Royal London, the Scottish Life and Scottish Provident owner, has lifted its surplus capital to over £2 billion, though pre-tax profits fell by 38% in the first half of 2012.
The key International Financial Reporting Standards (IFRS) operating profit measure was down by 25%, but group funds under management rose 2% to a record £47bn.
The £2bn of regulatory capital reflects the growth of the life industry's biggest mutual, and compares with the £3bn surplus declared last week at Standard Life, the sector's largest mutual until its flotation in 2006.
However, after racking up new business growth of almost 50% in the past four years, the momentum at Scottish Life has been checked. A year ago it reported first-half growth of 10%, helping Royal London to a 16% rise in IFRS operating profit, while in the second half of 2011 it grew by 4%.
The latest figures show Scottish Life new business down 3% to just over £1.2bn, just over two-thirds of total group sales which were down 1% at £1.78bn.
Phil Loney, who took over last year from veteran chief executive Mike Yardley, said the group was "trading robustly in a flat economy and a very competitive market".
He added: "Our profits have been impacted by the adverse economic conditions and particularly the continuing low interest rate environment, which reduces the pace at which revenues emerge from the policies held by our existing customers and members and which increases the value of liabilities in the group's defined benefit pension schemes."
Scott White, group spokesman, said the Scottish Life growth in recent years had set the benchmark at a higher level. Market share in group pensions was up on the back of an 8% rise in new business, while individual pensions were down around 8%.
New life and pensions business contributed £52 million, down from £59m a year ago, and the margin fell sharply from 3.3% to 2.9%. The international Royal London 360 division also saw a sales drop, down 8% to £192m.
But specialist protection brands Bright Grey and Scottish Provident helped fill the gap with a 46% uplift in new business to £221m.
Mr Loney said it was "particularly pleasing" that this intermediary business had replaced sales lost with a Santander contract a year ago.
He said there had been a significant 16% uplift in advisory firms joining the Ascentric wrap platform, where assets under administration were now well over £4bn, while Royal London Asset Management (RLAM) funds rose 2% to £44.9bn despite a net outflow from its traditional fixed interest assets.
Mr Loney added: "We have also recently won a number of new mandates from a range of clients and we expect significant inflows over the remainder of the year.
"Investment performance remains strong overall and our funds continue to gain external industry recognition through independent ratings and awards.
"Group funds under management of £47bn represent a new record rooted in our strong position in the pensions market, the ongoing growth of RLAM's institutional business and the successful acquisition and integration of closed back books."
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