Research, who had been our charity partner during 2009 and 2010.
Tim welcomed Andrew Palmer to the Board as a Non-Executive Director. In August 2010 Mike Yardley, current Group Chief Executive of Royal London, announced he would be stepping down from the Board after 13 years as Chief Executive. It was announced that Phil Loney will be replacing Mike in October 2011. On behalf of Royal London colleagues and members, Tim thanked Mike for all he has done and wished him well for the future.
Group Chief Executive
Mike provided an overview of Royal London’s performance during 2010. Highlights included the overall value of new life and pensions business exceeding £3 billion, an increase of 26% over the 2009 result; operating profit was £243 million – 42% up on the 2009 result despite the difficult economic and market conditions; and the Group’s capital position once again strengthened.
He then discussed each business, giving highlights from their results from the year, including:
Total new business was £2.2 billion, an increase of 37% from 2009, with individual pensions up 48% and company pensions up 26%.
Protection brands Bright Grey and Scottish Provident had achieved considerable success in individual protection not related to mortgages, with business protection sales enjoying a significant increase in volume.
Net new assets of £1.1 billion in 2010, an increase of 92% from the previous year.
Royal London 360°
Delivered a substantial increase in new business volumes in 2010, up 39% to £329 million.
Generated £1.2 billion of new business, an impressive increase of 189%. Assets under administration increased by 119% during 2010, exceeding the £2 billion mark.
Royal London Plus
Provides a high-quality administration service for over two million customers, including the majority of Royal London members.
He gave an update on 2011, noting that new life and pensions business was 9% higher than for the same period in 2010. RLAM and Ascentric also performed well, with Ascentric delivering a 72% increase in new business and raising assets under administration to over £2.9 billion.
Looking ahead, Mike commented on the considerable amount of legislative and regulatory change ahead, including the implementation of both Solvency 2 and the Retail Distribution Review. Looking beyond our own marketplace, he confirmed that we expect the external environment to remain tough for some time, while global economies are still in the process of stabilising.
Royal London’s guiding principle of financial sense was established 150 years ago, and our commitment to this will help ensure we continue to deliver value to our members and policyholders for the foreseeable future despite difficult economic conditions. Mike noted this was his last AGM with Royal London after nearly 33 years working for the Group. He’s proud to leave the Group in good shape and in the hands of an excellent senior management team and his successor, Phil Loney.
Group Finance Director
Stephen began by stating that overall, we achieved a very satisfying result that compares well with the rest of the industry. The key highlights for 2010 were:
- Substantial improvement in capital strength on all measures
- Improved operating profits
- Strong investment returns, above benchmark
He explained that as a mutual insurance company our security is reflected in our capital strength. He reported that on the Realistic Basis, our available capital increased from £1.9 billion to just under £2.1 billion by the end of 2010 (after deducting the mutual dividend payout of £85m). He also confirmed we achieved a good operating result in fairly difficult market conditions, with operating profit up from £171 million in 2009 to £243 million in 2010.
Investment returns are a key driver of the Royal London results. Stephen advised that overall our investment performance was good. The investments in the Royal London With-Profits Fund delivered a pre-tax return of 13.1% in 2010, which was 1.2% higher than the benchmark.
Stephen discussed the Royal Liver transaction, confirming that 81% of Royal Liver delegates voted to approve the transfer to Royal London. The acquisition has been structured so that the Royal Liver fund will be a separate closed fund administered by the Royal London Group in return for agreed servicing and investment management fees. We are confident that the terms of these fees will ensure the acquisition will be profitable for Royal London Group. It is a financial transaction rather than strategic opportunity.
He summarised that we have remained focused on maintaining and improving the Group’s capital strength and have succeeded in doing so. We delivered a significant improvement in operating profits and achieved another year of benchmark-beating investment performance. This, and the declaration of a substantial Mutual Dividend, have contributed significant returns to our with-profits policyholders.
Chairman of Remuneration Committee
David gave a summary of the Royal London Remuneration Committee Report, which is set out in full on pages 53 to 57 inclusive of the Annual Report. A summary of the Committee’s report is also included on pages 10 to 13 of the Summary Financial Statement.
He advised that during 2010 the committee conducted an extensive review of remuneration. As a result, the Committee approved a revised Long-Term Incentive Scheme to replace the previous schemes from 2011 onwards. This revised scheme is designed to provide stronger alignment with the interests of members and with-profits policyholders.
He concluded that the Remuneration Committee is satisfied that the overall compensation set out in the report for 2010 is appropriate, given the performance of the executive team in driving consistent and very significant performance by Royal London over a period of several years.