In its annual results for 2012, Royal London, the mutual insurer, reported that its profits had surged by 45 per cent year on year, much of it bolstered by what it saw as intermediaries placing business with strong brands.
“There is a story behind these results,” said Phil Loney, group chief executive of Royal London. “What’s happening is you’re seeing a real flight to quality in the run-up to the RDR.”
Mr Loney said the firm also saw a big uplift in its new business during the fourth quarter of 2012 immediately before the new regulations came into force.
In it results, which were announced on Thursday, 28 April, Royal London reported profits of £366m in 2012 on a European embedded value basis (EEV), an increase of 45 per cent on 2011, as well as an international financial reporting standards profit (IFRS) of £321m, an increase of 111 per cent.
In addition, the mutual insurer paid a dividend of £88m to with-profits policyholders, the same as in 2011, and reported returns of 8.6 per cent on its Royal London Open Fund. In 2011 the fund returned 6 per cent.
Despite the strong results, Royal London did show a few negative figures. Ascentric, its wrap platform, saw inflows that were 8 per cent lower than in 2011, at £1.2bn compared with £1.3bn the year before. Nevertheless, its assets under administration were up 41 per cent to £5.15bn.
Moreover, Royal London Asset Management (RLAM), the firm’s asset management arm, reported net new business of £286m, a 24 per cent decrease on 2011 when it had net new business of £379m. While it saw stronger inflows, it also experienced much higher outflows.
In 2012, RLAM has inflows of £2.26bn and outflows of £1.98bn compared against inflows of £1.36bn and ££98m in 2011.
Finally, the firm’s offshore arm, Royal London 360, also reported that its new business was down 9 per cent in the year, to £363m from £397.
Kerr Luscombe, group finance director at Royal London, said this was because the offshore arm was changing its new business strategy.
“There’s a deliberate strategy in Royal London 360 to move away from single premium business and into regular premiums,” he said, adding that while the amount of business was lower, the value of it had grown.
For Ascentric, Royal London said while the wrap has increased assets under management and its business model has reached a sustainable level of profitability, advisers have been more cautious about investing client money in the past year.
