General Insurance Article - Royal London report strong performance and operating profits

 Trading Highlights (figures in brackets show movement compared to 2013)

 This is the result of strong new business figures, particularly in intermediary pensions and in the wealth business, resulting in new business profits of £85m (2013: £70m) and existing business profits of £159m (2013: £140m).

 This reflects an exceptional £150m gain from the acquisition of CIS, its subsidiaries and TCAM2 reported in the 2013 financial results. Other factors impacting on this result were a one-off £61m charge relating to the workplace pensions charge cap, as previously reported in the Interim Statements (issued in August 2014) and the historically low yields on government bonds at the end of 2014.

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

 “The last year was marked by a very strong trading performance and a healthy increase in operating profit. New business performance was strong with particularly good contributions from group pensions and sales of income drawdown products. We anticipate that these will continue to be areas of growth for some time to come.

  

 We continued to see strong inflows into our investment management operations. 2014 saw significant inflows into our Equity Income, Cash Plus and fixed income funds.

  

 We are building our protection offering. The intermediary protection business is seeing a positive response to the improvements we made in the final quarter to both technology and improved critical illness definitions. Our consumer protection business has been growing significantly since it started marketing insurance products direct to consumers in Q4 2014. Our new Consumer division is now offering three new products.

  

 The Part VII Court decision at the end of 2014 concluded the legal transfer of the CIS life and pensions business2. Full integration into Royal London is now very well advanced.

  

 Our strong trading profit performance was offset in the short term by the impact of the government's decision to introduce a price cap and other alterations into auto enrolled pension schemes, and the impact of even lower yields. Royal London members who hold our workplace pension products will benefit from lower prices under the price cap, so the value has not been lost to members as a whole. The profitable growth of sales and market share across our product range provides a sound platform for future performance.

  

 Although the total bonuses paid to policyholders has decreased due to a reduced volume of maturities, the bonuses paid to individual with profits policyholders have increased. In addition, with profits policyholders benefit from a Profit Share; the average amount allocated to individual policies has been slightly reduced (by 0.1% to 1.15%) per policy this year. Over the last decade our profit sharing approach has boosted the value of policies held by qualifying customers to the tune of £466m.

 Royal London remains well capitalised, with surplus regulatory capital increasing to £3,390m (£2,749m in 2013).”

 
 [1] Present Value of New Business Premiums (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.
 [2] Royal London Group purchased Royal London (CIS) Limited (“CIS”) (previously known as The Co-operative Insurance Society Limited) and its subsidiaries and The Co-operative Asset Management Limited (“TCAM”) on 31st July 2013. In December 2014 the High Court approved the Part VII Transfer of CIS into The Royal London Mutual Insurance Society Limited.
 [3] Regulatory capital surplus includes tier 2 capital