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 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. 2

FINANCIAL HIGHLIGHTS 3

2018 FINANCIAL RESULTS FINANCIAL HIGHLIGHTS Change 2 31 Dec 18 31 Dec 17 EEV operating profit before tax £396m £329m £67m EEV Life and pensions sales PVNBP 1 £11,308m £12,002m (£694m) 1.8% 0.1% Total New business m argin (incl. RLAM) 1.7% EEV profit before tax £351m £594m (£243m) EEV em bedded value £3,739m £3,560m £179m IFRS IFRS (deduction from ) / transfer to the (£48m) (£400m) £352m UDS before OCI FLOWS Gross inflows 3 £21,196m £18,852m £2,344m Net flows 3 £7,652m £1,336m £6,316m FUNDS Funds under m anagem ent 4 £114bn - £114bn CAPITAL Solvency Surplus (Investor View ) 5 £4.6bn £5.4bn (£0.8bn) Capital cover ratio (Investor View ) 5 202% 228% (26%) All footnotes on page 14 4

2018 FINANCIAL RESULTS LIFE AND PENSIONS NEW BUSINESS SALES REMAIN STRONG Life and Pensions PVNBP (£ ’m ) 14,0 0 0 12,0 0 2 12,0 0 0 11,30 8 10 ,0 0 0 8 ,6 8 6 8 ,0 0 0 6 ,774 6,0 0 0 4 ,8 26 4,0 0 0 2,0 0 0 - 20 14 20 15 20 16 20 17 20 18 Interm ediary Interm ediary Consum er Pensions Protection £ 10 ,0 42m £ 8 47m £ 419m (20 17: £ 10 ,78 7m ) (20 17: £ 8 0 7m ) (20 17: £ 4 0 8 m ) 7% 5% 3% 5

2018 FINANCIAL RESULTS 2018 FINANCIAL RESULTS RECORD EXTERNAL NET INFLOWS AND STRONG PERFORMANCE MAINTAIN FUM Funds under m anagem ent (£ ’bn)  Funds under Management remained at £114bn; 114 114 120 Strong net inflows from new business sales and o 10 0 mandate wins; offset by 8 0 Unrealised losses due to political and economic o 6 0 uncertainty; and 4 0 Strategic disposal of RLAM C.I. Limited, o 20 resulting in a £2.0bn outflow. - 20 17 20 18 Net inflows 3 - £ 7,652m (20 17: £ 6,316m ) Gross inflows 3 - £ 21,19 6m (20 17: £ 18 ,8 52m ) Gross inflow £ 8 ,4 56m £ 10 ,396m Internal 20 17 External Net inflow £ 3,514 m £ 2,8 0 2m £ ’m 0 5,000 10,000 15,000 20,000 25,000 Gross inflow £ 8 ,8 79m £ 12,317m Internal 20 18 External Net inflow £ 3,552m £ 4 ,10 0 m £ ’m 0 5,000 10,000 15,000 20,000 25,000 All footnotes on page 14 6

2018 FINANCIAL RESULTS RECORD LEVELS OF GROUP EEV OPERATING PROFIT AND IMPROVING MARGINS Group EEV operating profit before tax (£ ’m ) Contribution from new Profit from m anaging business existing business 4 50 39 6 4 0 0 £ 24m £ 9m 329 350 £ 228 m £ 30 1m 28 2 30 0 (20 17: £ 252m ) (20 17: £ 29 2m ) 24 4 250 220 20 0 Strategic developm ent costs and other item s 150 £ 97m 10 0 £ 111m 50 - (20 17: £ 20 8 m ) 20 14 20 15 20 16 20 17 20 18 Margins Interm ediary Pensions Interm ediary Protection Consum er (0 .8 %) 5.3% 2.4% (20 17: (1.3%)) (20 17: 5.3%) (20 17: 2.2%) 0 .2% 0 .5% 0 % 7

2018 FINANCIAL RESULTS EEV PROFIT BEFORE TAX AND PROFITSHARE EEV profit before tax and ProfitShare (£ ’m ) 70 0 59 4 6 0 0 50 0 4 0 0 351 321 277 30 0 259 20 0 10 0 - 20 14 20 15 20 16 20 17 20 18 Low interest rate The surplus on the Royal Strong operating environm ent rem ains a London Group Pension perform ance offset by source of pressure on our Schem e increased by £ 27m lower than expected return longer-term business to £ 74 m on investm ents 8

2018 FINANCIAL RESULTS IFRS TRANSFER TO UDS £ ’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 A B C Continued political and Driven by the continued econom ic uncertainty Continued focus on being run-off of closed books driving m arket losses, offset slick and efficient in all our within Royal London by strong pension new business areas Legacy business sales 1 - Insurance operations 2 - Investment operations 9

2018 FINANCIAL RESULTS CONTINUED CAPITAL STRENGTH Capital Position - Investor View 5 (£ ’bn) Coverage ratio 228 % 20 2% 9.6 9.0 Surplus Surplus £5.4bn £4.6bn 4 .4 4 .2 Ow n Funds SCR Ow n Funds SCR 20 17 20 18 10

2018 FINANCIAL RESULTS CONTINUED CAPITAL STRENGTH Movem ent in Investor View 5 solvency surplus (£ ’m ) 5,38 0 10 1 8 6 (6 5) (118 ) (457) 4 ,552 (225) (150 ) - Solvency Economic Operating Financing and Existing New business One-off ProfitShare Solvency surplus assumption assumption other costs business projects and surplus (31 December changes and changes and investment in (31 December 2017) experience experience the business 2018) variances variances Sources of Capital Uses of Capital Investm ent in the business Adverse m arket Positive includes the ongoing conditions dem ographic transform ation of our pensions alongside assum ption changes business (# thinkbeyond), GAR financing costs on and benefit from com prom ise schem e and delivery the sub debt run-off business of ProfitShare 11

Q&A 12

THANK YOU 13

FOOTNOTES TO 2018 FINANCIAL RESULTS 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 outflows, 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. 20 March 2019 14