Price caps clip figures
Royal London enjoys new business growth
Royal London, Britain’s biggest mutual life assurer, saw its operating profits rise on new business growth, while it took a hit as a result of the government’ auto-enrolment price cap and the impact of lower yields.
Operating profit before tax rose by 12% to £220 million but the company reported a one-off £61m charge relating to the government’s workplace pensions charge cap.
The company was also impacted by “historically low yields on government bonds at the end of 2014.”
The company, which includes the former Scottish Life and Scottish Provident businesses, reported a 39% increase in new life and pensions business to £4.8 billion.
Funds under management also rose by 12% to £82.3bn.
Chief executive Phil Loney 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.
“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.”
Mr Loney said that 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 £3.39bn (£2.749bn in 2013).”