Annual General Meeting (AGM) 2005

This is a summary of the items discussed at the AGM and explains some of the key business decisions that were taken.

The AGM is every Member’s opportunity to speak personally to Liverpool Victoria’s Directors, meet with fellow Members and hear about the Society’s business performance.  More details about Liverpool Victoria’s financial performance are available in the Annual Report & Accounts, available to download from the web site.

• All resolutions passed unanimously
  See AGM resolutions
  
• Society’s strong capital position maintained
  See Chairman's Overview
  
• Changes to the Society’s rules and governance approved
  See AGM resolutions
  
• Stephen Maran and John Woolhouse re-appointed as directors for further three year terms
  See AGM resolutions
  
• Gillian Nott OBE appointed as non-executive Director
  See AGM resolutions

Stephen Maran, the Society’s Chairman, confirmed that the Society achieved a satisfactory financial result during 2004, posting a post tax profit of £392.4 million, despite the market presenting a difficult trading environment for all financial services providers.  The Society’s general insurance division achieved record profits, which reflected a combination of increasing sales, improved operational efficiency and high retention rates.  He reported that the Society’s capital position remained strong.

In 2004, the Society continued to follow a long-term and prudent approach to its investment strategy and produced an equivalent annual rate of return of 11.3% in its long-term fund.  Payouts for 10 and 25 year with-profits policies equated to an annual rate of return of 5.0% and 11.1%, respectively and continued to be among the best in the industry.  It should always be borne in mind, of course, that past performance is not a guarantee of future returns as these depend on bonuses yet to be declared.

The short-term performance of investment funds (including with-profits policies) continues to be affected by the fall in the stock market between 2000-2003.  The Chairman stressed that it was important to remember that with-profits policies should be considered as long-term investments (at least 10 years).

Sales of with-profits products were lower in 2004 than in the previous year, having been impacted by the stock markets continued sluggish performance. Sales of protection policies (for example, life assurance, income protection and critical illness insurance) were stronger.

The banking business produced a disappointing sales performance in 2004 with credit cards and personal loan business witnessing a downturn.  The Chairman explained it was a top priority for the management team to return this business to profitability.

The Chairman predicted that, for the next few years, market conditions would remain difficult for the financial services industry; however for Liverpool Victoria the outlook was healthy due to its strong capital position.

At the AGM, Members voted on a number of resolutions, the main ones concerning changes to the Society’s rules to ensure that the Society is in a position to comply with new requirements relating to the corporate governance of mutual insurers.  More information on corporate governance is provided below in the Governance section.
 
The rule changes included a provision enabling Members to vote on the directors’ remuneration report produced by the Remuneration Committee.

Other resolutions supported the election of a new non-executive director, Gillian Nott OBE, a former non-executive director of the Financial Services Authority and a leading promoter of financial literacy and the re-election of the Chairman and Deputy Chairman.  Approval of the Report and Accounts for 2004 was also proposed.

All resolutions were passed unanimously by the Members in attendance and overwhelmingly by the postal votes.

The Society currently complies with the majority of the Combined Code on Corporate Governance, even though this is specifically directed at listed companies, and is committed to high standards of governance. The significant changes are listed below, together with a number of other minor amendments which were introduced into the Society’s rules through AGM resolutions.

The rule changes will be implemented in time for the 2006 AGM so that the Society meets the requirements of the Annotated Combined Code as soon as possible.

The significant changes provided for the following amendments:

• Members able to vote on the directors’ remuneration report prepared by the Remuneration Committee.
  
• Directors appointed for a term of three years retiring at the third AGM following his/her appointment.
  
• The reappointment of retiring directors to be subject to a vote at the AGM.
  
• Members to be sent a notice of the AGM at least 20 working days before the meeting.

These changes clearly demonstrate the Society’s commitment to the pursuit of best practice in corporate governance.

Members asked a broad range of questions at the AGM.  In particular, questions were raised regarding the short-term performance of with-profits bonds and the market value reductions (MVRs) that are applied to bonds if the policy is surrendered early. 

Chairman Stephen Maran confirmed that with-profits policies should be considered as long-term investments (of at least 10 years).  He explained it was necessary to use an MVR in certain market conditions to make sure that Members who wished to withdraw their money early did not receive more than their ‘fair share’ of the fund, and to ensure that members whose money remains invested are not unfairly penalised. 

Mr Maran reiterated the fact that the stock market had fallen considerably between 2000 and 2003 and was still well down on its peak 2000 level.  Therefore many insurance companies have applied MVRs on their with profits policies, particularly to those investments made when the stock market was high and surrendered in a period of depressed equity values. He reiterated that the key benefit of with-profits is that movements in the stock market are smoothed over time and it is therefore important not to consider such investments as short term.