New Business Results - Year Ending 31 December 2006
Monday, 29 January 2007
Royal London, the UK's largest mutual life and pensions company, has announced further growth in new business for the full year 2006.
Total new life and pensions business (on a PVNBP basis) increased by 10% to £1,993 million (£1,808m in the equivalent period in 2005)
Commenting on the new business announcement, Mike Yardley, Group Chief Executive at Royal London, said:
"These results are in line with expectations for the year and are therefore very satisfactory.
"The market, and in particular the pensions market, has been intensely price-competitive, with increasing pressure to grow new business volumes at the expense of profitability. We have refused to go down that route and the Group's increase of 10% in overall new business is a very positive reflection on our reputation for innovative quality products and services.
"Our asset management business, RLAM, has had another outstanding year, attracting significantly higher levels of new business from a range of institutional investors. This has been driven by a strong track record, most notably in the UK fixed interest sector."
Chief Executive Review
Our focus on writing profitable new business has been particularly important in the pensions market, where Scottish Life continues to use its innovative Financial Adviser's Fee (FAF) to target profitable business. The success of FAF illustrates a growing understanding among Independent Financial Advisers (IFAs) that the high initial commission levels currently available from some providers are not sustainable in the longer term.
New business on a PVNBP basis was £1,425 million, an increase of 8% compared with the 2005 figure.
We are pleased with the continued improvement in new business margins we have been achieving for pensions business as a result of our focus on product pricing and persistency.
New business at Bright Grey reduced on the PVNBP basis, reflecting more conservative persistency assumptions than had been used for the previous year's figures.
In terms of new annual premiums written, Bright Grey's performance was very good - an increase of 15% over the 2005 figures. This is particularly impressive against a background of a very tough year indeed for individual protection sales. In the market as a whole, new premiums were down by 2% for the nine months to 30 September (the most recent industry figures available; source ABI ). Bright Grey's new business levels reflect the benefits achieved from the launch of its extranet at the start of 2006, with over 70% of applications now made online. The strength of Bright Grey's overall proposition has also resulted in increasing success with appointments to multi-tie panels, including Home of Choice and Sesame Protection Plus.
Scottish Life International has maintained its strong performance throughout the year, with an increase in the PVNBP figure of 25% to £165 million. Growth in new business has been led by the demand for offshore portfolio bonds in the UK, the continued success of the With Profits Bond in the German market and strong relationships with key distributors in Germany.
After an excellent year in 2005, the 61% increase in Royal London Asset Management's new business (excluding cash mandates) is particularly satisfying. The continued success included new mandates from corporate pension schemes, universities, local authorities, friendly societies and charities, with most being for UK fixed interest, an area of recognised strength for RLAM.
Mike Yardley added:
"I believe we are well placed to continue to grow profitable new business in 2007, despite continuing competitive conditions in our main markets."
Appendix detailing New Business results can be found here.
- ENDS -
For further information please contact:
Royal London
Alasdair Buchanan, Group Head of Communications
0131 456 7133
Polhill Communications
John Coles
0207 655 0530
Editor's Notes:
1. Royal London Group, is a specialist financial service provider. Its businesses focus on those sectors of the market which value premium propositions, operating through a number of brands:
• Scottish Life – UK pensions market
• Bright Grey – UK protection market
• Scottish Life International – offshore investment markets
• RLAM – fund management
• RLAS – life and pensions administration
Royal London is one of the stronger life and pension companies in the UK, with a current rating of 7/10 from Cazalet Financial Consulting, and has a particularly strong track record for with profits performance.
Royal London is the largest mutual life and pensions company in the UK with Group funds under management of £30.8 billion. Group businesses serve over three million customers and employ 2,640 people. (Figures quoted are as at 31 December 2006)
2. Key dates
Financial results
Full year 2006 financial results 2 April 2007
Quarter 1 2007 new business 2 May 2007
Quarter 2 2007 new business 31 July 2007
Half year 2007 interim financial results 27 September 2007
Quarter 3 2007 new business 31 October 2007
Annual General Meeting
Royal London AGM 22 May 2007
Subordinated debt interest payment date
Royal London subordinated guaranteed notes 15 December 2007
3. New business is reported on a Present Value of New Business Premiums (PVNBP) basis. The PVNBP figures are calculated as new single premiums plus the expected present value of new regular premiums evaluated at a risk free discount rate allowing for expected persistency.
4. Forward-looking statements
This document may contain forward-looking statements with respect to certain of Royal London's plans, its current goals and expectations relating to its future financial position. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Royal London's control. These include, among others, UK economic and business conditions, market related risks such as fluctuations in interest rates, the policies and actions of governmental and regulatory authorities, the impact of competition, the timing, impact and other uncertainties of future mergers or combinations within relevant industries.
As a result, Royal London's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Royal London's forward-looking statements. Royal London undertakes no obligation to update the forward-looking statements contained in this document or any other forward-looking statement it may make.
Commentary
Scottish Life
The year on year increase in the PVNBP new business figure has been driven primarily by single premium group pensions business. Regular premium business reduced from the 2005 figure as a result of our pricing and commission strategy and consequent focus on the profitability of new business written.
We expect a good contribution to new business in 2007 from new products which were launched in 2006, notably Pension Portfolio (our new SIPP product) which was launched in December.
Bright Grey
The launch of Bright Grey's extranet at the start of 2006 made a key contribution to sales growth and improved business efficiency. Bright Grey has also invested in its distribution team, increasing the number of face-to-face consultants, so enhancing the breadth and the depth of intermediary relationships.
Bright Grey has also been successful in securing positions on several multi-tie panels, a trend which is expected to continue in 2007.
Scottish Life International (SLI)
Continued steady growth has been based on the popularity of portfolio bonds in the UK and with profits bonds in Germany. This has been supported by a focused approach in marketing and distribution which has been very successful.
In 2007 we expect approval of our license for Dubai. We will also use our new IT platform to enable us to develop new products for markets in the Middle East and Germany.
Royal London Asset Management (RLAM)
RLAM has enjoyed increasing recognition of its strengths in 2006, winning a number of industry awards. Royal London Cash Management also enjoyed a successful year with £389 million of net new assets secured.
RLAM launched three new funds in 2006 with the UK Strategic Growth Fund and the Strategic Bond Fund in particular receiving a lot of positive attention.
Royal London branded sales relate primarily to business arising from in-force policies. These were originally sold through the direct sales channel, which was closed in 2004.
The increase in DWP rebate business for both Scottish Life and Royal London is a result of the clearance of a backlog at the Department of Work and Pensions. This meant that many rebate payments from 2005 weren't sent to providers until 2006.