TIDM41BM TIDM60KE
RNS Number : 6372I
Royal London
12 August 2019
Half Year Results 2019 12 August 2019
ROBUST PERFORMANCE
-- Net inflows 31% higher at GBP5.5bn (H1 2018: GBP4.2bn).
-- New business sales (PVNBP(4) basis) 4% lower at GBP5,824m (H1 2018: GBP6,077m).
-- European Embedded Value (EEV) operating profit before tax of
GBP187m (H1 2018: also GBP187m).
-- IFRS profit before tax 116% higher at GBP411m (H1 2018:
GBP190m) due to strong market performance for equities and debt
securities.
-- IFRS post tax transfer to eligible policyholders increased to GBP247m (H1 2018: GBP196m).
-- Assets Under Management(7) (AUM) at a record level of
GBP130bn (31 December 2018: GBP114bn) due to market growth of
GBP10.5bn and net inflows of GBP5.5bn.
-- Outstanding investment performance with 97%(8) (H1 2018: 58%)
of active funds outperforming their benchmark over a three year
period.
-- On a Standard Formula basis, estimated Group Investor View
solvency surplus of GBP4.7bn and a Group Investor View capital
cover ratio of 202% (1 January 2019: GBP4.4bn and 197%
respectively).
30 June 2019(1) 30 June 2018 Change(2)
=========== ================================== ================ ================= ==========
Flows Gross inflows(3) GBP12,618m GBP9,589m +GBP3,029m
----------- ---------------------------------- ---------------- ----------------- ----------
Net inflows(3) GBP5,473m GBP4,177m +GBP1,296m
----------- ---------------------------------- ---------------- ----------------- ----------
EEV Life and pension sales PVNBP(4) GBP5,824m GBP6,077m GBP(253)m
----------- ---------------------------------- ---------------- ----------------- ----------
EEV operating profit(5) before GBP187m GBP187m -
tax
----------- ---------------------------------- ---------------- ----------------- ----------
IFRS IFRS profit before tax(6) GBP411m GBP190m +GBP221m
----------- ---------------------------------- ---------------- ----------------- ----------
IFRS post tax transfer to GBP247m GBP196m +GBP51m
eligible policyholders(6)
----------- ---------------------------------- ---------------- ----------------- ----------
30 June 2019 31 December Change(2)
2018
=========== ================================== ================ ================= ==========
Funds Assets Under Management(7) GBP130bn GBP114bn +GBP16bn
=========== ================================== ================ ================= ==========
30 June 2019(10) 1 January 2019(9) Change(2)
----------- ---------------------------------- ---------------- ----------------- ----------
Capital Group solvency surplus (Investor GBP4.7bn GBP4.4bn +GBP0.3bn
(Solvency view)(9)
II)
----------- ---------------------------------- ---------------- ----------------- ----------
Group capital cover ratio
(Investor view)(9, 12) 202% 197% +5% points
---------------------------------------------- ---------------- ----------------- ----------
Kevin Parry, Chairman, commented:
"First half trading was robust. RLAM won new mandates on the
back of strong investment performance across asset classes. New
business in Pensions was marginally lower reflecting the
industry-wide reduction in defined benefit transfers, offset by
higher Workplace sales. Consumer and Protection traded in line with
expectations, making excellent progress in the Irish market.
"Royal London is well prepared for Brexit and will continue to
monitor carefully any developments that might affect our business
and customers. We will keep customers informed of significant
developments relevant to their policies.
"We continue to maintain a robust capital foundation to allow us
to invest in our future core products and propositions whilst also
innovating to deliver better outcomes for customers in underserved
markets.
"The Board looks forward to welcoming Barry O'Dwyer as Group
Chief Executive on 23 September 2019."
Financial Review
Gross inflows increased to GBP12.6bn (H1 2018: GBP9.6bn) driven
by external institutional business wins and strong flows into Royal
London Asset Management's (RLAM) wholesale range of credit and
sustainable funds. Net inflows increased to GBP5.5bn (H1 2018:
GBP4.2bn).
EEV operating profit before tax was GBP187m in line with the
prior period (H1 2018: GBP187m). The result includes strong growth
in RLAM external business, offset by the expected reduction in
Individual pensions. Life and pension sales (PVNBP) decreased 4% in
H1 2019 to GBP5,824m (H1 2018: GBP6,077m) primarily due to a
reduced level of defined benefit transfers, partially offset by
higher Workplace pension sales from new entrants to existing
schemes and new scheme wins.
IFRS profit before tax increased to GBP411m (H1 2018: GBP190m)
and IFRS post tax transfer to eligible policyholders increased to
GBP247m in H1 2019 (H1 2018: GBP196m). The IFRS results reflect
positive investment returns of GBP8.1bn (H1 2018: GBP0.5bn)
following strong performance in the global and UK equity markets.
This was offset by an increase in the value of policyholder
benefits and claims of GBP7.4bn (H1 2018: GBP0.6bn) driven by a
fall in yields used to discount liabilities.
RLAM achieved record AUM of GBP130bn as at 30 June 2019 (31
December 2018: GBP114bn) through positive investment returns and
net inflows.
Capital
Group Parent
----------------------------------------- ----------------------------------- --------------------------------------
Key metrics GBPm 30 June 2019(10) 1 January 2019(9) 30 June 2019(10) 31 December 2018(11)
----------------------------------------- ---------------- ----------------- ---------------- --------------------
Solvency surplus (Investor View) GBP4,692m GBP4,411m GBP4,801m GBP4,542m
----------------------------------------- ---------------- ----------------- ---------------- --------------------
Capital cover ratio (Investor View)(12) 202% 197% 206% 201%
----------------------------------------- ---------------- ----------------- ---------------- --------------------
Solvency surplus (Regulatory View) GBP1,839m GBP1,761m GBP1,948m GBP1,891m
----------------------------------------- ---------------- ----------------- ---------------- --------------------
Capital cover ratio (Regulatory View)(12) 140% 139% 143% 142%
----------------------------------------- ---------------- ----------------- ---------------- --------------------
On a Standard Formula basis, the Group had an estimated Investor
View solvency surplus of GBP4,692m (1 January 2019: GBP4,411m) and
an estimated Investor view capital cover ratio of 202% at 30 June
2019 (1 January 2019: 197%). The Parent company had an Investor
View solvency surplus of GBP4,801m (31 December 2018: GBP4,542m)
and an Investor view capital cover ratio of 206% at 30 June 2019
(31 December 2018: 201%). Our solvency surplus and capital cover
ratios have improved largely due to positive movements in bond and
equity markets in the first half of 2019.
We use an internal capital model for the purposes of managing
our capital. We have submitted an application to the Prudential
Regulation Authority (PRA) to use an Internal Model, compliant with
Solvency II requirements, to calculate our capital requirements for
regulatory purposes from Q4 2019. We expect to hear whether our
application has been approved by the end of Q3 2019.
Business Review
New life and pension business sales on a PVNBP basis decreased
4% in the first half of 2019 to GBP5,824m (H1 2018: GBP6,077m),
driven primarily by lower defined benefit pension transfers. Life
and pension new business margins improved to 2.8% (H1 2018: 2.3%).
RLAM gross and net inflows were up 32% and 31% respectively on the
same period in 2018 following new institutional scheme wins and
strong demand for RLAM's credit and sustainable funds.
New business contribution(13) PVNBP(4) New business margin(12)
================= =============================== ================ =========================
30 June 30 June 30 June 30 June 30 June 30 June
2019 2018 2019 2018 2019 2018
GBPm GBPm GBPm GBPm % %
================= =============== ============== ======= ======= ============ ===========
Pensions 127 120 5,162 5,398 2.4 2.2
================= =============== ============== ======= ======= ============ ===========
Protection (UK
& Ireland) 30 25 421 431 7.2 5.8
================= =============== ============== ======= ======= ============ ===========
Consumer 7 (5) 241 248 2.8 (1.8)
================= =============== ============== ======= ======= ============ ===========
Life and pension
business 164 140 5,824 6,077 2.8 2.3
================= =============== ============== ======= ======= ============ ===========
RLAM(14) 54 22 5,144 3,002 1.1 0.7
================= =============== ============== ======= ======= ============ ===========
Total 218 162 10,968 9,079 2.0 1.8
================= =============== ============== ======= ======= ============ ===========
Pensions
-- New business contribution increased 6% to GBP127m (H1 2018:
GBP120m) as revenue margins improved due to reduced acquisition
expenses.
-- Workplace pension new business sales increased by 6% to
GBP1,930m (H1 2018: GBP1,821m), due to new entrants into existing
schemes and new scheme wins. The market remains competitive; the
quality of service demonstrated through auto-enrolment has
underpinned our ability to win scheme tenders.
-- Individual pensions new business sales decreased by 10% to
GBP3,232m (H1 2018: GBP3,577m). This was primarily due to the
reduction in defined benefit transfer activity. We continue to grow
the Individual pensions business as customers reach retirement and
seek greater flexibility in the provision of pension benefits.
-- The reputation of our Pensions business was recognised by the
receipt of an award for Best Pension Provider 2019 by Money
Marketing. We have continued to invest in our Pension business, for
example we launched our mobile app for pension customers in 2019.
The new app helps customers check their contributions and monitor
the performance of their investments, providing an indicative view
of the value of their pension at retirement.
Protection
-- UK protection new business sales fell 8% to GBP354m PVNBP (H1
2018: GBP383m). In the first half of the year we focused on
improving the quality of service to advisers and customers, and
improving the profitability of new business. New business
contribution in the UK was unchanged at GBP21m (H1 2018:
GBP21m).
-- Improvements to our online service allow advisers to check
the status of applications and access their decision documents. The
UK protection division was awarded Best Online Service at the COVER
Customer Care Awards 2019. The division continued to develop this
service to make applying for protection quicker and simpler for
customers. We launched a new claims system in June 2019 which will
improve the customer experience and reduce the time taken to pay
claims.
-- Protection new business sales in Ireland achieved growth of
40% to GBP67m (H1 2018: GBP48m) leading to an increase in market
share to 21% in Q1 2019 (Q4 2018: 19%). There was stronger trading
performance across all products, especially in our Mortgage
Protection and Term Assurance offerings. Ireland Protection new
business contribution increased in H1 2019 to GBP9m (H1 2018:
GBP4m).
-- During H1 2019 Royal London in Ireland won awards at both the
2019 National Consumer Awards and 2019 Association of Irish
Mortgage Advisors Awards, including Best Value Mortgage Protection
and Best Value Term Insurance.
Consumer
-- New business sales for Consumer totalled GBP241m in H1 2019,
remaining broadly in line with the same period in 2018. Consumer
achieved a new business margin of 2.8%, up from (1.8)% in H1 2018,
due to significant increases in volumes of Over 50s life insurance
and the launch of our new unit-linked funeral plan product.
-- The division is one of the fastest growing providers of Over
50s life insurance in the UK and achieved a record market share at
Q1 2019 of 36% (Q4 2018: 23%), driven through digital and telephony
channels. This growth combined with the continuing support of our
partner brands has given the Consumer division a 20% share of the
non-adviser market (31 December 2018: 14%).
-- Partnerships also continued to grow. Our life insurance
partnership with Co-op Insurance Services was launched in February
2019, and our Over 50s life cover partnership with Cover Direct in
March 2019. Both enable the division to reach a wider range of
customers. Our Consumer division remains the only 5* provider of
Over 50s life insurance in the UK, according to Fairer Finance.
Royal London Asset Management (RLAM) - Flows
Gross inflows(3) Net inflows(3)
-------------- -------------------------- --------------------------
30 June 2019 30 June 2018 30 June 2019 30 June 2018
--------------
GBPm GBPm GBPm GBPm
-------------- ------------ ------------ ------------ ------------
Internal flow 4,478 4,597 1,540 1,952
-------------- ------------ ------------ ------------ ------------
External flow 8,140 4,992 3,933 2,225
-------------- ------------ ------------ ------------ ------------
RLAM Total 12,618 9,589 5,473 4,177
-------------- ------------ ------------ ------------ ------------
-- RLAM is one of the UK's leading asset management companies,
managing investments for a wide range of clients. Our funds meet a
broad range of investor needs across different asset classes, and
we also provide bespoke investment solutions to meet specific
client objectives.
-- Internal net inflows reduced to GBP1.5bn (H1 2018: GBP2.0bn)
due to a reduction in gross inflows from reduced pension sales and
higher outflows on workplace pension schemes than the same period
in 2018.
-- The increase in net inflows of external business to GBP3.9bn
(H1 2018: GBP2.2bn) was due to large institutional scheme wins and
strong demand in the wholesale sector for RLAM's range of credit
and sustainable funds, partially offset by higher outflows
primarily from cash funds.
-- RLAM AUM increased to GBP130bn at 30 June 2019 (31 December
2018: GBP114bn), through positive investment returns of GBP10.5bn
and net inflows of GBP5.5bn.
-- Investment performance in H1 2019 was outstanding, with 97%(8) (H1 2018: 58%) of active funds outperforming their benchmark over a three year period.
-- RLAM continues to work with clients to deliver strategies
that meet their needs, demonstrated most recently with the launch
of the Multi Asset Strategies Fund, which aims to deliver growth
while taking a more market neutral stance when volatility is
higher.
Royal London Platform Services (RLPS)
-- RLPS supports a range of platforms including Ascentric and
wrap offerings for Royal London Group companies.
-- Assets Under Administration increased 9% to GBP15.8bn (31
December 2018: GBP14.5bn) primarily due to positive investment
returns.
Outlook
Brexit will inevitably dominate politics in the second half of
the year resulting in a wide range of potential economic outcomes.
We are well prepared for Brexit and remain alert for any
development that could cause customer uncertainty. Against that
backdrop and the low interest rate environment, we remain focussed
on delivering excellent service and value for our customers and
members. We continue to maintain a robust capital foundation to
allow us to invest in our future core products and propositions,
whilst also innovating to deliver better outcomes for customers in
underserved markets. We remain committed to focusing on operational
efficiencies and maintaining profitability whilst investing in the
business, so we can continue to share our success with our
members.
Editor's notes
1. The results in this announcement are prepared on two bases:
International Financial Reporting Standards (IFRS) and European
Embedded Value (EEV). The results prepared under IFRS form the
basis of the Group's statutory financial statements. The
supplementary EEV basis results have been prepared in accordance
with the amended European Embedded Value Principles dated April
2016 prepared by the European Insurance CFO Forum. Royal London
adopted IFRS 16 'Leases', replacing IAS 17 from 1 January 2019,
which recognises more leases on the balance sheet.
2. Change is increase or decrease of H1 2019 compared to H1
2018, unless otherwise stated. Figures as at 30 June 2019 are
compared to 31 December 2018. All balances presented are for the
six months ended 30 June, or as at 30 June unless otherwise
stated.
3. Gross and net inflows incorporate RLMIS and RLAM. Net inflows
from RLMIS represent the combined premiums and deposits received
(net of reinsurance) less claims and redemptions (net of
reinsurance). Given its nature, non-linked Protection business is
not included. RLAM net inflows represent external inflows less
external outflows, including cash mandates.
4. 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 the
Group expects to receive over the term of the new contracts sold in
the year. The rate used to discount the cash flows in the reported
results has been derived from the H1 2019 swap curve calculated in
accordance with specification provided by the European Insurance
and Occupational Pensions Authority (EIOPA).
5. The definition of EEV operating profit follows the same
principles as IFRS operating profit with the exception of those
items which are recognised under IFRS but are excluded from EEV as
they cannot be recognised for regulatory purposes, and certain
items which are included in EEV but not recognised in IFRS. Most
notably, EEV operating profit includes the revaluation of the Value
of In-Force business (VIF) arising on the asset management and
service subsidiaries, and IFRS operating profit includes accounting
amounts such as amortisation of intangible assets which are
excluded under EEV as they are not permitted to be recognised for
regulatory purposes.
6. IFRS profit before tax is 'Result before tax and before
transfer to the unallocated divisible surplus' (UDS) in the
statement of comprehensive income. IFRS post tax transfer to
eligible policyholders is 'Transfer to the unallocated divisible
surplus' in the statement of comprehensive income, and represents
the IFRS result after tax for the period before taking into account
other comprehensive income (OCI). OCI comprises actuarial gains and
losses from changes to actuarial assumptions in the valuation of
the Group pension schemes. As a mutual, the transfer to the UDS is
a key measure of accumulation of funds available for us to share,
at our discretion, with eligible customers and members.
7. Assets Under Management represent the total of assets
actively managed by, or on behalf of, the Group, including funds
managed on behalf of third parties. It excludes assets administered
through Ascentric, our platform business.
8. Investment performance has been calculated using a weighted
average of our active assets under management. Benchmarks differ by
fund and reflect their mix of assets to ensure we are comparing
like with like. Passive funds are excluded from this calculation
as, whilst they have a place as part of a balanced portfolio, we
are believers in the long-term value that active management can
add.
9. The 'Investor View' does not restrict the surplus in the
closed funds. The 'Regulatory View' includes the restriction on
closed funds' surplus in excess of the SCR, which is treated as a
liability and is excluded from total available own funds.
Comparative figures for 2018 are not available for the Group
capital position as Royal London became an insurance Group for
Solvency II purposes with effect from 1 January 2019.
10. 30 June 2019 Parent capital figures are based on Q2 2019
regulatory returns and Group capital figures are based on an
estimated Q2 2019 position.
11. The 31 December 2018 figures have been restated in line with
the final regulatory returns which were presented in the 2018
Solvency and Financial Condition Report published in April
2019.
12. Figures presented in tables throughout are rounded. The
capital cover ratios and new business margins are calculated based
on exact figures.
13. The new business contribution has been grossed up for tax at
19% (H1 2018: 19%). We have done this to help compare our results
with the results of shareholder-owned life insurance companies
which typically pay tax at 19% (H1 2018: 19%).
14. PVNBP for RLAM relates to gross sales inflows in the period,
excluding external cash mandates which are treated as uncovered
business and not valued on an EEV basis.
About us:
Royal London is the UK's largest mutual life insurance, pensions
and investment company. We're committed to delivering the best
value for our customers and members.
Group Chief Executive:
As previously announced, Barry O'Dwyer has been appointed Group
Chief Executive subject to regulatory approval. He will take up his
appointment on 23 September 2019.
Financial calendar:
-- 13 November 2019 - RL Finance Bonds No 3 plc subordinated debt interest payment date
-- 30 November 2019 - RL Finance Bonds No 2 plc subordinated debt interest payment date
Forward-looking statements:
This document may contain forward-looking statements with
respect to certain 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 and
Ireland 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;
and 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.
The Royal London Mutual Insurance Society Limited is registered
in England and Wales (99064) at 55 Gracechurch Street, London, EC3V
0RL www.royallondon.com
For further information please contact:
Meera Khanna 0203 272 5129
Corporate PR Manager 0791 917 0502
meera.khanna@royallondon.com
Mona Patel 0203 272 5133
Group Head of External Communications 0791 917 1964
mona.patel@royallondon.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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