Royal London has announced its first-half 2007 before-tax profit has increased 71% on the same period last year.
The life and pensions company says the £357m figure, on an EEV basis, was due to “strong investment markets and growth in the pension fund surplus”.
A 31% drop in operating profit, to £66m, has been attributed to a significant block annuity Prudential transaction last year.
New business contribution was up 50% to £27m, embedded value pushed 17% higher to £2.33bn, while funds under management increased £1.9bn to £32.7bn.
Royal London group chief executive Mike Yardley says he was particularly pleased with the asset management arm, with £7m of external mandates won.
“As a number of other companies have also done, we strengthened the persistency assumptions used to value historic pensions business, which reduced the operating profit for Scottish Life, with a similar adjustment in persistency for protection business written through Bright Grey,” he says.
On the operating profit reduction, Yardley says a comparison to the £115m 2006 full-year result provides a better perspective.
He says the future strategy of the company is unchanged.
“We will not follow some providers and write business on terms we believe are certain to be unprofitable,” Yardley says.
“We recognise that the short-term consequence is that our pensions business volumes and market share may fall, given the pricing strategies still being followed by some competitor companies, especially in the group pensions market.
“We are pleased to see some signs of realism emerging in the market, as a number of providers publicly acknowledge the importance of moving to a sustainable business model, with several starting to follow a similar pricing approach to our own.”
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