Scottish Life stutters as online lifts Royal London

ONLINE services and acquisitions helped boost operating profits at Royal London last year, but growth slowed at the insurance and pension company’s Scottish Life subsidiary.

The UK’s biggest mutually-owned insurer – whose brands also include Scottish Provident, Bright Grey and Caledonian Life – said operating profit on its preferred measure of European Embedded Value (EEV) surged 37 per cent after including a £97 million contribution from last year’s acquisition of Liverpool-based insurer Royal Liver.

Stripping out the affect of that deal, Royal London’s operating profit fell 2.5 per cent to £237m.

Meanwhile, the company’s Ascentric platform – which provides services to buy and hold investments online – outperformed other parts of the business as assets under administration jumped by 48 per cent to £3.7 billion.

Reflecting what chief executive Phil Loney described as a challenging year, not all of the figures posted by Royal London were so positive.

Total revenues slumped by £2bn to £2.3bn as returns on investments tumbled by the same amount to £1.3bn. The firm was particularly hit by weak stock markets, though its exposure to risky sovereign debt in Europe amounts to less than 1 per cent of its £38.7bn of total assets.

Including the impact of this, profits on a statutory basis fell to £64m against the previous year’s £232m. However, the strong underlying results gave the company confidence to boost its mutual dividend by 3.5 per cent.

Loney said: “As a result of our robust operating performance, we are able to increase the mutual dividend allocated to relevant policyholders to £88m.”

Edinburgh-based Scottish Life, the biggest of Royal London’s brands in terms of premiums, saw growth slow to 4.3 per cent as the value of new business written climbed to £2.25bn.

That compared to growth of 37 per cent in 2010, though much of that was driven by the change in the minimum pension age at the beginning of that year.

Operating profits on the EEV measure fell from £98m to £68m as Scottish Life’s margins slipped to 1.2 per cent. Royal London said the decline from the previous year’s 1.5 per cent was the result of selling more group pensions, whose profit margins are lower than on individual pensions.

EEV profits at Bright Grey and Scottish Provident, Royal London’s critical illness and life insurance business, rose from £50m to £84m on the back of higher sales and increased margins.