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Continuing strong performance as markets remain difficult

Royal London, the UK’s largest mutual life and pensions company, today announces further strong new business results for the nine months ending 30 September 2010.

Total new life and pensions business (on a PVNBP* basis) increased 26% to £2,320m (2009 £1,847m) as Scottish Life and Royal London 360° continued to perform well.

Life and Pensions

•    Scottish Life new business up 44% to £1,598m (2009 £1,107m)
•    Royal London 360° new business up 24% to £233m (2009 £188m)
•    Bright Grey / Scottish Provident new business down 19% to £251m (2009 £310m)
•    Royal London (Retail) up 3% to £81m (2009 £79m)
•    RLAS new business down 4% to £157m (2009 £163m)

Asset Management / Administration

•    RLAM (excl cash mandates) net new business up 65% to £649m (2009 £392m)
•    Ascentric new assets under administration up 273% to £868m (2009 £233m)

*see Editor’s Notes for explanation of PVNBP

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

“I am very pleased that the Group continues to increase new business despite difficult market conditions.

“Our pensions and international businesses are both achieving record levels of business, while excellent performance from RLAM, our asset management company, is attracting new funds across all asset classes.  Ascentric continues to deliver strong new business growth in the wrap market.

“There is no doubt that markets will remain difficult for the foreseeable future.  However, I am confident that our focus on providing quality products and services puts us in a strong position to continue to perform well.”

Business Unit Reviews

Scottish Life – pensions

Scottish Life delivered another good set of new business results.  Individual pension new business was 62% higher than in the equivalent period of 2009.  While some of this growth reflects the first quarter ‘spike’ caused by the change in the minimum pension age, underlying performance remains strong, with third quarter new business 17% up on the equivalent 2009 figure.  The most recent statistics  available (to end Q2 2010) show Scottish Life had a 20.8% share of the IFA regular premium personal pension market and 13.3% of single premiums.       

In the group pensions market, there is still evidence of market distortion from the use of provider-driven commission ahead of implementation of the Retail Distribution Review.  In these circumstances, Scottish Life’s growth in new business of 22% for the 9 month period represents a satisfactory performance.  

Royal London 360° - international markets

Royal London 360° continues to perform very well, with both single and regular premium new business ahead of target.

Quantum, the new international regular premium savings product launched at the beginning of April, is proving very popular with savers and sales are significantly ahead of expectations.

The Royal London 360° Select Discounted Gift Trust (DGT), which helps to reduce the value of an individual’s estate for UK Inheritance Tax planning, recently won two International Adviser awards for Best New Product (UK Offshore) and Best Estate and Trust Planning Product (UK Offshore). It is the most wide-ranging DGT on the market, and is expected to help increase direct portfolio bond business from the UK market.

Bright Grey and Scottish Provident – individual life protection

Protection new business continues to be negatively affected by the slow mortgage market, traditionally a key factor for buying protection.  The recent contraction in the number of providers is a clear indication of how difficult and competitive the market is.

With two strong and well established brands, we are well placed to capitalise once the mortgage market improves.  In the meantime we are achieving considerable success in other product areas.  On the back of marketing initiatives to support advisers, business protection products have enjoyed a significant increase in business volume.  Recent media campaigns have highlighted the misconceptions many people have of State benefits and hence the need for people to make their own protection arrangements.

Royal London (retail) – bancassurance distribution

Again the depressed mortgage market is reflected in lower levels of mortgage-related protection business.  However the introduction of two new products, an online non-advised protection plan and a Whole of Life product (Guaranteed Lifetime Plan), has given a significant boost to new business, which was up 21% in the third quarter compared to the same period in 2009.

RLAM – asset management

RLAM continues to attract new monies across all asset classes on the back of some outstanding performance. At the end of September, 66% of OEIC / unit trust funds outperformed their sector averages for the year to date.

The RL Property Fund (which converted earlier in 2010 from unauthorised status) has now received external recognition with an AAA rating from Citywire. The fund, which was the first such conversion in the UK to the new PAIF structure, has generated considerable interest and is attracting new assets from clients.

In addition to the AAA rating for the Property Fund, RLAM also has two UK equity funds with AAA and two UK equity funds with AA ratings. The continued strong performance of the actively managed equity funds, coupled with this external recognition, is attracting new assets into a number of our equity funds.

Ascentric – Wrap Platform

Ascentric maintained its strong growth with total assets under administration at £2.086 billion, up 122% during the past year.  Over this period around 140 adviser firms registered on the platform, contributing to the inflow of more than 6,000 new customers.

Despite uncertainties surrounding the outcome of the FSA review on platforms and the general economic environment, we remain cautiously optimistic about our growth levels for the rest of the year.

Corporate announcements and activities

On 14 July Standard & Poor’s, the global ratings agency, reaffirmed Royal London's rating as A- and improved the outlook to "positive" (previously "stable"). Standard & Poor’s stated that its ratings reflected Royal London

Group’s “strong management and capitalisation”.  They also noted that “management has delivered significant efficiencies, cutting the cost base in half while significantly improving service quality”. In addition they stated Royal London “has significantly improved its capital position”.

On 27 August Royal London announced that Mike Yardley was planning to step down as Group Chief Executive once a successor has been appointed. The Board has appointed a firm of executive recruitment specialists to identify potential candidates to be the next Group Chief Executive of Royal London. No timescale has been set for this work, and both internal and external candidates will be considered.

On 31 August Royal London announced financial results for the 6 months ending 30 June.  Operating profit was up 3% to £111m and capital surplus was up 13% at £1,164m.

As previously announced, Royal London is in talks regarding the potential acquisition of the Royal Liver business.

Heads of Terms have been signed and due diligence is progressing.

-- ENDS –-

For further information please contact:

Royal London
Alasdair Buchanan
Group Head of Communications
T: 07919 170 413

Polhill Communications
John Coles
T: 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
•    Royal London 360° – offshore investment markets
•    RLAM – fund management
•    RLAS – life and pensions administration
•    Fundsdirect / Ascentric – fund supermarket; Wrap platform

Royal London also distributes life and pensions products through Santander’s UK branch networks.  

Royal London is the largest mutual life and pensions company in the UK with Group funds under management of £41.0 billion.  Group businesses serve around 3.4 million customers and employ 2,830 people.  Figures quoted are as at 30 September 2010.


2.  New life and pensions business for 9 months to 30 September 2010
Equivalent figures for 2009 in brackets.  All figures are in £ million.

(a)    Present Value of New Business Premiums (PVNBP)

(see appendix for table)
 
(b)    Annual Premium Equivalent (APE)

(see appendix for table)


3.  Present Value of New Business Premiums

PVNBP figures are the present value of new business premiums.  The PVNBP figures are calculated as new single premiums plus the expected present value of new regular premiums.

Annual Premium Equivalent

APE figures were the previous industry standard measure, calculated as new regular premiums plus one tenth of new single premiums.


4.  Asset Management / Administration

Net new business for 9 months to 30 September 2010.  Equivalent figures for the same period in 2009 are in brackets.  All figures are in £ million.

(see appendix for table)

5.  Royal London Administration Services (RLAS)

The new business shown above for “RLAS” consists primarily of DWP rebates.  These relate to policies sold by Royal London’s direct-to-customer salesforce (which was closed in 2004) and to policies transferred to Royal London following the acquisition of the United Assurance Group (Refuge Assurance and United Friendly) in 2001.

Royal London continues to offer a range of products, including several from selected third parties, direct to customers through its contact centre in Wilmslow.


6.  Financial Calendar

Subordinated debt interest payment    15 December 2010

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 contained in this document or any other forward-looking statement it may make.
 
Appendix:  Analysis of New Business Results – Life and Pensions

(a)  PVNBP figures – 9 months to 30 September

(see appendix for table)                                    


(b)  APE Figures – 9 months to 30 September

(see appendix for table)