Royal London slumps to loss as Covid-19 payouts mountwritten by Bella Palmer
Britain’s biggest mutual pensions and life insurance group, whose brands include Scottish Life and Scottish Provident, has eight million customers in the UK and Ireland
Britain’s biggest mutual pensions and life insurance group slumped to a £181 million loss before tax for the first half from a profit of £397m last year.
It paid out £8.5m in life insurance claims to the families of more than 1,200 customers whose deaths were attributed to Covid-19 and is setting aside £10m for future claims.
The loss was due to lower investment returns in the period and a reduction in discount rates used to value long-term business provisions leading to higher liability valuations.
Operating profit reduced to £36m in the first half (H1 2019: £90m), primarily driven by the reduction in new business volumes and increased investment in digital infrastructure.
Royal London, whose brands include Scottish Life and Scottish Provident, has eight million customers in the UK and Ireland.
New business sales were down 18%, primarily due to reduced pensions volumes particularly in Q2. Pension volumes decreased as economic uncertainty, stock market volatility and the national lockdown caused disruption to the services provided by intermediaries to their clients.
Workplace pension volumes were also lower as companies deferred decisions to move scheme providers.
Assets under management remained at £139bn at 30 June 2020 (YE19: £139bn) with net inflows of £997m offset by adverse market movements of £492m.
Barry O’Dwyer, CEO, who joined last year from Standard Life Aberdeen, said: Despite market volatility and economic uncertainty assets under management were stable at £139bn. Our capital position remains strong.
He said, new business sales for protection products grew by 15%, which was partly as a result of the pandemic reminding customers of the importance of life insurance, critical illness and income protection. Pension sales were lower as a consequence of the disruption to advisers’ ability to do business during lockdown.
In the first half of the year and despite the pandemic, we made progress on our strategic agenda, with the agreement to sell our platform business, Ascentric. We were also pleased to announce that Police Mutual would become part of Royal London. Both transactions are subject to regulatory approval, O’Dwyer said.
He said, Covid-19 will inevitably continue to have an impact on new business prospects.
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