Protection market 'very challenging' – Royal London

Royal London has described the protection market as “very challenging” after announcing a one-fifth fall in sales over the first half of the year.

Combined present value of new business premiums (PVNBP) at the group's two protection providers was down 19% in the six months to the end of June to £170m (from £210m in the same period last year).

Bright Grey's PVNBP figures fell 22% to £75m (from £96m in 2009), with Scottish Provident faring a little better, as that slipped 17% to £95m (£114m).

"Bright Grey and Scottish Provident results reflect the continued difficult economic conditions for protection business with volumes a little down on H1 2009," the mutual says.

"The protection market continues to be very challenging in the current difficult economic environment, both of our protection businesses have reported reduced sales volumes as compared to the equivalent period in 2009, putting new business margins under pressure," it adds.

Overall, Royal London Group lost £2m in the first half of 2010, compared with an £18m profit last year.

The IFRS loss before tax was due to investment returns dropping significantly below expectations, the mutual life company reports. IFRS loss after tax was £31m.

Operating profit on an EEV basis advanced 3% to £111m while the total present value of new life and pensions business premiums was up 35% to £1,615m.

Mike Yardley, outgoing CEO of Royal London, acknowledged the tough economic conditions but was cautiously optimistic for third quarter results.

"The overall financial results reflect an improved operating profit; increased contribution from new business; and an underlying fund performance that was ahead of benchmark," he says.

"Having a diversified portfolio of brands and products has served us well during the period. Protection new business continues to be hard hit by the downturn in the property market but this has been offset by our life and pensions business which delivered significant growth in the period.

"Overall, the Group's business performance in the third quarter has been satisfactory, though any outlook must be tempered with some caution given the current economic environment," he adds.