2018 FINANCIAL RESULTS Tim Harris 21 March 20 19 2018 FINANCIAL - - PowerPoint PPT Presentation

2018 FINANCIAL RESULTS

Tim Harris 21 March 20 19

2018 FINANCIAL RESULTS

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FORWARD LOOKING STATEMENT

This document should be read in conjunction with Royal London’s Financial Results Press Release for 2018, which can be found at: http:/ / www.royallondon.com / about/ m edia/ news/ This docum ent m ay contain forw ard-looking statem ents w ith respect to certain of Royal London’s plans, its current goals and expectations relating to its future financial position. By their nature, forw ard-looking statem ents involve risk and uncertainty because they relate to future events and circum stances w hich are beyond Royal London’s control. These include, am ong others, UK econom ic and business conditions, m arket-related risks such as fluctuations in interest rates, the policies and actions of governm ental and regulatory authorities, the im pact of com petition, the tim ing, im pact and other uncertainties of future m ergers or com binations w ithin relevant industries. As a result, Royal London’s actual future financial condition, perform ance and results m ay differ m aterially from the plans, goals and expectations set forth in Royal London’s forw ard-looking statem ents. Royal London undertakes no obligation to update the forw ard-looking statem ents.

FINANCIAL HIGHLIGHTS

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2018 FINANCIAL RESULTS

FINANCIAL HIGHLIGHTS

EEV operating profit before tax £396m £329m £67m

EEV

Life and pensions sales PVNBP1 £11,308m £12,002m (£694m) Total New business m argin (incl. RLAM) 1.8% 1.7% 0.1% EEV profit before tax £351m £594m (£243m) EEV em bedded value £3,739m £3,560m £179m

IFRS

IFRS (deduction from ) / transfer to the UDS before OCI (£48m) £352m (£400m)

FLOWS

Gross inflows 3 £21,196m £18,852m £2,344m Net flows 3 £7,652m £6,316m £1,336m

FUNDS

Funds under m anagem ent4 £114bn £114bn

• CAPITAL

Solvency Surplus (Investor View )5 £4.6bn £5.4bn (£0.8bn) Capital cover ratio (Investor View )5 202% 228% (26%) 31 Dec 18 31 Dec 17

All footnotes on page 14

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Change 2

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LIFE AND PENSIONS NEW BUSINESS SALES REMAIN STRONG

2018 FINANCIAL RESULTS

4 ,8 26 6 ,774 8 ,6 8 6 12,0 0 2 11,30 8

• 2,0 0 0

4,0 0 0 6,0 0 0 8 ,0 0 0 10 ,0 0 0 12,0 0 0 14,0 0 0 20 14 20 15 20 16 20 17 20 18 Life and Pensions PVNBP (£ ’m )

7% 5% 3%

Interm ediary Pensions Interm ediary Protection Consum er

£ 10 ,0 42m

(20 17: £ 10 ,78 7m )

£ 8 47m

(20 17: £ 8 0 7m )

£ 419m

(20 17: £ 4 0 8 m )

6 £ 3,514 m £ 8 ,4 56m £ 2,8 0 2m £ 10 ,396m

5,000 10,000 15,000 20,000 25,000 Net inflow Gross inflow Internal External £ ’m

£ 3,552m £ 8 ,8 79m £ 4 ,10 0 m £ 12,317m

5,000 10,000 15,000 20,000 25,000 Net inflow Gross inflow Internal External £ ’m

20 17 20 18

All footnotes on page 14 Gross inflows 3 - £ 21,19 6m (20 17: £ 18 ,8 52m )

2018 FINANCIAL RESULTS

RECORD EXTERNAL NET INFLOWS AND STRONG PERFORMANCE MAINTAIN FUM

2018 FINANCIAL RESULTS

114 114

• 20

4 0 6 0 8 0 10 0 120 20 17 20 18

Funds under m anagem ent (£ ’bn) Net inflows 3 - £ 7,652m (20 17: £ 6,316m )

• Funds under Management remained at £114bn;
• Strong net inflows from new business sales and

mandate wins; offset by

• Unrealised losses due to political and economic

uncertainty; and

• Strategic disposal of RLAM C.I. Limited,

resulting in a £2.0bn outflow.

RECORD LEVELS OF GROUP EEV OPERATING PROFIT AND IMPROVING MARGINS

2018 FINANCIAL RESULTS

220 24 4 28 2 329 39 6

• 50

10 0 150 20 0 250 30 0 350 4 0 0 4 50 20 14 20 15 20 16 20 17 20 18

Group EEV operating profit before tax (£ ’m )

£ 9m £ 24m £ 97m

Contribution from new business Profit from m anaging existing business Strategic developm ent costs and other item s

£ 30 1m

(20 17: £ 29 2m )

£ 228 m

(20 17: £ 252m )

£ 111m

(20 17: £ 20 8 m )

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0 .2% 0 % 0 .5%

Interm ediary Pensions Interm ediary Protection Consum er

2.4%

(20 17: 2.2%)

5.3%

(20 17: 5.3%)

(0 .8 %)

(20 17: (1.3%))

Margins

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EEV PROFIT BEFORE TAX AND PROFITSHARE

2018 FINANCIAL RESULTS

259 277 321 59 4 351

• 10 0

20 0 30 0 4 0 0 50 0 6 0 0 70 0 20 14 20 15 20 16 20 17 20 18

EEV profit before tax and ProfitShare (£ ’m ) Strong operating perform ance offset by lower than expected return

• n investm ents

Low interest rate environm ent rem ains a source of pressure on our longer-term business The surplus on the Royal London Group Pension Schem e increased by £ 27m to £ 74 m

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IFRS TRANSFER TO UDS

2018 FINANCIAL RESULTS

£ ’m 20 17 transfer to Unallocated Divisible Surplus 434 Change in insurance liabilities and VIF 1 2,995

A

Change from unrealised gains to unrealised losses 2 (8,547)

B

Change in investment contracts 2 4,773

B

Reduction in operating expenses (72)

C

Increased investment income 2 338 Change in insurance claims and premiums (net of reinsurance) 1 (52) Change from tax charge to tax credit 166 Other (30) 20 18 transfer to Unallocated Divisible Surplus 5

Driven by the continued run-off of closed books within Royal London Legacy Continued political and econom ic uncertainty driving m arket losses, offset by strong pension new business sales Continued focus on being slick and efficient in all our business areas A B C

1 - Insurance operations 2 - Investment operations

10 9.6 9.0 4 .2 4 .4

20 17 20 18 Capital Position - Investor View 5 (£ ’bn) Ow n Funds Ow n Funds SCR SCR Coverage ratio 20 2% Surplus £4.6bn Surplus £5.4bn 228 %

CONTINUED CAPITAL STRENGTH

2018 FINANCIAL RESULTS

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CONTINUED CAPITAL STRENGTH

2018 FINANCIAL RESULTS

4 ,552

• 8 6

(6 5) 10 1 (118 ) (225) (150 ) 5,38 0 (457)

Solvency surplus (31 December 2017) Economic assumption changes and experience variances Operating assumption changes and experience variances Financing and

• ther costs

Existing business New business One-off projects and investment in the business ProfitShare Solvency surplus (31 December 2018)

Movem ent in Investor View5 solvency surplus (£ ’m ) Sources of Capital Uses of Capital

Adverse m arket conditions alongside financing costs on the sub debt Positive dem ographic assum ption changes and benefit from run-off business Investm ent in the business includes the ongoing transform ation of our pensions business (# thinkbeyond), GAR com prom ise schem e and delivery

• f ProfitShare

Q&A

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THANK

YOU

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FOOTNOTES TO 2018 FINANCIAL RESULTS

20 March 2019

1) Present value of new business premiums (PVNBP) is the total of new single premium sales received in the year 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 year. The rate used to discount the cash flows in the reported results has been derived from the YE18 swap curve. 2) Change is increase or decrease compared 31 December 2017. 3) Gross and net flows incorporate The Royal London Mutual Insurance Society (RLMIS) and Royal London Asset Management (RLAM). Net flows from RLMIS represent the combined premiums and deposits received (net of reinsurance) less claims and redemptions (net of reinsurance). Given its nature, Protection business is not included. RLAM net flows represent external inflows less external

• utflows, including cash mandates.

4) Funds under Management represents the total of assets actively managed by, or on behalf of, the Group, including funds managed on behalf of third parties. It excludes assets administered through Ascentric, our platform business. 5) The ‘Investor View’ does not restrict the surplus in the closed funds. The ‘Regulatory View’ includes the restriction on closed funds’ surplus in excess of the SCR, which is treated as a liability and is excluded from total available own funds. Comparative figures have been restated in line with the final regulatory returns which were presented in the 2017 Solvency and Financial Condition Report (SFCR). 2018 Solvency II figures are estimated, final amounts will be disclosed in the SFCR in April 2019.

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