Royal London’s new business sales of protection products fell by 35% year-on-year, according to the mutual’s interim results for H1 2023.
The results reveal new business from protection fell to £11m in the first half of 2023 from £12m in H1 2022, with protection product premiums down from £569m to £368m over the same period.
Cost of living pressures
The mutual blamed the reduction in protection new business sales in part to cost of living pressures. But it had also witnessed increasing interest from some advisers who traditionally have not focussed on protection. This was due to the rollout of the regulator’s Consumer Duty, with many now seeking to write business themselves or refer to a protection specialist.
The decline in protection new business sales was also attributed to the discount rate change, with H1 2022 boosted by a one-off transfer of c.£100m.
New business contribution was maintained following the actions taken at the end of 2022 to exit the Over 50s life insurance market and to manage the cost base. The group added these actions have resulted in an increase in new business margin to 2.9%.
Royal London’s life and pensions new business recorded sales of £4,865m, down from £5,494m in H1 2022. There was a reduction in value as higher interest rates decreased the present value of new business premiums.
Workplace pensions new business sales grew 7.0% after adjusting for the increase in the discount rate, while individual pensions sales fell as higher interest rates impacted defined benefit transfer volumes.
New business sales up in Ireland
And across the Irish Sea, Royal London Ireland saw new business sales increase to £110m from £88m in H1 2022. The group attributed this strong performance to its continuing market leading status in the Irish broker protection market and its successful pensions proposition launch in September 2022.
Across the group, operating profit before tax increased by 16% to £127m from £109m in H1 2022. The increase was driven by growth in workplace pensions new business contribution and higher risk free rates which increased the expected returns on assets.
Assets under management increased to £153bn from £147bn as of 31 December 2022.
Aegon acquisition
Touching on its April acquisition of Aegon UK’s closed book of individual protection business, Royal London said the advised nature of this book made for a good strategic fit and reinforced its commitment to supporting and championing the benefits of impartial advice.
It added customers’ policies are expected to transfer to Royal London in 2024, subject to the completion of a court-approved Part VII transfer.
Barry O’Dwyer, group chief executive at Royal London, (pictured) said: “In the first half of 2023 we delivered good growth in workplace pensions new business and our net inflows increased 25% to over £3.2 billion. This growth, alongside our continued cost discipline, has helped to deliver a 16% increase in operating profit.
“As many of our customers continue to come to terms with the increased cost of living and higher interest rates, our priority has been to help them navigate these challenges, while building their long-term financial resilience.
“In April, we shared £155 million in ProfitShare with over two million members, and the 120,000 new workplace pensions customers we have welcomed since the start of the year all became members and are eligible for future ProfitShare allocations.
“Our success in workplace pensions is driven by employers increasingly valuing the benefit as a key way of supporting their employees’ financial wellbeing. As a result, they are choosing to partner with digital first providers with a strong sense of purpose.
“As more and more employers adopt this view, mutuals, like Royal London, will be a natural choice.
“Our mutual mindset of continually focusing on delivering positive enduring change for our customers and wider society ensures they, and employers and advisers, continue to place their trust in us.”
