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The Royal London Mutual Insurance Society Limited Annual Report and Financial Statements for the Year Ended 31 December 2017

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The Royal London Mutual Insurance Society Limited Annual Report and Financial Statements for the Year Ended 31 December 2017 THE ROYAL LONDON MUTUAL INSURANCE SOCIETY LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 Registered Number 99064 Royal London is the largest mutual life 2018 financial calendar insurance and pensions company in the UK Date Event 29 March 2018 Financial results for 2017 Conference call on financial results for 2017 Our vision 13 June 2018 Annual General Meeting We aspire to be rated by our customers as the most trusted 16 August 2018 Interim financial results 2018 and most recommended provider in our chosen markets. Conference call on interim financial results for 2018 Our purpose 13 November 2018 RL Finance Bonds No 3 plc subordinated debt interest payment date Royal London exists to create the best customer outcomes 30 November 2018 RL Finance Bonds No 2 plc subordinated debt interest payment date and the best customer experiences in its chosen markets. This reflects the fact that we are a member-owned business Registered office and so our focus is creating value for customers and members. In contrast, our competitors exist to create shareholder value. The Royal London Mutual Insurance Society Limited 55 Gracechurch Street London EC3V 0RL Registered in England and Wales Private company limited by guarantee Registered Number: 99064 royallondon.com Contact offices Bath Glasgow Trimbridge House 301 St Vincent Street Trim Street Glasgow Bath G2 5PB We’re concentrating on our customers and members BA1 1HB As a mutual, profits that we do not share immediately with our members Wilmslow Edinburgh Royal London House are reinvested to help us improve products and services for the long term. 57 Henderson Row Alderley Road Edinburgh Wilmslow EH3 5DL Cheshire SK9 1PF Edinburgh m m m bn 1 Thistle Street Republic of Ireland 8.8The Group has 8.8 million 1.2Royal London is a mutual £792Since 2007 we have £12We wrote £12bn of new Edinburgh 47 St Stephen’s Green policies across our offerings, with more than 1.2 million allocated £792m to our life and pensions business EH2 1DG Dublin 2 ranging from insurance to members who share in members and qualifying in 2017, calculated on the investments, pensions and our success customers, ensuring that present value of new business Ireland other savings products they benefit from our premiums (PVNBP), an strong performance increase of 38% on the previous year bn % m m £114We are the largest life 38Increase in our life and £142ProfitShare allocation for £434IFRS total transfer to and pensions mutual in pensions new business on 2017 after tax unallocated divisible surplus the UK, with £114bn funds the previous year, calculated under management on the present value of new business premiums basis Designed and produced by Wardour, London Royal London Group Annual Report and Accounts 2015 Performance at a glance Contents EEV operating profit before tax Strategic report and exceptional items 02 Our business strategy £329m 04 Chairman’s statement £282m 06 Group Chief Executive’s statement £244m £220m 11 Group performance £196m 12 Risk management and internal control 14 The Group’s risk governance structures 15 Principal risks and uncertainties 19 Longer-Term Viability Statement 20 Intermediary 22 Consumer 24 Wealth 2013 2014 2015 2016 2017 26 Our social responsibility 36 Group Finance Director’s review 44 Forward-looking statements 44 Strategic report approval ProfitShare (after tax) Corporate Governance £142m £114m 46 You matter to us 48 Our leadership £81m 50 Directors’ report for the year £70m £60m ended 31 December 2017 53 Corporate Governance statement 59 Board Committees 72 2017 Directors’ remuneration report 90 Auditors’ report 2013 2014 2015 2016 2017 Financial statements 99 Consolidated statement of comprehensive income Royal London open fund with-profits performance 100 Balance sheets 101 Statements of cash flows 14.8% 102 Notes to the financial statements 13.8% European Embedded Value 10.6% 10.9% 11.1% 9.5% 9.0% 9.0% 200 EEV supplementary information 201 EEV auditors’ report 203 Consolidated income statement – EEV basis 204 Consolidated balance sheet – EEV basis 4.1% 3.2% Notice of Annual General Meeting & resolutions 215 Notice of Annual General Meeting 216 Commentary on the resolutions 2013 2014 2015 2016 2017 Actual Benchmark Additional information 217 Glossary 220 2018 financial calendar 01 OUR BUSINESS STRATEGY Our divisions Consumer Wealth The Consumer division The Wealth division is home to our creates, markets and asset management and platform sells products directly businesses. Royal London Asset to customers or through Management (RLAM) manages partnerships on a non- £114bn in funds for Royal advised basis. It is also London policyholders and external home to our legacy books clients. Royal London Platform of business, administering Intermediary Services (RLPS) trades under the over 6.5 million policies. We work with independent financial Ascentric brand and provides an advisers to bring our protection online ‘wrap platform’. and pensions products to their clients in the UK and the Republic of Ireland. How we grow the business We grow our business by building value-for-money propositions that are shaped by customer and adviser needs, and are designed to deliver the best customer outcomes and experiences in the market at compelling prices. We achieve this through… \ \ Our people Service excellence We recognise the critical role of our people in delivering We are proud of our outstanding service reputation, our vision; we strive to provide a great experience for but we know that customer and adviser needs change them so that they in turn can deliver a great experience over time, and we will continue to respond to that. for our customers. \ A hard-to-copy business model \ Customer focus Our mutual status and customer-first approach Our focus is on the needs of customers and advisers, allow us to build propositions that offer added value not on the needs of shareholders. This drives our to customers and protect their interests over the thinking and decision-making. long term. \ \ A distinctive brand Efficient operations Our strong reputation and position as the UK’s largest We want to offer great value to our customers, so we mutual life insurance and pensions company allows us to strive to be as efficient as possible, which allows us to take a different perspective from the competition, and keep our costs down and our prices competitive. to reward our members. Royal London Group Annual Report and Accounts 2017 STRATEGIC REPORT STRATEGIC How do we generate long-term value for our members? We create long-term value through effective use of our resources and relationships. We approach business in a responsible way and have embedded our core values and culture in everything we do. Our business model is focused on achieving long-term value for our members. We do this by growing business in the pensions, protection and wealth management markets in the UK and Ireland, and also by managing Governance Corporate our assets and capital in order to deliver long-term growth and stability of income. See below for more specific detail on how we generate long-term value (in purple) and some of the outcomes of that work (orange). Increasing profits by ProfitShare maximising efficiencies When Royal London does well, Investment in core capabilities and so do our members. We allocate focus on cost management. a discretionary part of the Group’s profits annually to eligible with-profits To continue to improve our service and unit-linked pension policies. statements Financial and product development we must invest in the underlying technology. We do this because we expect it to result This enables us to streamline our in a larger and more successful Royal operations to ensure we deliver London that will, in time, produce good value for money. more profit for sharing. EEV operating profit before tax IFRS total transfer to European Embedded Value Embedded European unallocated ProfitShare divisible surplus allocation Capital Fair returns management from responsible Effective capital investment management strategies Our Wealth division continues & resolutions AGM of Notice ensure we have a strong to provide scale and to capital base to safeguard our manage assets to deliver financial commitments to our long-term growth and customers and fund future stability of income. profitable growth. Royal London pensions and with-profits performance Solvency II Funds under capital cover management information Additional ratio (FUM) 2017 performance on these outcomes can be found on page 1 and page 11 03 CHAIRMAN’S STATEMENT We have had another good year with EEV operating profit and new business delivering strong returns; however, these achievements only remind us not to become complacent amid a challenging market Royal London Group Annual Report and Accounts 2017 STRATEGIC REPORT STRATEGIC CHAIRMAN’S I am pleased to report on another good in monetary terms is due to our year for Royal London. The financial expanding membership. In all, results were strong, the IT systems are more than one million policyholders starting to benefit from heavy investment, are now benefiting from ProfitShare. Governance Corporate and the Group’s public profile has become STATEMENT more prominent. All these achievements Because we are a mutual, all should alert us to beware of complacency, 1.2 million members are both owners because the markets in which we operate and customers. For Royal London, it are getting more competitive and the is a matter of cultural principle to aim regulatory pressures more demanding. for the highest standards of customer To survive and prosper, your 157-year-old satisfaction. The policies we offer should Mutual Society has to keep on its toes. be straightforward, easy to understand and meet the needs of each customer. The financial headlines are encouraging. The way in which they are sold, serviced In 2017 the Group’s European Embedded and redeemed should live up to every Rupert Pennant-Rea Value (EEV) operating profit was customer’s expectations.
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