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Catch up with the latest press releases from LV=

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LV= announces 50% increase in profits in 2013

Press release: 31/03/2014

Mutual insurance, retirement and investment group LV=, the UK's largest friendly society, announces results for the year to 31 December 2013.

Financial highlights:

  • Group operating profit [1] up 19% to £105 million (2012: £88 million)
  • Profit before tax [2] up 51% at £156 million (2012: £103 million)
  • Net earned premiums down 4% to £2.2 billion (2012: £2.3 billion)
  • LVFS operating cash inflow of £190 million (2012: outflow of £12 million)
  • Mutual bonus of £22 million (2012: £21 million)
  • Group solvency at £720 million on a Peak 2 basis (2012: £186 million)

Strategic and operational highlights:

  • Continued growth in customer numbers to 5.5 million (2012: 5.2 million) despite challenging market conditions; primarily driven by growth in general insurance customer base of 273,000
  • Britain's most recommended insurer according to YouGov BrandIndex [3]
  • Successful capital raise of £350 million in May to strengthen financial position and help support business growth
  • General insurance commercial lines portfolio showing strong growth with SME premium income up 26% compared to 2012
  • Retirement business showing strong growth with new business contribution up 18%
  • The LV= with-profits fund earned an investment return of 11.1% [4] against a benchmark of 8.6% in 2013
  • Regulatory capital cover ratio up to 178% (2012: 121%)
  • 83% employee engagement [5]

The £53 million improvement in profit before tax to £156 million reflects the growth in operating profit and also positive short-term investment fluctuations in our life and heritage businesses. We have also seen a strong operating cash inflow of £190 million during 2013, reflecting cash generation in both the life and general insurance businesses. We also raised £350 million in a highly successful capital raise in May which was five times oversubscribed.

I am pleased to report that we have increased our profit before tax in 2013 to £156 million, from £103 million in 2012. This has been achieved despite challenging market conditions. As a mutual our efforts are focused on providing an excellent service to our customers and driving increased member value. As such I am delighted to confirm a mutual bonus of £22 million for 2013. This will be added to eligible members' policies on pay-out and means we have now allocated £62 million back to members over the past three years.

Mike Rogers, LV= Group Chief Executive

General insurance business

  • Combined ratio of 98.9% (2012: 99.7%)
  • Underwriting profit increased by £10 million to £15 million (2012: £5 million)
  • Investment returns of 3.2% (2012: 5.8%)
  • Operating profit decreased by 31% to £81 million (2012: £117 million)
  • Premium income decreased to £1.45 billion due to falling rates in motor (2012: £1.49 billion)
  • Pre-tax return on capital of 10.6% (2012: 17.7%)

The two core business areas of direct and broker now underwrite 3.0 million and 1.4 million policies respectively. Both channels contributed to the operating profits at £46 million (2012: £64 million) and £35 million (2012: £53 million) respectively and our underwriting profit has increased by £10 million to £15 million compared to 2012 benefitting from both favourable claims experience and also profitable expansion in chosen market segments.

Premium income has decreased slightly, due to falling motor premiums, however we've added 273,000 new policies across our product range during 2013. This means we now have 4.4 million in-force policies in an increasingly diverse range of product lines. Our road rescue policy count has increased by 44% to 442,000 during the year and we now insure over 650,000 homes. We continue to be the UK's third largest private car insurer with 3.1 million vehicles insured.

Our commercial lines business continues to grow and we now insure over 190,000 commercial properties and 107,000 commercial vehicles. The overall commercial premium income is performing strongly and is up 23% compared to 2012, with our SME business up 26% year-on-year.

Active, but conservative management of the investment portfolio during 2013 produced a total return of 3.2% (2012: 5.8%).

Life and pensions business

  • Underlying operating profit up 12% to £29 million (2012: £26 million) [6]
  • Retirement business saw a 5% fall in sales with APE of £119 million (2012: £125 million)
  • Protection business saw a 9% fall in sales with APE of £29 million (2012: £32 million)
  • Overall new business contribution of £22 million (2012: £25 million)

We are reporting increased underlying operating profits compared to 2012, driven by sales momentum which built into the second half of the year, margin initiatives and a focus on strong cost control.

Within retirement solutions we are reporting an improved new business contribution of £20 million (2012: £17 million). In annuities we took the strategic decision to manage capital consumption in the first half of the year by controlling sales volumes and then built volumes in the second half. This strong second half resulted in sales 17% higher than the same period in 2012 and 59% higher than in the first half of 2013.

LV= is a top five provider for a range of retirement solutions products and is positively positioned to take advantage of the changes in the market expected following the Chancellor's announcement on 19 March giving retirees more choice as to how they take the income from their pension fund. We believe that the certainty and guaranteed income that annuities provide will have a place in the new retirement income landscape. In the short term however we expect whole of life annuity sales to be impacted, and in the long term other options will now be given more consideration.

Although overall sales in protection new business contributions were lower than 2012, we are pleased with overall performance and the new business contribution of £2 million, taking into account the adverse market conditions as a result of the tax changes and gender rules. In this difficult environment we demonstrated the strength of our protection business by increasing our market share. We are the market leader for advised income protection. During the year we launched a new sick pay direct product aimed at consumers who have not previously considered protection which we hope will open up the protection market to a new segment of customers.

Heritage business

  • Operating profit of £18 million (2012: loss of £64 million)
  • Overall return on with-profits assets of 11.1% against a benchmark of 8.6% (2012: 9.9% against a benchmark of 8.4%)
  • A 25-year policy covering a £50,000 mortgage is currently paying a surplus of £16,592 (for a customer aged 30 next birthday at entry, the maturity value for a 25-year low cost mortgage endowment maturing on 1 March 2014 is £66,592) [7]

We are reporting a high level of investment return of 11.1% for our members this year. This is 2.5% above the market benchmark of 8.6%. With-profits remain an attractive investment proposition for certain market segments and we are committed to offering great returns to our customers. This excellent investment return is supported by the payment of a mutual bonus for the third year running. Operating profit of £18 million was mainly due to favourable model and valuation changes.

In a competitive market LV= has been able to deliver improved profits due to the quality of our customer service and the value of our products. Our general insurance business continues to trade satisfactorily in 2014 and we believe that motor rates will enter a period of modest hardening over the next 12 months as the benefits to claims costs from LASPO changes have been over anticipated by many players. Prospects for our life business in 2014 have an unusually high degree of uncertainty following the recent budget changes to the retirement market. Over the longer-term we believe that our broad product range, strong brand and financial strength will allow us to prosper in a retirement income market that offers consumers greater choice. However we anticipate "planning blight" over the next year as consumers defer decisions until the new regime takes effect, and this could lead to a significant reduction in annuity sales.

Mike Rogers, LV= Group Chief Executive

Read our Report & Accounts for 2013

For further information:

Emma Banks, LV=,, 0208 256 6714, 07894 158605


LV= employs 5,800 people and serves over 5.5 million customers with a range of financial products. We are the UK's largest friendly society and a leading financial mutual. We are a leading player in our chosen markets with top five positions in personal motor insurance, protection and enhanced annuities.

In 2013 as a result of our approach towards our people we were recognised as a high performing organisation by Towers Watson.

When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

We offer our services direct to consumers, as well as through IFAs and brokers, and through strategic partnerships with organisations such as ASDA, Nationwide Building Society and a range of trade unions.

LVFS is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, register number 110035. LVFS is a member of the ABI, the AFM and ILAG.

Registered address: County Gates, Bournemouth BH1 2NF.

  1. Operating profit excludes short-term investment fluctuations, amortisation of intangibles and other one off costs.
  2. Profit before tax is IFRS profit before mutual bonus, tax and transfer to or from the unallocated divisible surplus.
  3. Research conducted by YouGov found LV= in the top position on the BrandIndex Recommend measure when assessing the data collected between 1 March 2013 and 28 February 2014. All data was collected using an online survey and respondents are members of the YouGov panel. The 32,784 strong research sample for this study was sampled and weighted to a UK nationally representative 18+ adult profile. The Recommend metric measures a consumer's willingness to recommend a brand, hence the ambassadors and equity destroyers of the brands: Which of the following financial institutions would you recommend to a friend or colleague? / And which of the following financial institutions would you tell a friend or colleague to avoid?
  4. Gross of tax
  5. As measured by Towers Watson through our annual employee opinion survey; 3% above UK High Performing companies
  6. Underlying operating profit is the key performance measure for profitability for the LV= life business. This measure represents its ‘trading’ profit i.e. new business contributions and the net contribution of servicing in-force policies. We use operating profit measure for the LV= group and general insurance business. For the group this measure represents the longer-term return from all its businesses and the cost of on-going central overheads such as support functions. For the general insurance business this measure represents the return from insurance activities, i.e. underwriting profit and investment returns.
  7. Table below showing final bonus rates and pay outs 2013.

With-profits final bonus rates and payouts 2014

Conventional with-profits

Policy duration

Policy Description


Final Bonus Rate

Equivalent annual rate of return
over the full term

25 years [a]

Ordinary Branch Endowment




25 years [b]

Industrial Branch Endowment





  • a: Regular premium of £50 per month for a male aged 30 next birthday at entry, maturing 01/03/2014.
  • b: Regular premium of £5 per four week period for a male aged 30 next birthday at entry, maturing 01/03/2014.

LV= Group results for the year ending 31 December 2013

LV= Group results for the year ending 31st December 2013


2012 Restated*

General insurance












Operating profit



Accounting policy differences



Short-term investment fluctuations



Centrally managed costs



Finance costs



Amortisation and impairment of intangibles



Profit before tax



Mutual bonus



Income tax expense



Pension scheme actuarial loss net of tax



Transfer to/(from) the Unallocated divisible surplus



* Life operating profit has been restated to reflect the change in methodology applied for credit default experience reporting.
Previously favourable experience emerging in the reporting period in respect of credit default was reported in short-term investment fluctuations.
This is now reported as additional margin for credit default risk within operating profit.
2012 operating profit has been restated accordingly (£4m increase).

Unallocated divisible surplus



Pillar I excess regulatory capital (including debt capital)