Royal London announces strong financial results for the six months ended 30 June 2007
Thursday, 27 September 2007
Royal London, the UK's largest mutual life and pensions company, has announced its financial results for the first half of 2007.
Highlights
Profit before tax £357 million (EEV1 basis), up 71% over the same period in 2006 (£209m), largely as a result of strong investment markets and growth in the pension fund surplus.
- Operating profit before tax £66m, down 31% from £96m.(The 2006 figure included an exceptional contribution, relating to a significant block annuity transaction with Prudential.)
- New business contribution £27m, up 50% from £18m.
- Embedded value £2.33bn, up 17% over the end 2006 figure (£1.99bn).
- Transfer to the UDS2 £306m (IFRS3 basis) up 44% over the same period of 2006 (£214m).
- Funds under management up £1.9bn to £32.7bn.
Commenting on the results, Mike Yardley, Group Chief Executive of Royal London, said:
"I am pleased to report that Royal London has continued to deliver good financial results, with the profit before tax of £357m representing an increase of £148m over the equivalent period last year.This result also compares very favourably with the 2006 full year figure of £431m.
"We delivered new business profits from each of our brands, with the total contribution from new business 50% higher than the first half 2006 figure at £27m.Particularly noteworthy is the contribution from external mandates won by RLAM of £7m, which is more than the full year 2006 contribution.We also increased embedded value by 17% to reach £2.3 billion at 30 June 2007, a record figure for the Group.
"As well as growing new business and delivering healthy investment returns, we have once again produced a strong set of financial results.Operationally, markets continued to be intensely price-competitive, but we are committed to our strategy of focussing on writing profitable business.We are starting to see the benefit of this focus in the results from the Scottish Life business, although part of the margin improvement is due to differences in the incidence of DWP rebate business.
"As a number of other companies have also done, we strengthened the persistency assumptions used to value historic pensions business, which reduced the operating profit for Scottish Life, with a similar adjustment in persistency for protection business written through Bright Grey.The drop in overall half year operating profit to £66m also reflects a particularly strong result in 2006, which was due in part to an exceptional contribution from the transfer of a block of annuity business to Prudential Retirement Income Limited.Comparison with the 2006 full year operating profit of £115m provides a better perspective.
"Looking forward, our strategy is unchanged.We will not follow some providers and write business on terms we believe are certain to be unprofitable.We recognise that the short-term consequence is that our pensions business volumes and market share may fall, given the pricing strategies still being followed by some competitor companies, especially in the group pensions market.We are pleased to see some signs of realism emerging in the market, as a number of providers publicly acknowledge the importance of moving to a sustainable business model, with several starting to follow a similar pricing approach to our own.
"The IFA market continues to value companies which offer strong propositions for product, investment and overall service, backed-up by specialist expertise.Royal London is such a business and we are committed to building on our strengths for the long-term.
"I am confident that the Group can continue to grow successfully and profitably, building value for the benefit of our members."
1EEV is European Embedded Value
--ENDS–
For further information please contact:
Royal London
Alasdair Buchanan
Group Head of Communications
Tel: 0131 456 7133
Mob: 07919 170 413
Polhill Communications
John Coles
Tel: 0207 655 0530
Mob: 07836 273 660
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, and has a 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 £32.7 billion. Group businesses serve around three million customers and employ 2,570 people (figures quoted are as at 30 June 2007).
2.Key Financial dates in 2007
Quarter 3 2007 new business31 October 2007
Subordinated debt interest payment date
Royal London subordinated guaranteed notes15 December 2007
3. The results in this announcement are prepared on two bases: the International Financial Reporting Standards (IFRS) basis and the European Embedded Value (EEV) basis. The IFRS results form the basis of the Group's financial statements. The Group's directors continue to believe that the supplementary information prepared on the EEV basis provides a more meaningful reflection of the Group's long-term operations and their value to members.
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, including, 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.
For further information please see the attached note.