Royal London's caution tinged with confidence

Published on Friday 31 October 2008 19:52

SCOTTISH Life owner Royal London has hailed a 14 per cent rise in new business as a "very good" result against a backdrop of "challenging" market conditions.

The group, which ranks as the largest mutual life and pensions company in the UK, said it remained cautious but was confident it could grow both new business and profits "in the long term".

Total new life and pensions business rose by 14 per cent to 1.7 billion in the nine months to 30 September, boosted by this summer's twin acquisitions of Scottish Provident International and Phoenix Life Assurance.

Group finance director Stephen Shone described the company's financial standing as "strong", with working capital of 1.35bn.

On Thursday, rival Standard Life reported flat sales over the same period but gave assurances over its financial position amid concerns that insurers' capital strength could be whittled away by tumbling share prices.

About 2,000 of Royal London's 2,900 staff are based in Edinburgh. A spokesman for the group yesterday said that while nothing could ever be ruled out, there were "no plans for any headcount reductions in Scotland at the moment".

For some time now, Royal London has shunned business volumes and market share in favour of higher margin, more-profitable work. The group's interim results, released in September, showed operating profits before tax rising 30 per cent to 100 million, although after tax it was left nursing losses of 236m, "largely as a result of weak investment markets".

Those same testing conditions meant that new business at Royal London Asset Management slumped 42 per cent to 1.3bn in the nine-month period.

Sales at the core Scottish Life arm rose by 6 per cent to almost 1.2bn on the back of strong growth in individual pensions, up 22 per cent to 671m. But the group blamed high "old-style" commissions for a 17 per cent slide in group pensions sales, which fell 17 per cent to 319m.

Royal London's Edinburgh-based mortgage protection business, Bright Grey, saw a 3 per cent fall in new business to 127m.

Group chief executive Mike Yardley said: "The significant slowdown of the mortgage market has been well publicised, and it has had an inevitable effect on the sales of mortgage-related protection business."