Royal London reported a record quarter for new business from January to March 2016, following another record high year in 2015. However, the group’s CEO has expressed concern over how some big insurers are acquiring IFAs en masse.
Record Q1 profits
New life and pensions business for the first quarter of 2016 grew by 52% to £2.1bn. Main product line performance has posted positive growth. Consumer was the best performing product at £67m, growing 179% compared to the first quarter of 2015. Second was group pension at £959m, up 86% from the same quarter last year.
Other quarter-on-quarter positive performers were:
- Individual pensions (+29%)
- Income drawdown (+19%)
- Protection intermediary (+37%)
Royal London Asset Management also performed well by attracting new clients, resulting in gross inflows of £1.1bn, as compared to £0.7bn for Q1 2015.
Total group funds under management went up by 4% to £87.9bn compared to the end of 2015. It is a sign of good performance, especially during a period of stock market volatility, which causes lower investor confidence.
Royal London recently entered into partnerships with Co-operative Funeralcare and
Ecclesiastical, giving it a huge share of the prepaid whole-of-life funeral plan market. To maintain this growth, Royal London is aiming to enter more partnerships to reach a wider market and offer better products.
Phil Loney, group chief executive of Royal London, said: “The first quarter of 2016 has repeated the record-breaking pattern established throughout 2015. Our strategy of striving to bring the best quality proposition and best customer outcomes to the market is really paying off. While our Pension propositions have been leading the way for some time it is good to see that our Protection proposition in the intermediary market is now finding strong levels of support from advisers.
While new business growth remains robust I anticipate that Group Pensions will see a slowing of momentum in coming quarters. While we continue to bring on board large numbers of schemes, we anticipate that the average premium will be lower as more smaller employers enrol their workforces into a pension.”
Compromised neutrality
Amid excellent performance by his company, Loney took time to call out the behaviour of competitors. He mentioned that the trend of large insurers snapping up smaller financial planning firms could lead to higher prices and older clients not getting the best value for money, with the stockholders benefiting at the expense of the clients.
One example he cited was Standard Life which, via its subsidiary 1825, has acquired a large number of independent financial advisers. This, according to Loney, could lessen the amount of unrestricted advice for clients, as these IFAs may favour Standard Life products.
“We’re worried that what we’re starting to see is the end of impartial advice. These are all shareholder-owned companies and the pressure to improve margins will increase the cost of advice over time. There’s a danger consumers will not understand what they’re missing out. That is a concern,” said Loney.
However, Standard Life said that its financial planners are able and allowed to choose outside of its advice panels to give the best needed products for the clients.
