New Business Results and Interim Management Statement for the 9 months to 30 September 2013

Royal London Group

5 November 2013

Sustained new business growth post RDR

Royal London, the UK’s largest mutual life, pensions and investment company, presents its new business results for the nine months ended 30 September 2013.

Key performance indicators

  • Total new life and pensions business (on a PVNBP basis)1 up 14% at £2,950m (2012 £2,598m). Main product line performance:
    • Pensions £2,214m (+28%)
    • Protection £342m (-4%)
    • Royal London 3600 £345m (+28%)
    • £23m of new business written by Royal London (CIS) Limited (acquired on 1 August 2013).
  • Asset management business continues to perform well, with RLAM net new business inflows of £1,453m (Q3 2012 net new business of £157m).
  • The Ascentric wrap platform achieved a third quarter of record net new business, with £1,252m of new assets for the year to date.
  • Total Group funds under management £73.5bn (+48% on 31 Dec 2012). This includes £20.4bn of funds from the acquisition of The Co-operative Asset Management on 1 August 2013.
  • Members holding with profit policies benefited from fund investment performance which was 1.04% above benchmark over the period. Members holding pensions invested in our default unit linked pension fund enjoyed fund performance that was approximately 1.0% above benchmark.

1 See Editor’s Note 4 for an explanation of the PVNBP basis.

Business highlights

Pensions

  • Growing our footprint in the UK pensions market is a key focus of our strategy. Following on from good new business growth in 2012, our pensions business has delivered a strong set of results for the nine months to end September 2013, with an increase of 28% in new business over the same period in 2012.
  • Group Pensions business has been particularly buoyant in Q3 with new business 61% higher than the same period in 2012. This is genuine new business growth as the majority of our schemes are yet to pass the automatic enrolment staging date.
  • Individual new business showed a healthy 14% increase in the nine months to end September 2013 compared with the same period in 2012. This contrasts with the overall market for Individual Pensions, which has generally been in decline in recent times (e.g.
    a reduction of 9% in 2012 - ABI MSE stats, APE basis).
  • Our Income Release product continues to lead the drawdown market, with over 75% share of the external linked free-standing drawdown market.

Investment Management and Wrap platform

  • Our strategy of growing RLAM's presence in the institutional and wholesale asset management markets continues to progress well with strong franchises built in the charity, university, local authority and financial mutual sectors and good growth in assets managed on behalf of other insurers. Over the 9 months 56% of our asset management revenues came from external clients.
  • The core fixed income offering continued to account for the majority of new business inflows. In particular our buy & maintain credit strategy attracted strong inflows from corporate pension schemes into our segregated funds. Equity funds also saw strong flows.
  • At our wrap platform business both institutional business (IFDL), which includes accounts such as Succession Advisory Services and Openwork, and retail business (Ascentric) enjoyed strong growth over this period.
  • Around 800 more firms have signed up to use the wrap platform than over the same period last year contributing to a 42% increase in total assets to £6,698m.

Protection

  • A subdued protection market has resulted in a small decrease in total protection PVNBP for the nine months to end September 2013, 4% lower than the same period last year.  We see this trend likely to continue in the market through the remainder of the year. Over the last quarter we have reviewed both our Critical Illness and Income Protection product ranges and made significant improvements; we have broadened our cancer definitions and launched enhanced income protection products, making it easier for customers to claim.
  • We are continually reviewing our range of products to ensure they are priced competitively while also reviewing our service offering for IFAs.

Phil Loney, Group Chief Executive of Royal London, said:

“The continued new business growth across most of our core specialisms is very encouraging. Royal London continues to flourish in the post RDR market where competition is focused on the quality and value offered by our products, service and investment solutions.

New pensions business and especially group pensions continue to grow at an impressive rate. We expect continued growth in this market as the positive impact of automatic enrolment starts to work through to medium sized and smaller companies, which is the area of the market which we have made our target.

Nevertheless the recent decision by DWP to consult on a price cap on workplace pensions means that there will inevitably be less competition in the market as smaller employers approach their staging date for automatic enrolment. The aim of Government policy should be to improve competition by removing barriers to switching pensions provider not stifling competition by imposing an arbitrary ‘market norm’ for charges - which may actually have the effect of ‘levelling up’ average charges.

We continue to attract numerous industry awards, which reflect the overall quality of our core pension propositions in terms of service, investment, technology and product for customers and their advisers2.

Our wrap platform business registered a third consecutive quarter of record new business. This is a 46% increase in net new business on the previous year with the platform already exceeding the assets generated in 2012. The growth experienced to date highlights the important role transparent wrap platforms are playing in a post-RDR world.

The double-hit of the EU gender directive and RDR has resulted in a rather subdued protection market which is still taking some time to readjust and settle down again. It’s important that we continue to deliver product enhancements and innovation to deliver solutions that answer the needs of our customers.

During the third quarter we acquired the life & pensions and asset management business of The Co-operative Group. This has significantly increased the scale of Royal London Group in terms of customers (3.5 to 5.5 million) and assets under management (£50bn to over £70bn). Work is now underway to integrate these businesses into the Group.”

2 Awards

Scottish Life (2013)

Money Marketing Financial Services Awards

  • “First for Service” for Personal Pensions
  • “First for Service” for Income Drawdown

FTAdviser.com Online Service Awards

  • 5 Star awards for online service (Life & Pension category) for the seventh year running

Money Marketing Financial Services Awards

  • Best Pension Provider

Corporate Adviser Awards

  • The Ultimate Default Fund

--ENDS--


For further information please contact:

Gareth Evans, Head of Corporate Affairs 0207 506 6715
07919 170 069

Anna Schirmer, Lansons Communications 0207 294 3605

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:

  • Pensions Business - Scottish Life – UK pensions market
  • Protection Business:
    • Bright Grey – UK protection market
    • Scottish Provident – UK protection market
    • Caledonian Life – ROI protection market
  • Royal London (CIS) Ltd - UK life, pension and protection market
  • Royal London Plus – life and pensions administration
  • Royal London 360° – offshore investment markets
  • RLAM and RLAM (CIS) Ltd – fund management
  • Ascentric/IFDL – Wrap platform
  • MoneyVista – online financial planning service for consumers

Royal London is the largest mutual life and pensions company in the UK with Group funds under management of £73.5 billion. Group businesses serve around 5.5 million customers and employ 3,160 people. (Figures quoted are as at 30 September 2013.)

Over the next two years the Group is moving to operate all of its UK life, pension and investment business under a new version of the Royal London brand. The Group's wrap platform will remain branded Ascentric, and the Caledonian Life brand will be utilised in the Irish Republic.

2. New life and pensions business for 9 months to 30 September 2013

Present Value of New Business Premiums

Excluding DWP business1:

Q3 2013

£m

 

Q3 2012

£m

Change

%

 

Pensions

2,214

1,723

+28%

Protection

342

356

-4%

Royal London (CIS)2

23

n/a

n/a

Royal London 360°

345

270

+28%

Royal London Plus

25

37

-32%

Total excluding DWP business

 

2,949

 

2,386

+24%

 

DWP business

1

212

-100%

Total

2,950

2,598

+14%

1 DWP rebate business ceased in 2012 due to legislative changes.

2 On 1 August 2013 Royal London acquired Co-operative Insurance Society Limited (now known as Royal London (CIS) Limited). New business results shown are from the date of acquisition.

3. Royal London (CIS) Limited new life and pensions business for 9 months to 30 September 2013

On 1 August 2013 Royal London acquired Co-operative Insurance Society Limited (now known as Royal London (CIS) Limited) along with its subsidiaries and The Co-operative Asset Management Limited (now known as Royal London Asset Management (CIS) Limited), by way of a share purchase. This transaction has increased Royal London’s funds under management by approximately £20.4bn and increased our customer base by around 2 million customers. The financial impact of this acquisition will be reflected in our full year 2013 results.

Present Value of New Business Premiums

 

Pre-

acquisition

Post-acquisition

Q3 2013

Total

£m

 

 

Q3 2012

£m

 

Change

%

 

Savings and Investments

15

2

17

9

+89%

Pensions

8

1

9

7

+29%

Protection

71

20

91

92

-1%

Total

94

23

117

108

+8%

 

 

 

 

 

 

4. Present Value of New Business Premiums (PVNBP)

The PVNBP is the total of new single premium sales received in the year plus the discounted value, at the point of sale, of the regular premiums we expect to receive over the term of the new contracts sold in the year.

5. Asset Management / Administration net new business

 

Q3 2013

£m

Q3 2012

£m

Change

%

RLAM

Net new business, excluding external cash mandates

1,453

157

+825%

 

RLAM (CIS)

Net new business, excluding external cash mandates

 

62

 

49

 

+27%

 

Ascentric

Net new assets under administration

 

1,252

 

857

 

+46%

6. Financial calendar

15 December 2013   Subordinated debt interest payment
1 April 2014   Financial results for 2013 and interim management statement and first quarter new business figures

7. 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.


Appendix - Analysis of Royal London New Business Results – Life and Pensions

PVNBP figures – 9 months to 30 September

 

2013 PVNBP (£m)

2012 PVNBP (£m)

% change

 

 

Regular

Single

Total

Regular

Single

Total

Regular

Single

Total

Excluding DWP business

 

 

 

 

 

 

 

 

 

Pensions

780

1,434

2,214

608

1,115

1,723

+28%

+29%

+28%

Protection

342

-

342

356

-

356

-4%

-

-4%

Royal London (CIS)

3

20

23

n/a

n/a

n/a

n/a

n/a

n/a

Royal London 3600

114

231

345

77

193

270

+48%

+20%

+28%

Royal London Plus

3

22

25

8

29

37

-63%

-24%

-32%

Total

1,242

1,707

2,949

1,049

1,337

2,386

+18%

+28%

+24%

 

 

 

 

 

 

 

 

 

 

DWP business

-

1

1

-

212

212

-

-100%

-100%

 

 

 

 

 

 

 

 

 

 

Group Total

1,242

1,708

2,950

1,049

1,549

2,598

+18%

+10%

+14%

DWP business represents new business relating to DWP rebates, which has ceased in 2012, due to legislative changes.

The Royal London Group consists of The Royal London Mutual Insurance Society Limited and its subsidiaries. The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, provides life assurance and pensions and is a member of the Association of British Insurers and the Association of Financial Mutuals. Royal London Savings Limited provides the Individual Savings Account. Royal London Unit Trust Managers Limited provides unit trusts. Both of these companies are authorised and regulated by the Financial Conduct Authority.

In the Republic of Ireland: The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority in the UK and is regulated by the Central Bank of Ireland for conduct of business rules.

Group Registered VAT Number 368 5244 27