HOME
ABOUT US
MEDIA CENTRE
DELEGATION
PERFORMANCE
CONTACT USRoyal Liver Group (Royal Liver), one of the UK’s leading financial mutual societies, today announces solid interim results in the face of increasingly challenging markets in the UK and the Republic of Ireland.
Highlights
• Positive first half underpinned by carefully managed operations
• Continued evidence of capability to manufacture competitive, attractive and profitable products
• Continued delivery of operating income surplus for the Society (£2.4m) in face of tough conditions in all markets
• Good margins maintained through core protection products at Progress and Caledonian Life
• Park Row well down the restructuring track with a target for 2010 profitability; small acquisitions add to build strategy for Citadel
• Second half outlook dominated by worsening economic climate in UK and Republic of Ireland
Commenting on the half year results, Steve Burnett, Chief Executive of Royal Liver Group said:
"The first half of 2008 has seen admirable performances across Royal Liver’s businesses in the face of difficult market conditions. Our people’s ability to implement our modernisation strategy has contributed markedly to this success. We continue to develop our manufacturing and distribution businesses whilst carefully managing our operational expenditure.
“Having said that, like everyone in our sector, the outlook for the Group is dominated by the worsening economic climate in both the UK and Republic of Ireland and the likely impact on our customers’ spending patterns Resilience will be our watch word.
What was a tough job to manage our legacy cost base whilst growing our new businesses, has just got a whole lot tougher.”
For further information:
Royal Liver Group
Cara Bostock
Tel: 0151 600 4264
www.royallivergroup.com
HeadLand Consultancy
Tel: 0207 367 5222
Chris Salt/Tom Gough
Chief Executive’s Review
Results Overview
The first half of 2008 has been challenging with parts of our business continuing to outperform and other areas experiencing the fall out from worsening economic conditions as the year progressed. Economies in both the UK and Republic of Ireland are slowing and the financial services market place is being adversely hit as demand for both advice and product declines.
Whilst these external factors have had a major effect on Royal Liver’s performance over the past six months, the Society experienced better than anticipated new business volumes and margins in our manufacturing businesses of Progress and Caledonian Life, as well as lower operating costs. Consequently it achieved an operating income surplus of close to £2.4m for the first half of the year. This is up £3.9m on budget and continues the success of 2007 when net operating expenses fell to their lowest level for seven years, enabling the first enhancement of Asset Shares for With-profit members since 2002.
Our distribution businesses continue to tackle the specific challenges of their own development cycles. Citadel in the Republic of Ireland is very much a start-up business and has added to its reach through small broker acquisitions. Park Row in the UK is undergoing a radical restructuring with the aim of moving into profit in 2010 and positioning itself to take advantage of the FSA’s Retail Distribution Review.
Outlook
The first weeks of the second half of 2008 make it clear that the economic conditions in both the Republic of Ireland and the UK will impact all businesses in all sectors. Royal Liver will work hard to tackle the many challenges that these conditions will bring, but all indications suggest that the worsening consumer and investment climate will mean a tough second half to 2008.
Some cost increases in the second half are inevitable, as inflationary pressures in both the UK and Republic of Ireland start to make an impact and it will be increasingly difficult to sustain current strong margins in a number of products.
The market environment looks to be increasingly challenging, but Royal Liver is in better shape than ever before to face such adversity.
Progress
> New business volumes up 27% compared to first half in 2007
> New business allowances 42% ahead of budget
Progress had a successful first six months, helped by higher new business volumes and allowances which were up by over 46% compared with the same period last year. This encouraging performance reflects a strategy of steady, incremental growth.
Whilst not immune from the UK economic slowdown, average case values held up well and product margins, reflected in the allowances, remained relatively strong.
A number of initiatives launched in the period have helped increase product demand. A ‘Back to Basics’ campaign was designed to tackle the declines in investment, mortgage and pensions activity and has been well received by Independent Financial Advisers (IFAs).
Progress occupies a strong position in its marketplace. The business remains confident of its continued growth by developing further new initiatives to meet the challenges of market conditions.
Caledonian Life
o New business volumes 21% behind budget at £5.3m
o New business allowances 25% ahead of budget
The downturn in the Republic of Ireland property market and declining consumer confidence has made trading conditions very tough for Caledonian Life. New business for the first half stands 21% behind budget at £5.3m [£2.2m down from H1 07] and new single premium business through the with-profits bond was particularly badly affected, with sales reaching £27.7m, 45% lower than in the first half of 2007. These results are consistent with the experience of competitor firms within the Irish market and conditions for the second half of 2008 look set to remain difficult.
Encouragingly, new business allowances were 25% ahead of budget and 32% up on the first half of 2007. Margins have been maintained without sacrificing the competitiveness of the products although the emergence of rate-cutting behaviour from competitors in the market is likely in the second half of the year.
In March, both Caledonian Life and Citadel completed their move to the new, open-plan St Stephen’s Green office in the heart of Dublin city centre.
Although the trading environment is likely to remain difficult, a range of initiatives are planned for the second half of 2008, focusing mainly on new product development and enhancing the functionality and services offered by the online broker's centre.
Park Row
Park Row continues to make good progress with its radical restructuring and turnaround programme, albeit amid a very difficult first six months which impacted on sales. Income was £7.4m for the first half of 2008, which is 16% lower than the original budget of £8.7m. Operating losses for the first half reached £1.6m. This outcome reflects the turbulence in the mortgage and investment markets, which has depressed consumer demand for products.
To help mitigate the impact of reduced turnover, Park Row implemented a number of cost-saving initiatives including the restructuring of its central departments. This is in addition to the 2007 branch and sales reorganisation, which has resulted in branch costs falling to £0.9m for the first half of 2008 from £1.9m in the comparable period in 2007.
Park Row will now look to grow the business and its sales volume by recruiting quality advisers and aligning itself to take advantage of changes to current legislation and the Retail Distribution Review. And whilst adviser numbers are not expected to grow significantly during the remainder of 2008, early indications are better for 2009 and interest has already been shown by IFAs and induction courses are being filled.
Citadel
Citadel is currently at an important stage within its start-up development and as a reflection of this, as well as current market conditions, turnover was 28% below budget at £0.5m. However, costs have been managed well and grew at a slower rate which has meant that expenditure for the first half of 2008 was £1.5m, 18% lower than budget. Overall, operating losses for the first half of 2008 reached £1.0m.
The first half of 2008 has been focused on the company’s growth strategy through the organic expansion of its core adviser proposition, involving the recruitment of new advisers and the retention of existing advisers. At the same time, Citadel has been developing a wealth management proposition driven by the acquisition of small, but profitable, independent brokers.
The acquisition of quality independent brokers, which in the last six months included Capital Advisory Services Limited (in January) and McCarthy Investment Services Limited (in June), is expected to continue through 2008. This should enable Citadel to enhance its capability in this specialist area whilst at the same time providing a valuable contribution to operating profit.
Treating Customers Fairly
Royal Liver Group has been working towards the Financial Services Authority’s (FSA’s) deadline for embedding its Treating Customers Fairly (TCF) initiative. Ahead of the FSA’s audit in December, the Group looked at behaviours and competencies of Royal Liver staff to ensure they are providing fair treatment to all customers.
Responsible Business
During the first half of 2008, a Responsible Business plan was developed which has been well received within the industry. The plan focuses on a local and sustainable contribution to Liverpool’s European Capital of Culture. It draws on Royal Liver’s values and heritage, to ensure there is a lasting legacy from the City’s year of celebration by promoting inclusion and engagement in arts, sport and culture. So far in 2008, the Group has won the Corporate Social Responsibility category at the British Insurance Awards.
Other successes include launching the Cultural Legacy Endowment Fund and the ‘Adopt a postcode’ scheme which benefits the Royal Liver Building’s nearest neighbours, the community in the L1 district of Liverpool – a socially deprived area with high unemployment. Alongside these is the Royal Liver Scholarship, which supports two students studying for degrees at the Liverpool Institute of Performing Arts and also the Poetry of Place awards, one of the Group’s longer established projects which took place earlier in the year.
Notes to Editors
The Royal Liver Group consists of Royal Liver Assurance Limited an Incorporated Friendly Society, founded in Liverpool in 1850 for the mutual benefit and financial security of local families and its subsidiary companies of Park Row Group plc and Royal Liver Asset Managers in the UK and Citadel Financial Advice Limited in Ireland. The Royal Liver Group also includes Progress which is a trading name for Royal Liver Assurance Limited in the UK and Caledonian Life which is a trading name for Royal Liver Assurance Limited in Ireland.
Key facts (as at 31 December 2007)
3.2 million policies
1.7 million members
£3.5bn assets under management
Member of the Association of Mutual Insurers (AMI)
Royal Liver Assurance exists to service and maintain Royal Liver policies with a focus on delivering value back to policyholders. www.royalliverassurance.com
Park Row provides financial planning for individuals and businesses alike. Acquired in 2003, it acts as Royal Liver’s distribution arm in the UK. www.parkrow.co.uk
Progress is an online-only manufacturer and provider of protection products for IFAs, including Life, Income and Critical Illness Cover. www.ifa.royal-liver.com
Caledonian Life was formed in 2001 having held the Caledonian name for nearly 200 years in ROI. It manufactures and provides Protection and Protected Investment Products for independent brokers in ROI. www.caledonianlife.ie
Citadel is Royal Liver’s broker business in ROI offering IFA advice. Launched in October 2006, it has quickly become a key provider of independent financial advice. www.citadel-fa.ie
The Delegation
The Society has had a delegation system since 1886 whereby the Members of Royal Liver elect fellow Members to act as the sole representative body. There are 216 delegates and they are authorised to take decisions on behalf of the Membership at General Meetings of the Society.
LATEST NEWS
Royal Liver Group 2007