New business sales on a Present Value of New Business Premiums (PVNBP) basis have increased by 23% to £1,589m (2020: £1,291m) with increases in both Savings and Retirement and Protection.

The underlying performance of the business is strong with trading profit increasing to £29m (2020: £9m), driven by the significantly improved trading profit generated by new business of £17m (2020: £6m loss). Trading profit generated from in-force business decreased slightly to £12m (2020: £15m). Operating profit has decreased year-on-year by £9m to £31m (2020: £40m), with the improved trading profit more than offset by a reduction in positive impacts from model and basis changes.

2021 also saw a continuation of the strong cost disciplines embedded within the business with targeted operating expenses reducing by 3% to £105m (2020: £108m). We remain committed to reducing our targeted operating expenses below £100m and continue on the trajectory required to achieve this.

Our Solvency II capital position remains strong, with a capital surplus of £637m [iii] (2020: £690m) and a capital coverage ratio of 187% [i] (2020: 198%), still at the top of our risk appetite range of 140% - 200%. Operating capital generation of £110m (2020: £103m) includes £87m (2020: £58m) from our trading businesses. The £53m decrease in capital surplus during the year reflects planned distribution of proceeds from the sale of the general insurance business through bonuses, both those paid during 2022 and the investment strategy that supports ongoing bonuses.  Monies to pay future bonuses have been invested in a portfolio which better keeps pace with the With-Profits Fund to ensure future bonuses continue at intended levels.

We are reporting a loss before tax and mutual/exit bonus for the year of £66m (2020: £37m profit) with the year-on-year reduction mainly driven by interest rate swaps hedging the Solvency II capital position. Operating profit of £31m has also been offset by £90m (2020: £96m) of non-operational items, which includes strategic investment of £30m, £24m of debt interest, £21m strategic review costs and £15m of other restructuring and one-off costs. We are focused on reducing the level of spend on non-operational items over the next two to five years. Profit was also reduced by the one-off impact of £20m generated by the switch from the LIBOR to SONIA yield curve. 

Our Savings and Retirement business has experienced excellent growth in both sales and profitability. New business sales have increased by 21% to £1,257m (2020: £1,039m) on a PVNBP basis, primarily due to the significant outperformance of our Smoothed Managed Funds franchise which exceeded our 2021 target by 77%. This has once again led to increasing market share during the year. Profitability of new business has also improved with the trading profit generated by Savings and Retirement new business increasing to £12m compared to a new business trading loss of £3m in 2020.

We continue to develop our Smoothed Managed Funds franchise, which offers clients protection from market volatility with a track record of facilitating access to potential growth upside and have seen a doubling of inflows to £437m. Throughout the year we made a number of enhancements to the range including amending the investment strategy to include greater emphasis on environmental, social and governance criteria and introducing Smoothed Pensions and Smoothed Bonds.

We have made significant progress on our programme to improve the volumes and profitability of the Protection business. New business sales increased by 32% to £332m (2020: £252m) on a PVNBP basis, outperforming the market and growing our market share in the segments we have chosen to compete in. These sales generated £5m of trading profit (2020: £3m loss), driven by strong protection volumes during the year, particularly in Term Life.

Within Protection we made further enhancements to our flagship Income Protection proposition launching Mortgage and Rent Cover for those with fluctuating incomes, as well as regular earners and a new Executive Income Protection product enabling small businesses to pay sick pay benefits to key employees.

Notes to editors

These numbers are unaudited.

i, ii, iii The Solvency II capital metrics reported in this press release are based on the estimate of the year end results as at 28 March 2022. It is possible that the capital position will be adjusted prior to the publication of the group Solvency and Financial Condition Report later in 2022.

Certain statements in this press release may constitute "forward-looking statements". These statements reflect the Issuer's expectations and are subject to risks and uncertainties that may cause actual results to differ materially and may adversely affect the outcome and financial effects of the plans described herein. You are cautioned not to rely on such forward-looking statements. The Issuer disclaims any obligation to update their view of such risks and uncertainties or to publicly announce the result of any revisions to the forward-looking statements made herein, except where they would be required to do so under applicable law.