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Royal London announces solid financial results in a very difficult market, for the six months ended 30 June 2008

Tuesday, 30 September 2008

Royal London announces solid financial results in a very difficult market, for the six months ended 30 June 2008

Key points

  • EEV1 operating profit before tax £100 million, up 30% from £77 million (restated2)
  • Total new life and pensions business (on a PVNBP basis 3) increased by 6% to £1,064 million (£1,007 million in the equivalent period in 2007)
  • New business contribution £23 million, down 8% from £25 million (restated)
  • Funds under management £32.4 billion at 30 June 2008 (31 December 2007 £33.1 billion)
  • Embedded value £1,889 million, down 13% from the end 2007 figure (£2,164 million)
  • Loss after tax of £236 million (IFRS basis4) as compared to a profit of £305 million in 2007, largely as a result of weak investment markets.

Commenting on the results, Mike Yardley, Group Chief Executive of Royal London, said:

"These are a solid set of results in a very difficult market. EEV operating profit, the key indicator of our performance, is up 30%.  The loss after tax is a reflection of investment markets where, along with every other insurance company, we had significant negative returns.

"Both Scottish Life and Scottish Life International increased new business despite the economic environment and RLAM continued to attract strong new business flows building on the success of the last few years. Our protection business, Bright Grey, has been affected by the dramatic slowdown in the mortgage market.

"The figures include, for the first time, a contribution from Scottish Provident International (SPILA) acquired from Pearl on 3 June 2008.  These half year figures include just under one month's new business through SPILA, from the date of acquisition.  Our full year figures will also include the impact of new business written from 1 August through Phoenix Life Assurance Limited (formerly Abbey National Life) and also protection business written under the Scottish Provident brand.

"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.  This view has been reflected by many of the comments around the FSA's Retail Distribution Review, which we strongly support.  Our strategy has been to only write new business which we believe will be profitable and not to chase market share at the expense of profitability. We will not be changing this strategy.

"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 company and we are committed to building on our strengths for the long term.

"Looking forward, financial markets worldwide will continue to be unstable as confidence in the global banking system suffers. The effects of the fallout from the credit crunch will last for some time and it is difficult to predict how much our markets will be affected over the next 18 months.

"The current market turmoil will undoubtedly lead to a challenging economic environment in the short term. However, our members and policyholders can be confident that Royal London is well placed to meet such challenges."

[1] EEV is European Embedded Value. Operating profit excludes impact of investment markets

[2] Interim 2007 operating profit has been restated from £66m to £77m to reflect positive experience variances previously shown as economic experience variances

[3] PVNBP is the Present Value of New Business Premiums

[4] IFRS is International Financial Reporting Standards

– ENDS –

For further information please contact:

Royal London
Alasdair Buchanan
Group Head of Communications
Tel:  0131 456 7133
Mobile: 07919 170 413

Polhill Communications
John Coles
Tel: 020 7655 0530
Mobile: 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 quality propositions, operating through a number of brands:

  • Scottish Life – UK pensions market
  • Bright Grey – UK protection market
  • Scottish Provident - UK protection market
  • Phoenix Life Assurance Limited – provides life, investment and pensions products to Abbey's national branch network (acquired 1 August 2008)
  • Scottish Life International – offshore investment markets
  • Scottish Provident International – offshore investment markets
  • RLAM – fund management
  • RLAS – life and pensions administration
  • Fundsdirect / Ascentric – funds supermarket; Wrap platform

Royal London is the largest mutual life and pensions company in the UK with Group funds under management of £32.4 billion.  Group businesses serve around three million customers and employ 2,750 people.  Figures quoted are as at 30 June 2008, prior to the acquisition of Scottish Provident's new business capabilities (in respect of individual life protection business) and of Phoenix Life Assurance Limited.

2. Key Financial dates in 2008

Interim Management Statement                 20 November 2008

Subordinated debt interest payment date

Royal London subordinated guaranteed notes    15 December 2008

3. The new protection business sold under the Scottish Provident brand from 1 August 2008 will be written into Scottish Mutual Assurance (SMA) and will transfer to Royal London with the business of SMA as part of the scheme under Part VII of FSMA 2000.

4. 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.


5.  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 Additional Information.