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Catch up with the latest press releases from LV=

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LV= announces group operating profit of £86 million for 2014

Press release: 11/03/2015

Mutual insurance, retirement and investment group LV=, the UK's largest friendly society, announces results for the year to 31 December 2014.

Financial highlights:

  • Group operating profit [1] of £86 million (2013: £105 million)
  • GI operating profit of £92 million (2013: £81 million) reflecting strong underwriting results
  • Life underlying operating profit of £17 million (2013: £29 million) [2] reflecting impact of Budget changes on our retirement business
  • The LV= with-profits fund earned an investment return of 11.4% [3], slightly above market benchmarks
  • Mutual bonus of £24 million (2013: £22 million)
  • Group solvency at £689 million on a Peak 2 basis (2013: £720 million)
  • Group expenses before commission down 6% to £402 million (2013: £429 million)
  • Net earned premiums down 5% to £2.1 billion (2013: £2.2 billion)
  • Profit before tax [4] at £37 million (2013: £156 million) largely reflecting less favourable short-term investment fluctuations

Strategic and operational highlights:

  • Continued growth in customer numbers to 5.7 million (2013: 5.5 million); primarily driven by growth of over 180,000 in general insurance policies
  • Quick, customer-focused reaction to the Budget including launch of one year annuity within 10 working days
  • LV= continues to be Britain's most recommended insurer according to YouGov [5] and best insurer for customer satisfaction in research by the Institute of Customer Service
  • Progress in our diversification strategy for general insurance with strong growth in home, commercial and road rescue business lines
  • Number one provider of advised income protection
  • Agreed terms to take over the majority of Teachers Assurance in line with strategy to grow our life business
  • Employee engagement up to 85% (2013: 83%), 11% higher than other UK financial services organisations norm levels [6]

Mike Rogers, LV= Group Chief Executive, said:

2014 was an eventful year for our members and their Society so I am pleased to announce a solid operating profit of £86 million and an increased mutual bonus of £24 million; meaning we have allocated an extra £86 million to members over the past four years.

"Our general insurance business had an excellent year with good profit growth despite continued price competition and strong increases in our home and commercial customer bases as we delivered on our diversification strategy.

"Our protection, equity release, and heritage businesses had a good year helping to partially offset the significant impact of the 2014 Budget on our retirement new business profits as annuity volumes fell and we invested in new propositions. We believe that our existing expertise in enhanced annuities, pension drawdown, and equity release, coupled with our status as Britain’s most recommended insurer will enable us to compete strongly in the new retirement landscape.

"Finally our with-profits fund recorded another strong investment performance, benefiting many of our members."

General insurance business

  • Combined ratio of 96.1% (2013: 98.9%)
  • Operating profit increased by 14% to £92 million (2013: £81 million)
  • Underwriting profit increased by 240% to £51 million (2013: £15 million)
  • Investment returns of 2.0% (2013: 3.2%) reflected low interest rate environment
  • Premium income decreased by 4% to £1.39 billion due to falling rates in motor (2013: £1.45 billion)
  • GI paid dividends of £37 million in 2014 taking total capital returns to the Society (by way of dividends) of £110 million over the last three years
  • Pre-tax return on capital of 12.3% (2013: 10.6%)

The general insurance business continues to achieve excellent results and good profits despite continued depressed motor premiums and low investment returns over the year. The operating profit of £92 million is up 14% year-on-year and we have grown our business by over 180,000 new policies during 2014. This result is partly driven by a particularly strong underwriting result of £51 million, which has benefited from prior year reserve releases amounting to £113 million (2013: £41 million). The combined ratio of 96.1% is the lowest ever reported and demonstrates disciplined management of underwriting, claims and costs.

Personal motor insurance remains our most significant business line, however in line with our objective to diversify our business we have seen good growth in other products, particularly home and SME. Home premium income increased by 17% to £182 million in the year and commercial premium grew by 13% to £227 million. In motor we prioritised achieving underwriting margins, rather than growing market share, and therefore saw a slight fall in overall motor premiums in 2014. We have seen signs that rates are moving up and we expect this to continue in 2015.

The two core businesses of direct and broker now underwrite 3.2 million and 1.4 million policies respectively, and both businesses contributed to the profits at £46 million each. In August we launched a new direct landlord product aimed at property owners with one or two rented properties and sales have been promising so far. The focus on our people providing excellent customer service continues to set us apart from the market and we won a number of external accolades during 2014.

Despite active management, the continuing low interest rate environment meant that investment returns are down at 2.0% (2013: 3.2%).

Life and pensions business

  • Underlying operating profit decreased to £17 million (2013: £29 million) as a result of lower new business volumes and profit contribution from our enhanced annuity business.
  • Overall new business contribution (before investment in new propositions) of £22 million (2013: £29 million)
  • Strong financial performance in equity release and protection partially offsetting impact of annuities, with new business contributions (before investment in new propositions) of £8 million and £10 million respectively (2013: £4 million and £6 million)
  • Retirement business sales in line with 2013 levels at £1.13 billion on a PVNBP basis (2013: £1.14 billion)
  • 11% increase in protection new business sales at £217 million (2013: £195 million)

Our life business achieved an underlying operating profit of £17 million in 2014. The changes to pension freedom announced by the Chancellor in the Budget have created a very different business environment for our retirement solutions business. Whilst we are excited about the potential going forwards, we saw significantly lower new business volumes and profit contribution from enhanced annuities as customer behaviours started to change and people deferred making decisions until changes come into force in April 2015. The impact on enhanced annuities was however partially offset by strong performance in other business lines, particularly equity release and protection.

Our customer focus was demonstrated in the wake of the Budget announcement by enhancing policy conditions for those customers who had started the purchase of their retirement products, and we were the first to market with a fixed one year annuity designed to give customers a short-term option whilst they waited for the changes to come into effect.

In our retirement solutions business we are well positioned for the future with our range of retirement products. We will be launching our Retirement Account proposition for advisers in April, enabling easy quotation and purchase of multiple products together, alongside some simple tools that bring to life clients' retirement income choices. In addition we have been developing our capability in the bulk annuity market, which we view as an attractive market for LV= following the Budget changes.

In protection we have seen an increase in new business contribution before investment in new propositions at £10 million (2013: £6 million) with sales up 11% on 2013. We have maintained our position as market-leader in advised income protection, and increased the breadth of our product range with the launch of Personal Sick Pay, a new tailored income protection product designed for riskier, more manual occupations. This forms part of our strategy to drive growth in areas where we have significant recognised expertise and competitive advantage.

Heritage business

  • Operating profit of £13 million (2013: £18 million)
  • Sales up 66% in 2014 (£168 million versus £101 million)
  • Overall return on with-profits assets of 11.4% against a benchmark of 11.3% (2013: 11.1% against a benchmark of 8.6%)
  • A 25-year policy covering a £50,000 mortgage is currently paying a surplus of £15,324 (for a customer aged 30 next birthday at entry, the maturity value for a 25-year low cost mortgage endowment maturing on 1 March 2015 is £65,324)

Sales have been strong in heritage this year and we are reporting an operating profit of £13 million. Our actively marketed guaranteed bonds have had a very strong year in 2014 and sales are up 79% on 2013 to £153 million, as these products are becoming increasingly attractive to pensioners seeking an income in retirement. Within our closed book business we have achieved a strong investment performance, once again out-performing the market.

In December we agreed terms with Teachers Assurance to take over the majority of its business interests. The formal transfer is expected to happen at the start of 2016 and will add over 70,000 life and pension policies to our heritage business.

Mike added:

"In summary I am pleased with the progress we've made in 2014. Our continued focus on providing an excellent level of customer service has meant that despite the market conditions we have continued to prosper. In 2015, we plan to continue progress on key objectives including diversifying our general insurance business and growing our life business."

For further information please contact:

Emma Banks,, 0208 256 6714 / 07894 158 605


LV= employs 6,000 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.

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.

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 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. 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.
  3. Gross of tax.
  4. Profit before tax is IFRS profit before mutual bonus, tax and transfer to or from the unallocated divisible surplus.
  5. Research conducted by YouGov found LV= in the top position on the BrandIndex Recommend measure when assessing the data collected between 1st November 2013 and 31st October 2014. All data was collected using an online survey and respondents are members of the YouGov panel. The 35,384 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?
  6. As measured by Towers Watson through our annual employee opinion survey; 11% above other financial services companies