Operating profit reduced to £36m during first half of year despite protection sales increase
The mutual's 18% drop in new business sales overall can largely be attributed to reduced pensions volumes particularly in Q2, while the rise in intermediated protection sales (up 15%) was driven by a spike in customer interest, Royal London said.
New protection business sales increased to £407m (compared to £354m in H1 2019) for the first half of this year. Royal London said initiatives such as premium deferral options and increased underwriting non-medical limits brought in during the crisis have helped customers retain or gain access to cover.
While the mutual has not be hit by any material adverse claims experience in the first half of the year as a result of the pandemic, Royal London has put in place a reserve of £10m during offset the risk of future claims as a result of Covid-19.
Royal London said: "There remains uncertainty over the eventual impact of the pandemic including both future rates of mortality, as well as the wider health impacts from the deferral of non Covid-19 related medical treatments."
The growth in protection sales combined with a focus on cost management increased the new business margin to 5.1% (compared to 4.9% for 30 June 2019).
Overall, Royal London recorded loss before tax of £181m in H1 2020 (H1 2019: profit of £397m) due to lower investment returns in the period and a reduction in discount rates used to value long-term business provisions leading to higher liability valuations. However its assets under management remained stable at £139bn.
Barry O'Dwyer, group chief executive, Royal London said: "New business sales for protection products grew by 15%, which was partly as a result of the pandemic reminding customers of the importance of life insurance, critical illness and income protection. Pension sales were lower as a consequence of the disruption to advisers' ability to do business during lockdown.
"In the first half of the year and despite the pandemic, we made progress on our strategic agenda, with the agreement to sell our platform business, Ascentric. We were also pleased to announce that Police Mutual would become part of Royal London. Both transactions are subject to regulatory approval.
"Covid-19 will inevitably continue to have an impact on new business prospects. Looking further ahead, our strong capital position and unrivalled reputation with advisers and customers will stand us in good stead as we continue to help customers meet their protection, investment and long-term savings needs."
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