Royal London Annual Profit Falls On Decreasing Pension Sales

LONDON (Alliance News) - Royal London Mutual Insurance Society Ltd last Thursday reported a decrease in annual profit as the UK's largest mutual insurer saw a drop in workplace pensions sold.

A mutual insurer is owned entirely by its policyholders.

Royal London recorded European embedded value pretax profit of GBP351 million in 2018 compared to GBP594 million in 2017.

The 41% decrease was attributed to a negative investment performance in 2018 on "volatile" global equity markets, compared to a positive return in 2017.

EEV operating pretax profit increased 20% to GBP396 million, a record for the insurer.

Royal London's new business sales "remained strong despite challenging market conditions". The company's life & pension new business sales decreased 5.8% to GBP11.31 billion from GBP12.00 billion in 2017.

The drop was attributed to the expected lower workplace pension sales - following the end of an auto-enrolment roll-out - was offset by higher individual pension sales and protection sales.

Workplace pensions sales decreased 28% to GBP3.13 billion.

"In 2018 the end of the auto-enrolment roll-out, turbulent market conditions as a result of ongoing Brexit uncertainty and the continuing low interest rate environment presented challenges to our sector," said Chief Executive Phil Loney. "However I am pleased to report that we saw strong life and pensions new business sales with strong individual pension sales and increases in protection sales from our intermediary businesses both in the UK and Ireland and also our direct to consumer business."

Royal London's funds under management ended 2018 flat at GBP114 billion. The company's gross inflows increased 13% to GBP21.20 billion with net inflows increasing 21% to GBP7.65 billion.

The company ended 2018 with an estimated solvency II surplus of GBP4.6 billion, behind the GBP5.4 billion seen at the end of 2017. Royal London's capital ratio at year-end was 202% compared to 228% the year before.

Royal London said its solvency surplus was hurt by the "difficult market conditions".