Royal London posts positive half-year results with new pension business swelling

Oliver Gill
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Royal London was founded in a coffee shop in the capital in 1861 by Joseph Degge and Joseph Ridge (Source: Getty)

New business and assets under management grew at insurance mutual Royal London despite an "uncertain backdrop" created by the Brexit vote.

The figures

For the six months to June, total new life and pensions businesses – a figure that represents all the future revenues from new business won discounted back to today's prices – jumped from £3bn to £4bn.

Funds under management grew by 11 per cent to £93.8bn

Operating profit was up to £138m from £115m

Royal London's solvency ratio – the proportion of capital it has set aside to underwriting, investment and operational risks – was estimated to be 166 per cent at the end of June 2016, slightly down from the 169 per cent at the end of December 2015.

Read more: Royal London boasts record breaking year

Why it's interesting

As a mutual insurer and therefore not a listed entity there is no reaction from the stock markets when Royal London announces its results, but the numbers still make for positive reading.

The pensions business had a bumper six months increasing the present value of new business by over £1bn to £3.7bn. The contribution from new business during the six months amounted to £67m an increase of £24m on the previous year.

Royal London admitted that while growth from the take-up from workplace pensions may slow, there is an opportunity for the business to expand its higher-end advisory offering.

The funds under management increase was also impressive. This number includes the total assets managed or administered by the group. But its own asset management division – Royal London Asset Management – had gross inflows of £2.3bn (up from £1.5bn in 2015).

Many fund managers have experienced reducing assets under management in recent months and for those that have grown them, it has often been due to market price increases rather than inflows from customers.

What Royal London said:

Chief executive Phil Loney said:

Today we are announcing a strong set of results delivered against the uncertain backdrop of the UK referendum on EU membership and continuing low interest rates. Despite the reduction in interest rates, profit margins have held up well, allowing continued investment in the business to support the development of our product and servicing capabilities.

As the auto-enrolled market matures we are beginning to see a new trend; the growth of a secondary market as advisers recommend schemes move to take advantage of better quality scheme administration or investment options.

Royal London has benefited from this trend, taking on schemes that have already auto-enrolled with other providers. This “flight to quality” introduces competition to the market and will result in better outcomes for scheme members.

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