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LV= announces general insurance results and life 2013 first half sales

Press release: 29/07/2013

Mutual insurance, retirement and investment group LV=, the UK's largest friendly society, announces its general insurance results and life sales figures for the period ended 30 June 2013.

Half year general insurance results:

  • Operating profit of £43m (2012 HY: £62m)
  • LV= now UK's third largest car insurer*
  • Premium income of £748m (2012 HY: £747m) despite market conditions remaining very competitive
  • Investment returns of 2.6% (2012 HY: 4.4%)
  • Combined operating ratio (COR) up 0.6% to 97.6% (2012 HY: 97.0%) due to falling premium rates
  • Customer renewal retention rate of 79% (2012 HY: 79%) on car and 82% on home (2012 HY: 84%)
  • SME premium income up 28% and home income up 9%

Half year life and pensions sales:

Sales decreased 14% to £74.3m on an APE basis (H1 2012: £86.0m) reflecting a challenging market and a focus on returns. This includes:

  • Retirement 18% decrease with APE £54.8m (H1 2012: £66.7m)
  • Protection 9% decrease with APE £14.7m (H1 2012: £16.1m)
  • Savings and Investments 50% increase with APE £4.8m (H1 2012: £3.2m)

The GI business continues to perform well and I am pleased with progress at the half year. The underwriting profits and high retention rate demonstrate that despite the tough market conditions we are continuing to grow and our existing customers are staying with us, thanks to our focus on providing an excellent level of customer care. In the life business, the softer sales performance reflects the more challenging market and our decision to focus on returns, rather than market share. We continue to have leading positions in our chosen markets and we remain confident that our innovative products, and excellent customer service, position us well for future profitable growth. I look forward to releasing the full group half year results on 9 September.

Mike Rogers, LV= Group CEO

GI results summary:


6 months 2013 (unaudited)

6 months 2012 (unaudited)

Full year 2012 (audited)

Gross written premiums (GWP)




Underwriting profit




Investment return




Operating profit




Loss ratio




Expense ratio*




Combined ratio




Return on capital employed




Motor in-force policies




Total in-force policies




*The expense ratio includes ancillary income

LV= general insurance continued to grow during the first half of 2013 and is now the UK's third largest private car insurer with an 11% share of the market. The profitable half year result was delivered despite tough price competition seen across all distribution channels as motor premium rates continued to fall.

The two core business areas, direct and broker, now underwrite 2.9m and 1.4m policies respectively. Both channels contributed to the operating profit at £23m and £20m respectively.

The combined operating ratio of 97.6% means that the business delivered an underwriting profit of £17m for the first half of 2013. Within this, the loss ratio of 73.6% showed an improvement on the same time last year. The expense ratio at 24.0% was slightly higher than 2012, which is a result of reducing car insurance rates and therefore lower premiums.

The financial markets experienced significant volatility in the first half of 2013, which meant it was not possible to repeat the exceptional investments performance seen during the same period last year. Nevertheless, the asset portfolio produced a total investment return of £26m (equating to a 2.6% annualised return), contributing to the overall operating profit of £43m.

This is a solid performance against a backdrop of weakening motor rates, intense competition and low investment returns. We've grown our home insurance customer base by almost 50,000 policies over the past 12 months and in our broker business, the highlight has been a 28% increase in SME premium income, as a growing number of brokers have come to recognise us as a trusted and consistent partner in this market.

John O'Roarke, managing director of LV= general insurance

I expect to see continued growth in SME and home in the second half of the year. This will help mitigate the impact of overly competitive conditions in the core motor business. I remain confident of delivering good returns for our members despite a relatively challenging outlook for the market as a whole in the short-term.

John O'Roarke commenting on the outlook for the second half of 2013

Life summary:

  • Retirement 18% decrease with APE £54.8m (H1 2012: £66.7m) made up of:
    Pensions: 27% increase with APE £33.5m (H1 2012: £26.4m)
    Annuities:** 51% decrease with APE £17.6m (H1 2012: £36.0m)
    Equity release: 14% decrease with APE £3.7m (H1 2012: £4.3m)
  • Protection 9% decrease with APE £14.7m (H1 2012: £16.1m)
  • Savings and Investments 50% increase with APE £4.8m (H1 2012: £3.2m)

The market has been challenging in 2013 following the regulation changes at the end of last year. Against this backdrop our protection business sales have performed well and our pensions, savings and investments have performed particularly strongly, with LV= bucking the general market trend. Within annuities we took a decision to focus on returns over sales and this is reflected in the results. Our focus on providing an excellent service to our customers continued in 2013 and as a result we won industry recognition with awards for best life insurer and best online service provider. During the half year, we also developed and launched new products. Our innovative Sick Pay insurance, a simplified income protection product, is the first of its kind on the market and has been very well received. It has been designed to appeal to customers that traditionally wouldn't have purchased protection and we believe it will help us expand into a new customer area. We additionally made some enhancements to our critical illness policy during the half year to make it the most comprehensive plan in the market. Looking ahead to the second half of the year I am confident of delivering good returns for our members despite a challenging outlook for the market as a whole in the short-term.

Richard Rowney, LV= Life Managing Director

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APE = Annual Premium Equivalent
This is a measure comprising new regular premium sales plus 10 per cent of single premiums.

*Measured by number of in-force car policies

**Annuities includes enhanced, with-profits and 'fixed term annuity' protected retirement plan

LV= employs over 5,700 people and serves over five million customers with a range of financial products. We are the UK's largest friendly society and a leading financial mutual.

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.