REG - Royal London RL Fin Bnds No.4 PLC RL Fin Bnds No.3 plc RL Fin Bnds No.6 PLC RL Fin Bnds No.2 PLC - Financial results 2024
07/03/2025 08:15
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RNS Number : 7301Z Royal London 07 March 2025
Results Announcement 2024
7 March 2025
2.3 million customers to share in £181 million ProfitShare payout
Barry O'Dwyer, Group Chief Executive Officer, commented:
"Royal London is customer-owned and is run for the benefit of customers, not
shareholders. We share our profits with eligible customers and our ProfitShare
scheme will distribute £181m to 2.3 million customers in April. This was
underpinned by the business delivering an 11% increase in operating profit to
£277m in 2024.
"Our customer focus means we continually enhance our offerings and digital
services to help customers build their financial resilience, often partnering
with independent financial advisers. We have recently launched an innovative
new online application process for individual pensions business, making it
substantially easier for advisers to work with us. Our customer-first approach
also appeals to employers wanting to pick the best possible offering and, in
2024, nearly 1,000 employers chose to establish a Royal London Workplace
Pension scheme, very often moving from a shareholder-owned competitor.
"2024 also saw Royal London enter the bulk purchase annuity market, giving
trustees the option of choosing the only customer-owned provider in this
market."
Highlights
* ProfitShare(3) of £181m (2023: £163m) to be shared in April 2025 with 2.3
million eligible customers who have pensions and life policies with Royal
London.
* The Governed Range, our flagship fund offering, attracted net inflows of
£3.2bn (2023: £3.2bn), with assets under management (AUM) reaching £72bn
(2023: £61bn).
* Welcomed 966 (2023: 930) new Workplace Pension schemes and 240,000 new scheme
members (2023: 240,000). Workplace Pensions new business sales were up by 19%,
reflecting the increasing number of medium and large-sized employer scheme
wins.
* Introduced a range of digital improvements to support customers to build their
financial resilience, including a new contribution guidance tool and further
enhancements to our pension consolidation service, helping to deliver a 39%
increase in the number of Workplace Pension transfers.
* Continued to enhance our digital offering for financial advisers, launching a
new online service that makes it easier for advisers to deal with us,
including streamlined and intuitive 'quote and apply' functionality for new
business.
* Paid 98.7% (2023: 99.0%) of protection claims, delivering £751m to over
65,000 customers and their families in the UK and Ireland.
* Announced our entry into the bulk purchase annuity market in September 2024
and completed three buy-in transactions with £187m of premiums.
* Made our first natural capital asset purchase, acquiring one of the UK's
largest prime farmland assets, while also investing into our UK Living
strategy with the purchase of 500 apartments in the Thames Valley.
* Investment performance of actively managed funds remains good, with 60% (2023:
96%) outperforming their three-year benchmark(4) on an AUM weighted basis and
81% of funds (2023: 89%) outperforming on an equally weighted basis.
* Our business in Ireland delivered a 29% growth in new business sales of
Protection and Pensions products, up to £297m.
* Customer satisfaction, as measured by our Customer Value Statement (CVS(5))
score, up 3 percentage points over the year, and 11 percentage points since
2020, with an average of 43% of customers rating Royal London 9 or 10 out of
10 across each of seven key measures.
* Contributed £2.8m towards social impact initiatives, including Cancer
Research UK, to help tackle cancer inequalities and Turn2us, a national
charity working to address financial insecurity across the UK.
Financials
Year ended Year ended
31 December 2024 31 December 2023
UK GAAP Operating profit before tax(6) £277m £249m
Transfer to the fund for future appropriations(7) £167m £382m
ProfitShare(3) £181m £163m
New business Life and pensions new business sales(8) £10,804m £9,253m
Inflows/(outflows) Gross inflows(9) £31,825m £29,904m
Net (outflows)/ inflows(9) ( ) £(1,037)m £4,203m
31 December 2024 31 December 2023
Funds Assets under management(10) £173bn £162bn
Capital(11) Regulatory View solvency surplus £2.7bn £2.9bn
(Solvency II(12))
Regulatory View capital cover ratio 196% 206%
Investor View solvency surplus £2.7bn £2.9bn
Investor View capital cover ratio 203% 218%
* Operating profit before tax(6) increased by 11% to £277m (2023: £249m)
supported by increased new business contribution across all our main product
lines and a growing book of in-force business.
* Transfer to the fund for future appropriations (FFA)(7) of £167m (2023:
£382m) includes the impact of positive economic movements and is stated after
the allocation of ProfitShare.
* Life and pensions new business sales(8) were up 17% to £10,804m (2023:
£9,253m) with growth across all products, including a 19% increase in
Workplace Pensions due to a rise in both transfer volumes and the number of
new schemes won.
* Gross inflows(9) rose to £31.8bn (2023: £29.9bn). Net outflows(9) of £1.0bn
(2023: £4.2bn net inflows) were impacted by £4.3bn of external net outflows
from Global Equities strategies following the departure of some members of the
Global Equities team.
* Assets under management(10) increased to a record £173bn (31 December 2023:
£162bn).
* Capital position remains robust as the Investor View and Regulatory View(11)
ratios reduced to 203% (31 December 2023: 218%) and 196% (31 December 2023:
206%) following changes to the level of equity hedging as we seek to manage
the capital position within our capital management framework.
Investor Conference call
Royal London will hold an investor conference call to present its 2024
Financial Results on Friday, 7 March 2025 at 08:30. Interested parties can
register here.
(https://events.teams.microsoft.com/event/073f5eb7-c0b7-48d4-b989-1f1fb645d2e6@e0cfe368-5773-4452-b8c6-671891a3f98a)
A copy of the presentation to investors is available on the Group's website
(https://www.royallondon.com/about-us/our-performance/investor-relations/) .
For further information please contact:
Lora Coventry, Senior PR Strategy Manager (lora.coventry@royallondon.com /
07919 170673)
About Royal London
Royal London is the UK's largest mutual life, pensions and investment company
and in the top 30 mutuals globally a (#_ftn1) . Working with advisers and
customers, we provide long-term savings, protection and asset management
products and services. Our Purpose, 'Protecting today, investing in tomorrow.
Together we are mutually responsible', drives us and defines the impact we
want to have.
Financial calendar:
* 7 March 2025 - Financial Results for 2024 and conference call
* 27 May 2025 - RL Finance Bonds No. 6. plc subordinated debt interest payment
date
* 3 June 2025 - Annual General Meeting
* 8 August 2025 - Interim Financial Results for 2025 and conference call
* 7 October 2025 - RL Finance Bonds No. 4 plc subordinated debt interest payment
date
* 13 November 2025 - RL Finance Bonds No. 3 plc subordinated debt interest
payment date
* 25 November 2025 - RL Finance Bonds No. 6 plc subordinated debt interest
payment date
Editor's notes
1. The information in this announcement relates to The Royal London Mutual
Insurance Society Limited ('RLMIS' or 'the Company'), and its subsidiary
undertakings, together referred to as 'Royal London' or 'the Group'.
2. The Group assesses its financial performance based on a number of measures,
some of which are not defined or specified in accordance with relevant
financial reporting frameworks such as UK GAAP or Solvency II. These measures
are known as alternative performance measures (APMs). APMs are disclosed to
provide further information on the performance of the Group and should be
viewed as complementary to, rather than a substitute for, the measures
determined according to UK GAAP and Solvency II requirements. Accordingly,
these APMs may not be comparable with similarly titled measures and
disclosures by other companies.
3. ProfitShare is a discretionary enhancement to eligible RLMIS customers with
unit-linked or With-Profits policies. The allocation is considered annually
and depends on a number of factors including financial performance, capital
position, the risks and volatility of financial markets and the Group's
outlook.
4. Investment performance has been calculated for funds with a defined external
benchmark on an equally weighted basis, by measuring the number of in-scope
funds outperforming their three-year benchmark divided by the total number of
in-scope funds and, on an AUM weighted basis, by using a weighted average of
active assets under management. Benchmarks differ by fund and reflect their
mix of assets to ensure direct comparison. Passive funds are excluded from
this calculation as, whilst they have a place as part of a balanced portfolio,
Royal London believes in the long-term value added by active management.
5. The Royal London Customer Value Statement (CVS) model tracks seven key pillars
of importance across nearly 3,000 Royal London customers twice a year:
Communicate, Membership, Resolution, Be Personal, Pay Out, Investment and
Reputation. The results are reported by each factor and through an overarching
CVS weighted index that represents the percentage of customers rating the
company 9 or 10 out of 10 overall.
6. Operating profit before tax is the transfer to the fund for future
appropriations before other comprehensive income excluding: short-term
investment return variances and economic assumption changes (economic
movements); charges/credits arising from mergers and acquisitions;
ProfitShare; ValueShare; tax; and one-off items of an unusual nature that are
not related to the underlying trading of the Group. Profits or losses arising
within the closed funds are held within the respective closed fund surplus;
therefore, operating profit before tax represents the result of the Royal
London Main Fund (RL Main Fund) and the RLI DAC Open Fund.
7. Transfer to the fund for future appropriations represents the statutory UK
GAAP measure 'Transfer to the fund for future appropriations' in the technical
account within the Consolidated statement of comprehensive income.
8. Life and pensions new business sales represent life and pensions business only
and exclude Asset Management, other lines of business and bulk purchase
annuity buy-ins transacted with the Group's defined benefit pension schemes.
New business sales are presented as the Present Value of New Business Premiums
(PVNBP), which is the total of new single premium sales received in the period
plus the discounted value, at the point of sale, of the regular premiums the
Group expects to receive over the term of the new contracts sold in the
period. The rate used to discount the cash flows in the reported results has
been derived from the opening swap curve at the start of the financial period
for all new business except annuities where the rate used is the future yield
(less an allowance for downgrade and default risk) on assets expected to back
these annuitant liabilities over the lifetime of the contracts.
9. Gross and net inflows incorporate flows into Royal London Asset Management
(RLAM) from external clients (external flows) and those generated from RLMIS
(internal flows). External client net flows represent external inflows less
external outflows, including cash mandates. Internal net flows from RLMIS
represent the combined premiums and deposits received (net of reinsurance)
less claims and redemptions paid (net of reinsurance). Given its nature,
non-linked Protection business is not included.
10. Assets under management (AUM) represent the total of assets actively managed
by the Group, including funds managed on behalf of third parties.
11. The capital cover ratio is calculated as the Group's Own Funds, being the
regulatory capital under Solvency II, divided by the Solvency Capital
Requirement (SCR). The 'Investor View' equals the RL Main Fund capital
position (i.e. excluding ring-fenced funds). The 'Regulatory View' solvency
surplus and capital cover ratio exclude the closed funds' surplus as a
restriction to Own Funds. All capital figures are stated on a Group Partial
Internal Model basis and the 2024 figure is estimated and unaudited.
12. In November 2024 the Prudential Regulation Authority (PRA) announced the final
policy statement to implement reforms to the Solvency II framework previously
applicable in the UK. The resultant new prudential regime for UK insurers
became effective on 31 December 2024 and will eventually be known as 'Solvency
UK'. However, in line with the approach outlined in the policy statement, the
UK regime will continue to be referred to as Solvency II until such time as
the PRA has changed all references from Solvency II to Solvency UK across all
their relevant materials.
13. Figures presented throughout are rounded. The capital cover ratios and new
business margins are calculated based on exact figures.
Review of the Year
Driven by our Purpose - Protecting today, investing in tomorrow. Together we
are mutually responsible. - we are focused on growing our business sustainably
and deepening our relationships with our customers.
We have a relentless focus on meeting our customers' needs, and the insights
we gather help to inform how we improve our products and services. Our
Financial Resilience Report, published in May last year, looked at how cost of
living challenges in the UK have affected retirement savings and plans. The
research identified that, while the financial position of some consumers had
improved, people's retirement plans had been affected significantly.
Over the last few years, we have offered dedicated cost of living guidance and
resources and believe that financial advice plays an important role in
delivering good customer outcomes. Our 2024 Meaning of Value Report found that
66% of consumers who pay for advice said they receive 'good' or 'excellent'
value for money from their adviser, an increase of more than a fifth compared
to our 2023 study.
With climate-related impacts on society likely to increase, we continue to
champion a 'just transition' to a low-carbon economy to play our part in the
move to a sustainable world. Decarbonising our investment portfolio, which
accounts for the majority of our Scope 3 emissions - the emissions indirectly
produced from our business activities - is critical to managing risks and
opportunities on our customers' and clients' behalf. When we believe a company
we invest in is falling short, we use our voting rights, and our interactions
with boards and management, to encourage action on key issues.
We also use our sponsorship partnerships to support positive change across
society. Levelling the playing field for women in sport is the objective of
our partnership with The British & Irish Lions. At the start of 2024, we
announced our role as Founding Partner of the Lions Women's team, ahead of its
first ever tour in 2027 to New Zealand.
Enhancing the breadth of our offering
In 2024 we made improvements to our digital experience to help customers build
their financial resilience. These included updates to our mobile app and
digital portals, such as the option to update beneficiaries, the introduction
of retirement planning and pension options tools, and a more personalised
Financial Wellbeing service. We introduced a new online system for advisers
recommending our pensions. The system has made it easier for advisers to deal
with us. It includes streamlined and intuitive 'quote and apply' functionality
for new business and has received very positive feedback.
We have built a compelling bulk purchase annuity offer and in September we
confirmed our entry into this market. We believe that offering pension scheme
trustees a customer-owned provider will be attractive as they look to secure
their members' benefits. We are off to a strong start, completing three
transactions by the end of the year as we focus on establishing a reputation
as an insurer of choice for trustees and their advisers in our chosen markets.
We believe equity release will become an increasingly important option for
those with property wealth but insufficient pension savings. Our acquisition
of Responsible Life Limited and Responsible Lending Limited in January 2024
has given us a great opportunity to broaden the solutions available to support
advisers and customers who are looking for solutions in retirement. In August,
we rebranded Responsible Lending to Royal London Equity Release. This has been
well received reflecting our brand's strong reputation. In a recent survey 22%
of equity release advisers cited that the strength of the Royal London brand
is now a key factor in their decision to place business with us.
In July we finalised the acquisition of Aegon UK's individual protection
business and as a result strengthened our position in the UK protection
market, welcoming nearly 400,000 new customers and their financial advisers to
the Group. In addition, we introduced a series of improvements to strengthen
and expand the flexibility of our Income Protection proposition, with features
specifically for the self-employed, payout limits that reflect today's living
costs, and more certainty for customers that their income will be maintained.
Our Asset Management business continued to deliver good investment
performance, with new appointments across a range of asset classes enabling us
to build on our existing strength and capabilities, including in Global
Equities following the departure of some of our team in April. We made good
progress as we continued to build our Private Markets capabilities, and in
diversifying the range of assets we offer. We believe this will help customers
achieve good returns in a wider range of scenarios. Building on our
established track record in real estate, and our commitment to responsible
investing, we are supporting UK life sciences companies by providing
infrastructure in key locations across the 'golden triangle' of Cambridge,
Oxford and London. We also successfully completed the acquisition of 21,000
acres of prime UK farmland in March, as part of a joint venture with South
Yorkshire Pension Authority.
In Ireland, our strong performance was supported by our focus on growing and
enhancing our Pensions offering. This included the launch of our new Personal
Retirement Savings Account in November. We are also pleased that enhancements
to our product range have helped us to maintain our position as a leader in
the Irish broker protection market.
Delivering for customers
Over the last few years, we have adapted to fulfil the obligations of the
Financial Conduct Authority's (FCA) Consumer Duty. After meeting the
requirements for open books of business in July 2023, we successfully met the
requirements for closed books of business ahead of the 31 July 2024 deadline.
We track customer satisfaction through our Customer Value Statement score,
which saw an overall increase in 2024 compared to the previous year. Our focus
on good customer outcomes, and the strength of our relationships with
advisers, also continued to be reflected through the awards we received in
2024. We were named a five-star investment provider for the 11th consecutive
year at the annual Financial Adviser Service Awards, while our Pensions and
Protection products were awarded four stars. Additionally, there were wins in
several categories at the Brokers Ireland Excellence Survey Awards, including,
for the seventh year in a row, Service Excellence.
Looking ahead
As we look to the year ahead, we will continue to focus on developing digital
journeys, expanding the range of solutions we offer and running our business
efficiently, to generate value for our members and strengthen our
relationships with customers and clients.
We are well positioned to help customers, employers and advisers navigate the
evolving external environment. The Budget announcement last October means
pensions will be brought into the inheritance tax regime from April 2027 and,
in 2025, we are also expecting the government to consult on the second stage
of its pensions review, focusing on the adequacy of outcomes for UK pension
savers.
We remain committed to helping customers build their financial resilience to
protect their standard of living. By enhancing the breadth of our offering,
while growing our business sustainably, we aim to ensure that we continue to
provide a strong mutual choice to support customer and client needs.
UK
Market overview
The UK workplace contract-based pensions market continued to grow, benefitting
from employment rates remaining relatively high and employees receiving real
pay increases. Enhanced transfer activity underpinned increased sales in the
individual pensions market. However, as a result of the ongoing cost of living
pressures for many, ad hoc and regular customer withdrawals from pension pots
increased.
In October, consumer concerns increased around the security of access to
tax-free cash through their pensions, based on speculation in the weeks
running up to the Autumn Budget. This also contributed to higher levels of
withdrawals across the market. However, a reduction in mortgage lending
activity over the year led to the size of the individual protection market
shrinking.
2024 continued to bring significant focus on delivering value for money in the
advice market because of Consumer Duty requirements. Advisers, on balance, are
positive about the Duty. At the same time, the increased requirements have led
to a reduction in the average number of clients being served by advisers, as
they have adjusted their business models to service clients while meeting the
new regulation.
Industry research in the year suggested the advice gap - the number of people
who are not receiving financial advice due to factors such as cost,
accessibility, and lack of awareness - is increasing. This has been widely
recognised for some time and, in December, the FCA set out its initial
proposals for the Advice Guidance Boundary Review, which aims to support more
customers in making more informed decisions when considering their financial
needs.
At the same time, the pace of technological change and innovation designed to
help increase customer financial understanding continues to accelerate across
the industry. We continue to invest in systems to enable increased engagement
with advisers and customers, alongside reducing barriers to customers building
their financial resilience.
Business performance
Strong new business growth across all our main product lines supported a
significant increase in UK operating profit to £368m (2023: £330m). We saw
increased levels of new business sales across both Workplace and Individual
Pensions as well as Protection, with our workplace market share continuing to
increase.
Customers and advisers benefitted from our ongoing focus on improving
technology through enhancements to digital services and support. These
improvements included the launch of a new contribution guidance tool and
further enhancements to our pension consolidation service, helping to deliver
a 39% increase in the number of workplace pensions transferring to Royal
London in 2024.
We continue to focus on supporting customers to understand their savings,
income and protection options. During the year we launched a series of
retirement guidance journeys on our app to support our customers in making
good retirement decisions. Throughout the year Royal London's Trustpilot score
was over four out of five, reflecting the level of service provided for
customers.
We track customer satisfaction through our Customer Value Statement (CVS)
score across seven aspects that are important to customers (Communicate,
Membership, Resolution, Be Personal, Pay Out, Investment and Reputation).
Since 2020, when the measure was introduced, we have seen an 11 percentage
point rise in customers who scored Royal London as 9 or 10 out of 10 across
the seven measures to 43%, with a 3 percentage point rise since 2023.
Pensions
Our Workplace Pensions business grew over 2024, with new business sales
increasing by 19%. Over the year we welcomed 966 new Workplace Pension scheme
employers (4% up on 2023) and 240,000 new scheme members, in line with 2023.
This reflects our continued investment in the Workplace offering, including
the introduction of client management capabilities to support schemes and
enhancing our communications offer, which has led to increased success in
winning larger schemes and growth in sales. Our continuing growth was also
supported by a significant increase in pension consolidation volumes. Our
flagship Governed Range, where most Workplace Pension customers are invested,
attracted net inflows of £3.2bn in 2024, building on the £3.2bn of net
inflows in 2023, with AUM at 31 December 2024 rising to £72bn (31 December
2023: £61bn). Our Workplace AUM grew 24% over 2024 to £31bn, reflecting
strong net inflows of £3.0bn and market growth.
During 2024, to support customers looking to consolidate their pension pots,
we made further enhancements to our online pension transfer hub, including
automating how requests are made to other providers, reducing turnaround times
for customers. We have also reduced the time and effort to complete transfers
by streamlining the process. An increasing number of customer requests are now
made digitally via our mobile app, giving customers the opportunity to manage
their pension savings in one place and simplifying how they plan for their
future.
We continued to develop tools to help customers gain a better understanding of
their financial position, building on the success of the Financial Wellbeing
service launched the previous year. These included the introduction of our
retirement income and lifestyle planner, and a calculator for customers to
establish their pension lump sum allowance. Between them we have seen over
10,000 customers utilising these services.
We have launched 'voluntary scheme pays' for Workplace Pension schemes,
allowing scheme members with an annual allowance charge to pay it from their
plan. We have also developed video benefit statements for Workplace customers
that provide a more creative digital representation of the information in
paper statements, as we seek to support customers to build their understanding
of their pension savings.
New business sales from Individual Pensions increased by 12% to £4,850m, with
26% growth in single premium transfers and non-advised drawdowns reaching
£643m. We saw an improved tax year end, and higher sales pre-Budget, as
customers sought to maximise their annual allowances. In December we launched
our new online service for advisers. Digitised illustrations, client alerts,
communications and digital drawdown capabilities are now available under the
service.
Protection
The overall size of the Individual Protection market decreased as a result of
lower mortgage sales. Our market share increased year on year as we continued
to evolve and improve our offering. 99% of protection claims were paid out
during 2024, providing £702m to over 61,000 customers and their families.
In July 2024, we completed the Part VII transfer of Aegon UK's closed book of
individual protection business, with nearly 400,000 customers transferring to
Royal London. We now support over 1.2 million advised protection customers and
continue to build on the strength of our proposition and reputation in this
area.
We have continued to focus on delivering good outcomes for customers
throughout their lives. Nearly a quarter of a million customers are now
registered on the My Royal London portal, enabling them to access valuable
information to help them understand their plans and options. We have had a
particular focus on ensuring that customers who are considering cancelling
their policies understand the valuable benefits they could lose. This has led
to many of them choosing to retain their policies and reduce their cover,
instead of cancelling completely.
We also help advisers by notifying them when customers' premiums have stopped,
to allow them to explore alternative options to support customers' financial
resilience. Enhancements to our proposition in 2024 included a refresh of our
Income Protection proposition, to enable more customers to have the right
cover, online trust arrangements to include whole of life cover and, in an
industry first, allowing people cohabiting together to be named as
beneficiaries. We have also introduced improvements to enable more accurate
pricing for ex-smokers and launched a new 'joint life second death' product -
which provides a payout on the second person covered in a joint policy if they
die or are diagnosed with a terminal illness - to support inheritance tax
planning.
Annuities and Later Life
We finalised an internal bulk purchase annuity buy-in transaction in January
2024 to insure a subset of members of the Royal London Group Pension Scheme.
Since then, we have continued to build our capabilities in this area,
announcing our entry into the external bulk purchase annuity market on 30
September 2024. During the second half of the year, we completed three full
scheme buy-in transactions with external pension schemes. In total, we
transacted over £500m of bulk purchase annuity premiums over 2024, including
£187m for external schemes. As the only mutual offering in the market, the
launch has been well received, and we already have a good pipeline of business
for 2025.
Our Individual Annuity proposition is available to longstanding customers
invested in the Royal London (CIS) Fund with pension policies that have
guaranteed annuity rates. The total new business volumes over 2024 were stable
at £165m (2023: £162m), in line with expectations.
Following the completion of our acquisition of the later life lending and
product specialists, Responsible Life Limited and Responsible Lending Limited,
at the end of January 2024, we rebranded Responsible Lending under the Royal
London brand as Royal London Equity Release.
Reflecting our belief that impartiality can benefit customers, our advice
service, Royal London Equity Release Advisers, offers access to specialist
whole-of-market advisers for equity release and other later-life lending
products, such as retirement interest-only mortgages.
Longstanding customers
A key focus throughout 2024 for longstanding customers was on the Consumer
Duty. As a result of the improvements we have delivered in recent years, we
successfully met the requirements for closed books of business ahead of the 31
July 2024 deadline. We also established a new longstanding customer
proposition team to deliver oversight and improvements.
As well as meeting Consumer Duty requirements, we have been improving our
engagement with our longstanding customers. We have a strong focus on product
and experience improvement and are committed to ensuring that our longstanding
customer proposition evolves to continue to meet their changing needs.
Looking ahead
Changes announced in the UK Autumn Budget, such as bringing pensions under the
inheritance tax regime, are a timely reminder of the value of independent
financial advice. However, we recognise it is not affordable or accessible for
all, so we continue to invest in financial guidance and embedding this into
our digital tools and experiences. We also welcome the FCA's ongoing work to
introduce 'targeted support' as another option for customers, bridging the gap
between the guidance and full advice available today, to get the help they
need. We believe that by developing digital tools, alongside continuing to
invest in underlying technologies, we will help our customers and advisers to
navigate short-term challenges, supporting the ability of our customers to
build their financial resilience.
Asset Management
Market overview
For much of 2024, market focus was on high inflation across developed
economies and the use of higher interest rates by central banks to combat
these inflationary pressures. The year began with market expectations that
inflation would fall sharply and that central banks would cut interest rates
early and several times. These expectations changed as the year progressed,
with inflation data generally higher than expected with central banks only
starting to cut rates in the summer.
In the UK Institutional market we operate in, continued high interest rates
coupled with actions taken post the LDI crisis in 2022 mean that many pension
schemes have closed their funding gaps sufficiently to move to buy-out. The
consequence of this is that asset managers such as RLAM lose directly managed
assets as companies move to insured solutions. However, RLAM benefits from
managing the assets for the Group's bulk purchase annuities proposition.
Further pooling within Local Government Pension Schemes announced by the
government also poses additional risks to our business. As a result, we
continue to diversify and grow our distribution capability outside the UK,
seeking opportunities in established markets such as Australia.
Within the wider investment management sector, several longer running trends
are still evident, including the move from domestic to globally focused
strategies, increased allocations to private market assets and a preference
for passive over active management in core asset classes. While the pace
behind sustainable investing has slowed, clients remain interested in climate
change and the journey towards net zero.
Investors are increasingly looking for personalised investment solutions
rather than off-the-shelf products and are achieving this through developing
deeper relationships with fewer managers. Our insurance heritage means we
already offer solution-orientated products to our parent and consider
ourselves to be in a prime position to externalise this capability.
Personalisation is also becoming key for all our clients across marketing
engagement, the sales process, customer engagement and retention. Improving
our client experience remains a key part of our plans and we intend to further
invest in the technology which supports our client-facing functions.
Business performance
Operating profit decreased in 2024 to £59m (2023: £62m). While revenues
increased driven by strong markets, we have continued to build capability
organically in our existing Real Estate business, where we are developing into
alternative segments, and in our new Private Assets business.
Our strategy to expand in private markets has progressed well, with the
recruitment of key personnel in 2024, and we expect to launch a range of new
products and sub-strategies in 2025. While this requires a significant initial
investment in capability, it further diversifies the business from our core
liquid asset capability and increases fee margins in an increasingly fee
constrained environment.
There were net external outflows in Global Equities of £4.3bn during the year
following the departure of a number of members of the Global Equities team.
While significant levels of AUM have been retained and we have successfully
recruited new members of the team, there will be a full year impact on
revenues in 2025 from the outflows during 2024. Our strategy to grow
investment capabilities while focusing on delivering good outcomes for clients
and providing outstanding customer service is unchanged, and there is no
change to the investment approach which underpins our equity capabilities.
Our Property team has an established track record as a long-term investor in
Real Estate and we have extended this with the purchase of our first natural
capital asset, acquiring one of the UK's largest prime farmland assets for
£260m. We also made the first investments into our UK Living strategy with
the purchase of three sites in Bracknell, Slough and Barking, which will
result in the provision of over 500 apartments.
Flows and funds
Delivering above-benchmark investment performance is central to our ability to
attract and retain clients for the long-term success of the business.
Investment performance of actively managed funds(4) remains good with 60%
(2023: 96%) outperforming their three-year benchmark on an AUM weighted basis
over the three years to 31 December 2024. Consistent with previous years, this
measure is calculated using a weighted average of active assets under
management for funds with a defined external benchmark. The equally weighted
measure, which measures the number of funds outperforming their three-year
benchmark divided by the total number of in-scope funds, was 81% (2023: 89%).
Peer rankings are positive for key open-ended investment companies (OEICs),
with 64% (2023: 87%) of funds in the top two quartiles over the three-year
period.
The Group's assets under management grew over the year to £173.4bn (2023:
£162.3bn), driven predominantly by positive market movements of £12.1bn
offset by net outflows of £1.0bn.
Net outflows over the year of £1.0bn (2023: net inflows of £4.2bn) comprised
£2.4bn of external net outflows and £1.4bn of internal net inflows. Net
flows were impacted by £4.3bn of external net outflows from Global Equities
strategies. External net inflows across other strategies improved to £1.9bn
(2023: £0.7bn) reflecting the benefits of our diversified capabilities and
included net inflows into Property and Sterling Credit. Our Wholesale team
also performed well in the year being the top active asset manager b (#_ftn2)
in the UK for gross flows in this channel in 2024.
Internal net inflows increased to £1.4bn (2023: £0.9bn) driven by positive
net Workplace Pensions inflows supported by the bulk purchase annuity buy-in
policies transacted with the trustees of the Royal London Group Pension Scheme
(RLGPS) in January and with other third-party pension schemes.
Responsible investment
Our Asset Management business adopts a distinct approach to active management.
As part of a customer-owned mutual, it is not driven by short-term shareholder
demands. Instead, we prioritise our clients, focusing on long-term investment
returns. We are committed to responsible investing. We believe that
well-managed companies make better long-term investments. Being trusted
stewards of our clients' assets has been central to our history and will
continue to be vital in our future. This aligns with Royal London's strategic
goals which naturally support a strong responsible investment ethos.
We believe that effective responsible investment benefits society and yields
better results for our investors. Recognising the opportunities in this area,
we are committed to evolving our approach, investing in our people and
infrastructure to contribute to a sustainable world. For example, we applied a
low-carbon and governance tilt strategy to our £5.6bn c (#_ftn3) Emerging
Market equities fund in December. Most of the assets are within RLMIS
portfolios, with the solution expected to reduce our carbon exposure.
However, we also acknowledge the limitations of our influence, which is why we
believe transparency is essential in our messaging to customers, clients and
society.
Looking ahead
As a predominantly UK business, expanding our distribution capability and
improving client experience is key to future growth. We will make further
investments in technology in our client-facing functions following the
successful implementation of the BlackRock Aladdin investment management
technology platform in 2023 and will extend our ability to service overseas
clients, for example in Australia where we have assets under management of
£2bn.
We will also continue to invest for the longer term in new capabilities to
support the insurance business and external clients. This ongoing investment
will be funded by the profits of the existing business over the next two to
three years but will support further growth in the future.
Ireland
Market overview
The economy in Ireland remained strong in 2024, with Modified Domestic Demand,
a measure of underlying Irish economic performance, showing growth of just
over 3%. The Irish government implemented a number of cost of living benefits
which, when coupled with reductions in inflation and cuts in European Central
Bank (ECB) interest rates, were positive for consumers.
Economic growth had a positive impact on the overall life assurance market in
Ireland, for both protection and pension business product lines in which Royal
London Ireland is active. Financial brokers, the only distribution channel
used by Royal London Ireland, continue to retain the largest share of the
market.
Business performance
2024 was another successful year for our business in Ireland, delivering a 29%
growth in new business sales to £297m. Our continuing new business growth
across Protection and Pensions, combined with lower investment costs as the
development of our Pensions proposition concluded, resulted in operating
profit doubling to £10m (2023: £5m).
The strength of our holistic Protection offering, aided by launching a range
of service and customer-centric product enhancements, meant we retained our
position as the largest provider of protection to financial brokers, but by
mid-year had also grown to become the largest provider of protection in
Ireland overall.
Our Pensions business, which was launched in September 2022, has seen positive
progress throughout 2024 and in November we launched the next phase of our
Pensions business in Ireland, a regular premium Personal Retirement Savings
Account (PRSA), which was built using insights gained from broker and consumer
research. To support its launch, we ran a nationwide advertising campaign on
national and local radio, local press and online, encouraging people to
contact a financial broker for independent financial advice.
Protection
Protection new business sales for 2024 were £188m (2023: £179m). We remained
focused on delivering service excellence and proposition enhancements, which
included improvements to our Specified Serious Illness offering. This now
offers coverage for 112 illnesses, including 13 new cancer-related partial
payments, which are more than those offered by any other provider in the Irish
market. We were able to deliver these developments without any impact on our
price positioning. We also made improvements to our product that combines
Specified Serious Illness covers with Mortgage Protection, adding dual and
conversion options, based on broker and customer insight and feedback.
As a result, we have seen an increase in brokers placing new business for
these product lines with us and continue to see positive activity through
other Protection product propositions, which allow customers and their
families to protect themselves and build their financial resilience.
In July, we added a new Protection portal for customers, enabling them to
receive their policy documents online rather than through the post. As well as
helping to make things more convenient for customers, this also supports
efforts within our business to reduce paper use.
In 2024, we paid out 98% of claims, £49m in total. Our Helping Hand service
continued to offer additional support by providing access to nurse advisers,
counselling and other valuable services.
Pensions
Throughout 2024, we continued to work with financial brokers to highlight the
strength of our Pensions product, fund, service and technology offering, as we
reach our second full year operating in the pensions market. In May 2024, we
announced our second ValueShare award, the Ireland equivalent of ProfitShare,
resulting in a boost to customers' policies with an uplift of 0.13% for all
those eligible. ValueShare is unique in Ireland and demonstrates the tangible
benefits of our mutuality.
The strength of our proposition is recognised and we increased the number of
brokers supporting us by 78% in 2024, helping to grow sales volumes for our
Approved Retirement Fund (ARF) and Personal Retirement Bond (PRB). As a
result, our Pensions new business sales more than doubled to £109m (2023:
£51m).
In November 2024, we launched the second phase of our Pensions business in
Ireland through the introduction of our PRSA, designed to provide a regular
premium product that offers flexibility for customers. It is suitable for a
range of people, from the self-employed to a company director or employees who
are not members of a company pension scheme.
We worked closely with financial brokers to design our PRSA and PRSA AVC
products and to develop the pricing model, fund offerings, personalised
service, and features, like ValueShare. Initial feedback from brokers has been
extremely positive given the additional choice provided to their clients.
Looking ahead
The Irish life and pensions market continues to be driven by enhanced digital
journeys and an expanded range of solutions. We remain a firm advocate of the
benefits of independent financial advice and are focused on delivering the
best possible outcomes for customers and brokers. We are committed to
continuing to deliver outstanding customer service while enhancing our
Protection and Pensions offerings to meet customers' evolving needs.
Financial Review
Group operating profit before tax for the year ended 31 December 2024
increased to £277m (2023: £249m), supported by a growing book of in-force
business and increased new business contribution across all our main product
lines. Strong growth in Workplace Pensions due to a rise in both transfer
volumes and the number of new schemes won helped new business contribution
grow overall by 14% to £209m. This was also supported by our successful
launch into the bulk purchase annuities market.
Asset Management contribution increased by £3m driven by one-off fees
received for new mandates and increases in average AUM due to market growth
despite overall net outflows. Whilst gross inflows increased by £1.9bn,
supported by net inflows within our Wholesale business and Property
strategies, there were overall net outflows for the period of £1.0bn,
primarily driven by £4.3bn of net external outflows in our Global Equities
strategies.
ProfitShare for the year totalled £181m (2023: £163m), with underlying
allocation rates maintained at prior year levels, again demonstrating our
consistent approach to sharing returns with eligible customers.
The transfer to the fund for future appropriations (FFA) was £167m (2023:
£382m), with positive economic movements largely offset by ProfitShare
allocations. These results demonstrate our ability as a mutual to deliver
consistent and sustainable returns for our members, while also taking a
longer-term view and continuing to invest in our future capabilities.
Our capital position remains robust with an estimated Solvency II Investor
View capital cover ratio of 203% (31 December 2023: 218%) with our hedging
programmes continuing to operate as intended. The reduction is mainly driven
by changes to the level of equity hedging, as we seek to manage the capital
position within our capital management framework. The estimated Solvency II
Regulatory View capital cover ratio decreased to 196% (31 December 2023:
206%).
Group operating profit before tax
The following table shows the Group operating profit before tax for the year
ended 31 December 2024. Further details of the Group's segmental reporting is
included in note 2 of the Financial Statements.
2024 2023 Change
£m £m £m
Long-term business
New business contribution 209 184 25
Existing business contribution 289 236 53
Contribution from AUM and other businesses 81 84 (3)
Business development costs (54) (40) (14)
Strategic development costs (71) (61) (10)
Amortisation of intangibles (17) (6) (11)
Result from operating segments 437 397 40
Corporate items (73) (63) (10)
Financing costs (87) (85) (2)
Group operating profit before tax 277 249 28
New business contribution
New business contribution increased to £209m (2023: £184m) due to an
increase in trading volumes across our key businesses, with new business sales
increasing on a present value of new business premiums (PVNBP) basis by 17% to
£10,804m (2023: £9,253m). We saw a 19% increase in Workplace Pensions due to
a rise in both transfer volumes and the number of new schemes won. Sales of
Individual Pensions also grew by 12%, driven by an increase in volumes in our
Income Release product. New business sales were further boosted by our entry
into the bulk purchase annuities market, delivering £187m of sales in the
second half of the year. Overall, new business margin reduced slightly to 1.9%
(2023: 2.0%).
New business contribution PVNBP New business margin
2024 2023 2024 2023 2024 2023
£m £m £m £m % %
Individual Pensions 66 65 4,850 4,346 1.4 1.5
Workplace Pensions 85 71 4,459 3,753 1.9 1.9
Protection 27 23 846 760 3.2 3.0
Bulk Purchase Annuities 7 - 187 - 4.0 -
Individual Annuities and other 11 14 165 164 6.6 8.5
UK 196 173 10,507 9,023 1.9 1.9
Ireland 13 11 297 230 4.3 4.8
Total 209 184 10,804 9,253 1.9 2.0
UK
Individual Pensions new business sales increased by £504m to £4,850m, driven
by increased volumes in our non-advised Income Release proposition, with
non-defined benefit single premium transfers performing well. While the growth
in Income Release volumes resulted in a slight decrease in new business margin
to 1.4%, overall new business contribution increased to £66m (2023: £65m).
Workplace Pensions saw growth in new business sales of 19% due to increased
transfer volumes, partly due to an increasing number of customer requests
through our mobile app, combined with growth in the number of new schemes won
during the year by 4%. This resulted in an increase in new business
contribution to £85m (2023: £71m), with margins maintained at 1.9%.
Protection new business sales increased by 11% with higher volumes across our
whole of life, menu and funeral plan propositions, with increased volumes
within our large case proposition. New business margin increased to 3.2% due
to the change in product mix, which resulted in new business contribution
increasing to £27m (2023: £23m).
Following our launch into the bulk purchase annuities market during the second
half of 2024, we have successfully transacted with three external pension
schemes, generating new business sales of £187m at a new business margin of
4.0%. Both current and prior year metrics exclude the impact of bulk purchase
annuity buy-ins transacted with the Group's defined benefit pension schemes.
Individual Annuities and other new business sales were £165m (2023: £164m).
New business contribution decreased to £11m (2023: £14m) due to increased
acquisition costs resulting in margins declining to 6.6% (2023: 8.5%).
Ireland
New business sales grew to £297m (2023: £230m), primarily through increased
Pensions sales of £109m (2023: £51m) as we continue to build market share
since the launch of the proposition in 2022. Protection new business sales
were £188m (2023: £179m) as we maintained our position as the market leader
in the Irish intermediary market. New business contribution increased to
£13m, while new business margin decreased to 4.3% (2023: 4.8%) reflecting the
continued growth of the Pensions business.
Existing business contribution
Existing business contribution increased to £289m (2023: £236m), summarised
in the table below.
2024 2023 Change
£m £m £m
Expected return 255 194 61
Experience variances and assumption changes (9) 28 (37)
Modelling and other changes 43 14 29
Total 289 236 53
Expected return for the year increased by £61m due to the growth in the
investment portfolio during 2023, meaning there were higher surplus assets at
the start of 2024, and enhancements to the calculation methodology, partially
offset by a small overall reduction in risk premia.
Experience variances and assumption changes continued to be relatively benign
overall with a charge of £(9)m (2023: gain of £28m). This includes the
positive impact of higher than expected Workplace Pensions premiums received
during the year which was more than offset by a charge for persistency
assumption changes, particularly in respect of expectations over the assumed
level of pension transfers as customers consolidate their pension pots. The
expense assumptions have also been updated to take account of the higher
levels of National Insurance Contributions from April 2025 announced in the
Autumn Budget.
Modelling and other changes were a gain of £43m (2023: £14m) as part of
ongoing activities to ensure our actuarial models remain as reliable as
possible.
Contribution from AUM and other businesses
Contribution from AUM and other businesses decreased to £81m (2023: £84m).
Our Asset Management segment delivered a £3m increase due to market growth
and higher performance fees, offset by the impact of net outflows in Global
Equities following the departure of a number of members of the Global Equities
team in the first half of the year. Contribution from our Asset Management
businesses is expected to be lower in 2025 as a result of the full year impact
on revenues of the Global Equities outflows in 2024 and the ongoing build of
new capabilities which will support further growth in the future.
The contribution from our other businesses reduced following the sale of the
general insurance and healthcare elements of the Police Mutual business in
February 2024 and the investment we are making into our Equity Release
propositions following our acquisition of the remaining stakes in Responsible
Life Limited and Responsible Lending Limited.
Business development costs
Business development costs increased to £54m (2023: £40m) as we continued to
strengthen our propositions in our UK and Asset Management segments. In the UK
we have continued to focus on enhancing our Pensions and Protection
propositions and delivering the changes required by Consumer Duty for our
longstanding customers. Asset Management has invested in new propositions and
capabilities in addition to continuing to invest data and technology.
Strategic development costs
Strategic development costs of £71m (2023: £61m) represent the costs of
ongoing investment we are continuing to make across our businesses. This
includes £58m of costs in our UK business (2023: £40m) including the
development of our Bulk Purchase Annuity capabilities and the continuing
investment into our Pensions propositions with the launch of the new online
service for advisers incorporating streamlined 'quote and apply'
functionality. Other costs in the UK include investments into our underlying
Protection systems. Asset Management costs of £8m (2023: £15m) relate to the
decommissioning of legacy platforms following the successful implementation of
the BlackRock Aladdin investment management technology platform in 2023. Costs
in Ireland include the final phase of the development of our Pensions
proposition of £5m (2023: £6m).
Amortisation of intangibles
Amortisation of intangibles relates to capitalised software assets which
became available for use in the second half of 2023, resulting in a higher
charge than the prior year.
Corporate items and financing costs
The net charge for Corporate items of £73m (2023: £63m) includes costs
arising from strengthening the Group's operational resilience, investment in
our data capabilities, regulatory change costs and defined benefit pension
scheme items.
Financing costs of £87m (2023: £85m) represent the interest payable on the
Group's subordinated debt and have increased due to the higher interest costs
of the RT1 debt issued in May 2023 as compared to the previous Tier 2 debt
that was repaid.
Reconciliation of operating profit before tax to transfer to the FFA
The transfer to the FFA of £167m (2023: £382m) was lower than our operating
profit as positive economic movements were more than offset by ProfitShare
allocations and tax.
2024 2023 Change
£m £m £m
Group operating profit before tax 277 249 28
Economic movements 179 391 (212)
Charges arising from mergers and acquisitions (15) (10) (5)
ProfitShare (181) (163) (18)
Profit before tax and before transfer to the fund for future appropriations 260 467 (207)
Tax attributable to long-term business (93) (85) (8)
Transfer to the fund for future appropriations 167 382 (215)
Economic movements
Economic movements include short-term investment return variances from our
longer-term expected return assumptions on the surplus assets of the Royal
London Main Fund and the impact of changes to economic assumptions used to
value liabilities. This amount therefore includes the impact on the FFA of
market value movements and interest rate changes over the year.
During 2024, economic movements were a gain of £179m (2023: £391m). This
gain was mainly driven by changes to economic assumptions used to value
liabilities, primarily due to the increase in risk-free rates over the year of
between 70 and 90bps depending on duration, partially offset by investment
returns being slightly below our longer-term expected return assumptions.
Charges arising from mergers and acquisitions
Charges arising from mergers and acquisitions comprises amortisation of
goodwill and other gains or losses arising from corporate transactions,
including the sale of the general insurance and healthcare elements of Police
Mutual to Bspoke Group, the acquisition of the remaining stakes in Responsible
Life Limited and Responsible Lending Limited during the year and adjustments
in respect of prior acquisitions.
Responsible Life is a later life mortgage broker, while Responsible Lending is
a later life mortgage lender. The consideration payable for the transaction
was an initial £12m, plus up to an additional £11m based on subsequent
business performance. This resulted in the recognition of goodwill of £18m
which is now being amortised.
ProfitShare
ProfitShare represents an allocation of part of the Group's profits by means
of a discretionary enhancement to asset shares and unit fund values of
eligible policies.
ProfitShare allocation rates for 2024 were maintained, with total ProfitShare
for the year increasing to £181m (2023: £163m). The enhancements to
qualifying policies from ProfitShare were 1.2% for existing With Profits
policies taken out prior to 2022 and 0.3% for With Profits policies taken out
subsequently (2023: 1.2% and 0.3% respectively). Unit-linked policies received
an enhancement of 0.15% (2023: 0.15%).
Balance sheet
Royal London's balance sheet position is robust. Our total investment
portfolio increased in value to £124.6bn (31 December 2023: £113.7bn), as a
result of net internal flows and increases in fair value primarily in equity
and bond asset classes. At 31 December 2024, £1,818m of assets were ring
fenced (31 December 2023: £1,347m) to back annuitant liabilities net of
reinsurance of £1,748m (31 December 2023: £1,279m). The ring-fenced
portfolio of assets continues to grow as our Bulk Purchase Annuities
proposition builds scale and it includes a mix of corporate bonds, gilts,
cash, commercial real estate loans and private placement debt. We expect to
add additional asset classes to the ring-fenced portfolio over the course of
2025.
Our financial investment portfolio remains well diversified across a number of
financial instrument classes, with the majority invested in equity securities
and fixed income assets.
A significant portion of our debt securities portfolio is in high-quality
assets with a credit rating of 'A' or above. In our non-linked portfolio, 78%
(31 December 2023: 77%) of our non-linked debt securities and 69% (31 December
2023: 68%) of our non-linked corporate bonds had a credit rating of 'A' or
better at 31 December 2024. There have been no significant defaults in our
corporate bond portfolio.
Assets under management
Assets under management (AUM) increased to £173bn (31 December 2023:
£162bn), driven by positive market movements of £12bn offset by net outflows
of £1bn.
Gross inflows Net inflows/(outflows)
2024 2023 2024 2023
£m £m £m £m
External flows 20,280 20,187 (2,432) 3,308
Internal flows 11,545 9,717 1,395 895
Total 31,825 29,904 (1,037) 4,203
External net outflows were £2.4bn (2023: £3.3bn net inflows) which were
impacted by £4.3bn of net outflows from Global Equities strategies, as
compared to net inflows of £2.7bn during 2023. Net inflows from other
strategies totalled £1.9bn (2023: £0.6bn), including £0.4bn into our
Property strategies and £1.4bn into Sterling Credit.
Internal net inflows increased to £1.4bn (2023: £0.9bn) driven by positive
net Workplace Pensions inflows and the bulk purchase annuity buy-in policies
transacted in the year.
Investment returns
Equity markets continued to rise over 2024, ending the year close to all-time
highs following consecutive years of double-digit returns. The S&P 500
index gained over 25% on the year, with a small number of large technology
stocks responsible for a significant portion of the overall market gains, a
trend which accelerated in the fourth quarter following the US election.
Although there were two rate cuts in the UK during the year, these largely
only impacted short-dated gilts, with longer equivalents rising, due to
inflation not decreasing as expected and higher issuances than expected. As a
result, UK 30-year gilt yields ended the year at 25-year highs, bringing
overall returns into negative territory. However, corporate bonds produced
positive returns, more than offsetting the negative impact of higher gilt
yields with the higher yield available on this asset class.
In this environment, the overall return on assets in the RL Main Fund was 5.1%
in 2024.
Pension schemes
The Group operates three defined benefit pension schemes. The net surplus of
the three schemes at 31 December 2024 was £164m (31 December 2023: £177m).
The largest scheme, the Royal London Group Pension Scheme (RLGPS), had a
surplus of £108m as at 31 December 2024 (31 December 2023: £121m). The
scheme remains well funded, with high levels of hedging within the scheme and
relatively low allocations to growth assets.
The Group's two other schemes operate for former Royal Liver employees. The
Royal Liver UK and Royal Liver Ireland schemes are similarly well funded and
had surpluses as at 31 December 2024 of £23m and £33m respectively (31
December 2023: £23m and £33m).
On 31 January 2024 the trustees of the RLGPS Scheme transacted a bulk purchase
annuity buy-in policy with RLMIS, covering approximately 18% of liabilities
related to the scheme, following the full buy-in of the Royal Liver UK scheme
in 2023.
Strength of our capital base
The strength of our capital base is essential to our business, both to ensure
we have the capital to fund further growth and to give peace of mind to our
customers that we can meet our commitments to them.
Managing our capital base effectively is a key priority for us. In common with
others in the industry, we present two views of our capital position: an
Investor View for analysts and investors in our subordinated debt, and a
Regulatory View where the closed funds' surplus is excluded as a restriction
to Own Funds.
We review our capital management framework regularly, although we would not
expect the ranges we manage our capital within to change frequently. On an
Investor View basis, we manage the solvency coverage ratio (the investor
ratio) within an acceptable range, the lower end of which is 165%. In
practice, we expect to operate with an investor ratio above 180% under normal
circumstances. Given the business is managed for the benefit of its members on
a long-term basis, the level of the investor ratio of the business may be
higher to provide flexibility for future investment in the business.
The capital position of the closed fund is managed on a standalone basis. We
expect the Regulatory View solvency coverage ratio to be above 150% under
normal circumstances.
At 31 December 2024, the estimated Solvency II Group Investor View capital
cover ratio was 203% (31 December 2023: 218%) and the estimated Solvency II
Group Regulatory View capital cover ratio was 196% (31 December 2023: 206%).
Estimated solvency surplus on both the Group Investor and Regulatory View was
£2,745m (31 December 2023: £2,880m).
Key metrics 31 December 2024 31 December 2023
(estimated)
Regulatory View solvency surplus £2,745m £2,880m
Regulatory View capital cover ratio 196% 206%
Investor View solvency surplus £2,745m £2,880m
Investor View capital cover ratio 203% 218%
The reduction in both Regulatory and Investor View cover ratios is mainly
driven by changes to the level of equity hedging which reduced both ratios by
8%, as we seek to manage the capital position within our capital management
framework. In addition, the capital ratio includes the effect of changes in
the short-term asset mix of the funds over the year end and the initial
capital strain from writing bulk purchase annuities. We expect the investor
ratio to reduce gradually over the short term as we write more bulk purchase
annuity business and continue to invest in additional capabilities.
We continue to monitor closely our capital position given market volatility
and wider global economic pressures. Scenario testing performed as part of our
regular capital management activities demonstrates that our capital position
continues to be robust under a number of severe but plausible market
scenarios.
The estimated Solvency II leverage ratio d (#_ftn4) is 22% (31 December 2023:
22%), with the level of outstanding debt unchanged over the year.
Sensitivity analysis of Group Solvency II capital position
Our capital position is sensitive to changes in economic and non-economic
assumptions. The 'Solvency II Investor View sensitivities' table below sets
out a sensitivity analysis of the estimated capital cover ratio and solvency
surplus based on possible different scenarios. The results of the sensitivity
analysis show that the Group capital position is not materially impacted even
in the event of significant external market volatility.
The 2024 Single Group Solvency and Financial Condition Report (SFCR) will be
published on our website in April 2025 and will meet disclosure requirements
for both the Group and the Company.
Scenario e Investor View capital cover ratio Impact on solvency surplus
(%) (£bn)
Base scenario: 31 December 2024 203 2.7
25% decrease in equity investments 6 (0.1)
15% decrease in property prices (1) (0.1)
100bps rise in interest rates f 3 -
100bps fall in interest rates( f ) (5) (0.1)
25bps increase in government bond yields g (1) -
200bps widening in credit spreads h 3 -
20% of assets downgrading in MA Portfolio i (1) -
15% fall in GBP exchange rates j (3) -
Solvency II reform
Following the changes to the Solvency II risk margin at 31 December 2023,
further changes have been implemented by the PRA to reform Solvency II
reporting over 2024. The changes from the reform should allow capital to be
used more effectively, while continuing to ensure that customers are protected
and providing simplification to processes for insurers in key areas such as
Internal Model change and reporting.
Over 2024, we have implemented changes linked to the MA portfolio to allow for
more granular assessments of credit ratings and the removal of the cap applied
on sub-investment grade assets. We have also reviewed the fundamental spread
used to calculate the MA to ensure it reflects all retained risks. None of
these changes are material given our current MA portfolio and the assets which
we hold.
Rating agencies
Two leading agencies, Standard & Poor's (S&P) and Moody's, regularly
issue ratings on us. We carry an 'A' rating from S&P Global Ratings with a
stable outlook and an 'A2' rating with Moody's, also with a stable outlook.
Tax
We are a major taxpayer and recognise that taxation is an essential way
businesses and citizens contribute to society.
We are subject to various taxes, including corporate taxes, employment taxes
on salaries and indirect taxes such as VAT. The corporation tax that the
Company pays is a proxy for policyholder tax liabilities, paid on behalf of
certain life assurance policyholders. For these life policies, tax is charged
on taxable income, less expenses, and is largely driven by market movements.
This tax is paid directly to HMRC by the Company as corporation tax on behalf
of policyholders.
For pension policies, returns to the policyholder accumulate without incurring
a similar corporation tax charge. This is part of the UK government's strategy
of incentivising saving for retirement. Tax is paid directly by the pension
policyholder when they receive their pension.
In 2024, the total tax contribution of the Group was £651m (2023: £566m),
made up of the taxes borne of £132m (2023: £92m), i.e. taxes incurred by the
Group that impact our results, and taxes collected of £519m (2023: £474m),
that are administered by the Group and collected from others for onward
payment to HMRC and other tax authorities.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are set out in the
'Principal risks and uncertainties' section of the Strategic Report within
Royal London's 2024 Annual Report and Accounts (ARA)
(royallondon.com/about-us/our-performance/investor-relations/
(https://www.royallondon.com/about-us/our-performance/investor-relations/) ).
The risks and uncertainties continue to be monitored and managed through our
risk management system, including those related to the economy and Royal
London's key markets, the risks associated with climate change and cyber
security, and the political and regulatory environment.
Forward-looking statements
Royal London may make verbal or written 'forward-looking statements' within
this announcement, with respect to certain plans, its current goals and
expectations relating to its future financial condition, performance, results,
operating environment, strategy and objectives. Statements that are not
historical facts, including statements about Royal London's beliefs and
expectations and including, without limitation, statements containing the
words 'may', 'will', 'should', 'continue', 'aims', 'estimates', 'projects',
'believes', 'intends', 'expects', 'plans', 'seeks' and 'anticipates', and
words of similar meaning, are forward-looking statements. The statements are
based on plans, estimates and projections as at the time they are made and
involve unknown risks and uncertainties. These forward-looking statements are
therefore not guarantees of future performance and undue reliance should not
be placed on them.
By their nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances, some of which will be
beyond Royal London's control. Royal London believes factors could cause
actual financial condition, performance or other indicated results to differ
materially from those indicated in forward-looking statements in the report.
Potential factors include but are not limited to: geopolitical conditions; UK
and Ireland economic and business conditions; future market-related risks such
as high interest rates; and the performance of financial markets generally;
the policies and actions of governmental and regulatory authorities (for
example, new government initiatives); the impact of competition; the effect on
Royal London's business and results from, in particular, mortality and
morbidity trends, lapse rates; and the timing, impact and other uncertainties
of future mergers or combinations within relevant industries. These and other
important factors may, for example, result in changes to assumptions used for
determining results of operations or re-estimations of reserves for future
policy benefits.
As a result, Royal London's future financial condition, performance and
results may differ materially from the plans, estimates and projections set
forth in Royal London's forward-looking statements. Royal London undertakes no
obligation to update the forward-looking statements in this announcement or
any other forward-looking statements Royal London may make. Forward-looking
statements in this announcement are current only at the date on which such
statements are made. This announcement has been prepared for the members of
Royal London and no one else. None of Royal London, its advisers or its
employees accept or assume responsibility to any other person and any such
responsibility or liability is expressly disclaimed to the extent not
prohibited by law.
The Royal London Mutual Insurance Society Limited is registered in England and
Wales (99064) at 80 Fenchurch Street, London, EC3M 4BY. www.royallondon.com
(http://www.royallondon.com)
Financial Statements
Consolidated statement of comprehensive income
for the year ended 31 December 2024
Group
Technical account - long-term business 2024 2023
£m £m
Gross premiums written 1,851 1,481
Outwards reinsurance premiums (358) (458)
Earned premiums, net of reinsurance 1,493 1,023
Investment income 4,643 6,227
Unrealised gains on investments 5,046 2,443
Other income 728 626
Total income 11,910 10,319
Claims paid
Gross claims paid (3,318) (3,095)
Reinsurers' share 616 606
Change in provisions for claims
Gross amount 11 23
Reinsurers' share 46 (30)
Claims incurred, net of reinsurance (2,645) (2,496)
Change in long-term business provision, net of reinsurance
Gross amount 268 22
Reinsurers' share 12 36
280 58
Change in technical provision for linked liabilities, net of reinsurance (8,247) (6,383)
Change in technical provisions, net of reinsurance (7,967) (6,325)
Change in non-participating value of in-force business 309 302
Net operating expenses (652) (737)
Investment expenses and charges (409) (346)
Other charges (286) (250)
Total operating expenses (1,347) (1,333)
Profit before tax and before transfer to the fund for future appropriations 260 467
Tax attributable to long-term business (93) (85)
Transfer to the fund for future appropriations 167 382
Balance on technical account - long-term business - -
Other comprehensive income, net of tax:
Remeasurement of defined benefit pension schemes (7) (22)
Foreign exchange rate movements on translation of Group entities (10) (5)
Deduction from the fund for future appropriations (17) (27)
Other comprehensive income for the period, net of tax - -
Total comprehensive income for the period - -
As a mutual company, all earnings are retained for the benefit of
participating policyholders and are carried forward within the fund for future
appropriations. Accordingly, the total comprehensive income for the period is
always £nil after the transfer to or deduction from the fund for future
appropriations.
Balance sheets
as at 31 December 2024
Group Company
2024 2023 2024 2023
£m £m £m £m
ASSETS
Intangible assets
Goodwill 33 19 17 19
Negative goodwill (25) (32) (3) (5)
8 (13) 14 14
Other intangible assets 134 143 109 114
142 130 123 128
Non-participating value of in-force business 3,085 2,776 3,085 2,775
Investments
Land and buildings 75 109 75 109
Investments in Group undertakings and participating interests - - 14,040 14,502
Other financial investments 33,275 33,348 19,884 19,492
33,350 33,457 33,999 34,103
Assets held to cover linked liabilities 91,279 80,228 91,113 80,169
Reinsurers' share of technical provisions
Long-term business provision 3,278 3,267 3,231 3,219
Claims outstanding 141 121 124 103
Technical provisions for linked liabilities (57) (47) (57) (47)
3,362 3,341 3,298 3,275
Debtors
Debtors arising out of direct insurance operations 21 50 19 47
Debtors arising out of reinsurance operations 61 92 46 73
Other debtors 3,280 2,341 3,161 2,128
3,362 2,483 3,226 2,248
Other assets
Deferred taxation 3 - - -
Tangible fixed assets 25 27 - -
Cash at bank and in hand 499 490 282 273
527 517 282 273
Prepayments and accrued income
Deferred acquisition costs on investment contracts 50 67 42 65
Other prepayments and accrued income 62 45 1 -
112 112 43 65
Pension scheme asset 164 177 164 177
Total assets 135,383 123,221 135,333 123,213
LIABILITIES
Subordinated liabilities 1,284 1,283 1,284 1,283
Fund for future appropriations 4,256 4,106 4,529 4,432
Technical provisions
Long-term business provision 30,906 31,253 31,001 31,346
Claims outstanding 404 360 365 321
31,310 31,613 31,366 31,667
Technical provisions for linked liabilities 91,072 79,935 90,906 79,877
Provisions for other risks
Deferred taxation 107 46 109 49
Other provisions 176 177 172 173
283 223 281 222
Creditors
Creditors arising out of direct insurance operations 300 264 280 248
Creditors arising out of reinsurance operations 1,540 1,778 1,530 1,757
Amounts owed to credit institutions 27 48 27 47
Other creditors including taxation and social security 5,123 3,776 5,118 3,659
6,990 5,866 6,955 5,711
Accruals and deferred income 188 195 12 21
Total liabilities 135,383 123,221 135,333 123,213
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements of the Group have been prepared in accordance with
the recognition and measurement requirements of UK accounting standards,
including Financial Reporting Standard (FRS) 102, 'The Financial Reporting
Standard applicable in the United Kingdom and the Republic of Ireland' and FRS
103, 'Insurance Contracts'.
The accounting policies applied in the Financial Statements are the same as
those applied in the Group's 2024 ARA. The full UK GAAP accounting policies
can be found in the Group's 2024 ARA on the Royal London website
(royallondon.com/about-us/our-performance/investor-relations/
(https://www.royallondon.com/about-us/our-performance/investor-relations/) ).
The Results Announcement for the year ended 31 December 2024 does not
constitute statutory accounts as defined in Section 434 of the Companies Act
2006. The financial information in this Results Announcement has been derived
from the Group financial statements within the Group's 2024 ARA. The Group's
2023 ARA has been filed with the Registrar of Companies, and the 2024 ARA will
be filed in due course. The results on a UK GAAP basis for the full year 2024
and 2023 have been audited by KPMG LLP (KPMG) and PricewaterhouseCoopers LLP
(PwC) respectively, following KPMG's appointment as the Group's auditor for
the year ended 31 December 2024 onwards. KPMG and PwC have reported on the ARA
in 2024 and 2023 respectively. Both their reports were (i) unqualified, (ii)
did not include a reference to any matters to which they drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
The Financial Statements have been prepared on a going concern basis under the
historical cost convention, as modified by the inclusion of certain assets and
liabilities at fair value as permitted or required by FRS 102.
The Group regularly performs sensitivities and stress testing on a range of
severe but plausible scenarios. Stress testing has been performed on the
capital position for severe adverse economic and demographic impacts arising
over the short to medium term, and on the liquidity position for severe
adverse economic impacts over the short term. The most adverse scenarios
contain severe but plausible assumptions including adverse economic and
insurance risk impacts, prolonged effects from cost of living pressures and
subdued financial markets, significant third party failure and the effects of
climate change on economic and insurance risks. There are a range of
management actions, both in the RL Main fund and the closed RL (CIS)
With-Profits Fund, available to the directors in stress scenarios which could
be considered if there were a deterioration in the capital and/or liquidity
position of the Group, to restore the position back within risk appetite.
Sufficient liquidity is available to settle liabilities as they fall due and
the capital and liquidity positions remain sufficient to cover capital
requirements and liquidity requirements respectively in all scenarios tested.
Having considered these matters and after making appropriate enquiries, the
directors are satisfied that the Group has adequate resources to continue to
operate as a going concern for a period of at least 12 months from the date of
approval of the Financial Statements. For this reason, they consider it
appropriate to continue to adopt the going concern basis in preparing the
Financial Statements. The directors have also concluded that there are no
material uncertainties over the Group's ability to adopt the going concern
basis of accounting.
2. Segmental information
Operating segments
The operating segments reflect the level within the Group at which key
strategic and resource allocation decisions are made and the way in which
operating performance is reported internally to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been
identified as the Company's Board of Directors.
The activities of each operating segment are described below:
UK
The UK business provides propositions to customers, employers and pension
scheme trustees, primarily through intermediaries. Products offered include
workplace and individual pensions, as well as protection products and later
life offerings. From 2024, the UK business also provides a bulk purchase
annuity product to pension schemes via the scheme trustees.
Asset Management
The Asset Management business provides investment propositions to Royal
London's life and pensions customers and to external institutional and
wholesale clients, primarily through intermediaries.
Ireland
The Ireland business provides propositions to customers through brokers.
Products offered include individual pensions and protection products.
Operating profit before tax
A key measure used by the Company's Board of Directors to monitor performance
is operating profit before tax, which is classed as an Alternative Performance
Measure. The Company's Board of Directors consider that this facilitates
comparison of the Group's performance over reporting periods as it provides a
measure of the underlying trading of the Group.
Operating profit excludes short-term investment return variances. Expected
return therefore represents the longer-term investment return expected to be
generated by the net assets of the Royal London Main Fund based on our opening
economic assumptions applied to assets held at the start of the year. Any
differences between the expected and actual investment return are shown
outside of operating profit within Economic movements.
The operating profit by operating segment is shown in the following table.
Group - 2024
UK Asset Ireland Total
£m Management £m £m
£m
Long-term business
New business contribution 196 - 13 209
Existing business contribution 287 - 2 289
Contribution from AUM and other businesses (8) 89 - 81
Business development costs (38) (16) - (54)
Strategic development costs (58) (8) (5) (71)
Amortisation of intangibles (11) (6) - (17)
Result from operating segments 368 59 10 437
Corporate items (73)
Financing costs (87)
Group operating profit before tax 277
Group - 2023
UK Asset Ireland Total
£m Management £m £m
£m
Long-term business
New business contribution 173 - 11 184
Existing business contribution 235 - 1 236
Contribution from AUM and other businesses (2) 86 - 84
Business development costs (31) (8) (1) (40)
Strategic development costs (40) (15) (6) (61)
Amortisation of intangibles (5) (1) - (6)
Result from operating segments 330 62 5 397
Corporate items (63)
Financing costs (85)
Group operating profit before tax 249
From 1 January 2024, the results of RLUM Limited have been reported within the
Asset Management segment to reflect changes in the operational management of
this subsidiary. Previously the results of this subsidiary were reported
within the UK segment. To ensure consistency, the segmental reporting for the
year ended 31 December 2023 has been restated to reflect this change. This has
resulted in an increase in the result of the Asset Management segment, and
equivalent decrease in the result of the UK segment, of £31m for the year
ended 31 December 2023.
a Based on total 2022 premium income. International Cooperative and Mutual
Insurance Federation Global 500 Report, 2024
b Source: The Pridham Report December 2024
c As at 31 December 2024
d Solvency II leverage ratio is the Solvency II value of the Group's
outstanding debt (which is entirely subordinated liabilities) divided by the
Group's estimated Solvency II Own Funds (Regulatory View)
e Sensitivities include movements in the Transitional Measure on Technical
Provisions (TMTP), which was formally recalculated at 31 December 2024. The
sensitivities do not include any subsequent rebalancing of the asset
portfolio.
f Interest rate sensitivities assume that government and other bond yields
and risk-free rates all move by the same amount. Interest rates are allowed to
be negative.
g The government bond yield sensitivity assumes risk-free rates and other
yields remain constant. The Matching Adjustment rate and Volatility Adjustment
have been reassessed in the stressed scenario.
h The widening in credit spreads stress assumes a widening in all ratings
and an associated increase in the discount rate for the Royal London Group
Pension Scheme and Royal Liver pension schemes at 25% of the asset spread
stress. The Matching Adjustment rate and Volatility Adjustment have been
reassessed in the stressed scenario.
i The 20% assets downgrade scenario assumes a uniform downgrade across all
asset class holdings in the Matching Adjustment (MA) portfolio, with no
recovery in asset holdings. The MA rate has been reassessed in the stress
scenario.
j The fall in GBP exchange rates stress assumes an increase to the value of
assets held in currencies other than GBP by 15% in GBP terms.
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