Royal London announces change in financial fortunes

Royal London, one of the UK’s largest mutual life and pensions company, has announced increased earnings and a strong contribution from its protection businesses for the six months ending 30 June 2009.

Key Points

European Embedded Value (EEV) operating profit up 8% at £108 million (H1 2008 £100 million) EEV profit before tax of £49m (H1 2008 loss of £284 million) International Financial Reporting Standards (IFRS) profit before tax of £18 million (H1 2008 loss £332 million) Contribution from new business up 66% to £48 million (H1 2008 £29 million) Total present value of new life and pensions business premiums up 12% to £1,195 million (H1 2008 £1,064 million) Insurance Groups Directive (IGD) capital surplus of £621 million** (end 2008 £773 million). IGD surplus at 31 August 2009 £900 million (estimated).

Commenting on the results, Mike Yardley, Group Chief Executive of Royal London, said: “As our markets continue to be affected by the difficult economic environment, increasing the operating profit to £108 million is a good result. We continue to focus on our core markets - pensions, protection and asset management.

“The success of this strategy is demonstrated by the significant contribution from new business, which also includes the former Resolution businesses we acquired in 2008. All these businesses have been integrated into the Group and are performing in line with initial expectations.  New business margins were higher than in the first 6 months of 2008 with a particularly strong increase in protection business margins from 4.0% to 7.6%.

“The profit before tax compares favourably with a loss in the same period in 2008, mainly because of better investment performance. Since the end of June, markets have risen sharply resulting in a significant increase in our capital surplus.

“Business performance in the third quarter has continued to be satisfactory.”