Results
His comments came as the company issued its results today (March 8), which showed muted year-on-year net inflows for 2022 compared with 2021, but a significant rise in operating profit.
Parry pointed to developments made in 2022 to help enhance tech and service to advisers, such as:
- A free service for Workplace Pension members to assess their financial wellbeing and build awareness of financial resilience for them and their families.
- Enhanced support for protection advisers through a new online dashboard providing proactive case management
- Migrated 4.3mn long-standing policies onto new technology.
The mutual reported an overall positive set of results for much of the business, compared with August last year when market movements had hammered fund values.
Its results attributed the growth and 58 per cent rise in operating profit partly to an improved market but mostly to its cost-cutting drive across 2022, during which the mutual consolidated a range of legacy life funds, streamlined its operations and stopped offering over-50s life insurance to new customers.
Net inflows remained positive at £3.71bn, despite the ravages of 2022. While this was still a drop on 2021's figure of £5.28bn, the mutual acknowledged it had suffered as a result of having cash outflows from some institutional clients with leveraged LDI portfolios managed by other institutions.
O'Dwyer said: “We still performed well in 2022. We don’t run LDI portfolios ourself but we look after bonds and cash for pension funds that have portfolios managed elsewhere.
"They drew down the cash and bonds to meet their obligations. We were caught in the cross-fire with the LDI situation: we are strong in fixed income, many schemes use us for that and in the days after the 'mini-budget' things came at everyone thick and fast. Schemes needed to liquidate quickly to get collateral."
Despite this, workplace pensions has been the "strongest product" for Royal London in 2022, he added.
Payouts
Overall, the mutual was still able to award discretionary payouts totalling £155mn to customers, compared with £169mn in 2021, citing the benefits of mutuality rather than having to pander to shareholders.
Parry said: "Our aim is to invest continually in our business while awarding discretionary ProfitShare every year. We have again maintained our allocation rates awarding £155mn to eligible customers.
"Our continued strength means they are receiving ProfitShare for the seventh year in a row, demonstrating Royal London’s consistent approach.
“We also believe our role and responsibilities extend to supporting wider-society and in 2022, charitable and social impact initiatives benefited from over £2m in donations and support, the equivalent of 1 per cent of our operating profit."
Financials at-a-glance:
- Operating profit before tax increased by 58 per cent to £210mn as the adverse market impacts on asset management revenues were more than offset by the benefits from a continuing focus on cost control, growing the annuity portfolio, and consolidating and simplifying closed funds.
- Transfer from the fund for future appropriations was £162mn (2021: transfer to FFA £79mn).
- Life and pensions new business sales up 12 per cent at £10.7nb (2021: £9,58bn).
- Net inflows remained positive at £3.7bn (2021: £5.28bn).
- AUM decreased to £147bn (2021: £164bn).
- Capital position: Investor View capital cover is at 213 per cent (2021: 216 per cent) and the Regulatory View capital cover ratio has risen to 206 per cent, compared with 173 per cent for 2021.
Background
In August last year, the life and pensions giant posted a pre-tax loss of £228mn for the first half of the year, which the company said had been caused by falls in equity and bond market that led to negative economic variances, compared to the expected return assumptions for assets supporting its life funds.
