Royal London profits slide as new business slows

Royal London has reported a drop in profits for the first half of 2012 as new business sales fell across its life and pensions, investments and platform divisions in the opening six months of the year.

According to the firms interim results, published today (17 August), total new business in the life and pensions business dropped 1 per cent in the first half of the year to £1.8bn, driven primarily by a 3 per cent fall in new business in its Scottish Life subsidiary to £1.2bn.

Protection sales did buck the negative trend across the division, with intermediary new business coming from Bright Grey and Scottish Provident up 46 per cent at £221m, but coming from a low base this had a minimal overall effect.

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In investments, new business saw a substantial £890m negative swing as funds in the Royal London Asset Management business saw a £310m outflow in the first six months of the year, compared to a £583m inflow in the same period of 2011.

Royal London’s platform business, Ascentric, also reported a fall in new assets under administration of 21 per cent to £587m, from £741m in 2007.

Operating profits across the company were down 25 per cent at £94m from £126m last year, while profits before tax fell by 38 per cent and stood at £86m for H1 2012, down from £138m in 2011.

Despite the new business falls, assets under management across Royal London rose 2 per cent to a record £47bn, with assets in the RLAM unit up 2 per cent to £44.9bn and assets under administration in Ascentric rising 16 per cent to £4.3bn.

Phil Loney, Group Chief Executive of Royal London, said: Our new business results show that Royal London is trading robustly in a flat economy and a very competitive market.

“Particularly pleasing is the strong growth in our intermediary protection new business, which has helped to replace business that we were previously receiving through the Santander contract which ceased in June 2011.

“Our profits have been impacted by the adverse economic conditions and particularly the continuing low interest rate environment, which reduces the pace at which revenues emerge from the policies held by our existing customers and members.”