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LV= doubles half year operating profit in 2015

Press release: 08/09/2015

Mutual insurance, retirement and investment group LV=, the UK's largest friendly society, announces interim results for six months ending 30 June 2015.

Financial highlights:

  • Group operating profit up 103% to £79 million (H1 2014: £39 million) [1]
  • Net earned premiums unchanged at £1.1 billion (H1 2014: £1.1 billion)
  • Profit before tax up 4% to £49 million (H1 2014: £47 million)
  • General insurance combined ratio improved and operating profit up 52% to £70 million (H1 2014: £46 million)
  • Life operating profit up to £12 million (H1 2014: loss of £5 million)
  • Group solvency remains strong with excess capital at £714 million (FY 2014: £689 million)
  • Return on the main LV= with-profits fund of 1.9% against benchmark of 1.4% for the first half of 2015

Strategic and operational highlights:

  • Launched the first online regulated advice service to help retirees to make the most of their pension savings
  • Retirement sales up 15% driven by an increase in demand for income drawdown
  • 50% increase in income protection sales during half year and LV= remains the top provider of individual income protection insurance
  • The UK's most recommended insurer according to research by YouGov [2]
  • General insurance business continues diversification into non-motor lines
  • High renewal rates of 80% and 84% on direct motor and home insurance
  • UK Institute of Customer Satisfaction Index shows LV= is the leading insurer for customer satisfaction [3]

Mike Rogers, LV= Group Chief Executive, said:

"A doubling of profits in the first six months of 2015 is a strong result. We have achieved this despite high levels of competition continuing in general insurance and a shift in the buying behaviour of retirees meaning the products we are selling in our retirement business have changed.

"Our capital position remains strong with excess capital at £714 million compared to 2014 year-end of £689 million. The developments required for the transition to the Solvency II regime continue to be a key focus and we are on track to comply with the requirements with effect from 1 January 2016.

"Providing a great service to our customers is very important to us, and a key differentiator, so we are delighted to remain the UK's most recommended insurer, according to YouGov. Our life insurance business has been voted ‘most trusted' by consumers in the Moneywise awards and our general insurance customer satisfaction rate of 83% reporting to be ‘very' or ‘extremely' satisfied is very good. Renewal rates of over 80% of direct home and car insurance customers further demonstrates our strength of service."

General Insurance financial highlights:

  • Operating profit up 52% to £70 million (H1 2014: £46 million)
  • Underwriting profit increased by 152% to £53 million (H1 2014: £21 million)
  • Improved combined ratio of 92.1% (H1 2014: 96.9%)
  • Premium income up to £729 million (H1 2014: £720 million)
  • Pre-tax return on capital of 18.1% (H1 2014: 12.4%)

The general insurance result in the first half of the year is good with profits up by 52% compared to the same period in 2014. GWP is also up for the period and the improved combined ratio of just over 92% is our best ever demonstrating disciplined management of underwriting, claims and costs. This result is partly driven by prior year reserve releases amounting to £55 million (H1 2014: £58 million); we anticipate however that the prior year run off will be at lower levels during the second half of the year. We have continued to diversify into non-motor lines with the proportion of non-motor polices now at 37% (H1 2014: 33%).

Both the Direct and Broker channels contributed to the operating profits at £52 million (H1 2014: £29 million) and £18 million (H1 2014: £17 million) respectively. Investment returns at £17 million were lower than for H1 2014 (£25 million) reflecting more challenging investment market conditions.

In Direct our profit is the best achieved for a half year period, as are our record levels of sales of £416 million in the first half of 2015, compared to £408 million in 2014. We have grown across all business lines in the last quarter and now insure over 600,000 homes.

In Broker we have seen increased competition in commercial lines and so have managed growth to protect margins. In Broker personal lines we achieved a combined ratio of 95% for the six month period by prioritising margin preservation over market share.

Claims costs have benefitted from good weather over the winter months, contributing to our strong underwriting results. The motor market remains competitive across both direct and broker but we have seen some rate recovery during the first half of the year, helping us to protect margins from increasing personal injury claims costs, which continue to be problematic for the industry.

Life and pensions business

  • Life operating profit up to £12 million (H1 2014: loss of £5 million)
  • New business contribution up 117% to £13 million (H1 2014: £6 million)
  • Life business sales up 20% to £864 million (H1 2014: £721 million) measured on a present value of new business premiums (PVNBP) [4] basis
  • Retirement sales up 15% to £720 million (H1 2014: £625 million)
  • Protection sales up 50% at £144 million (H1 2014: £96 million)

The life business has had a strong first six months of the year and our operating profit is up to £12 million. In addition, new business contribution has more than doubled from £6 million to £13 million.

The impact of the 2014 Budget has led to a change in buying behaviour with more pension savers shopping around for retirement income solutions. LV= offers a wide range of products and we have seen strong sales, up £95 million compared to H1 2014. We have seen pensions performing well due to an increased demand for our drawdown proposition, with sales up 45% on this time last year. Our flexible guarantee bonds are also proving to be very popular with those approaching retirement resulting in year-on-year sales increasing by 136%. Sales of our fixed term annuities have risen by 18% which supports our view that our annuities will continue to play a role in helping retirees to fund their retirement.

We have invested significantly in developing new technology that helps people make the most of the new pensions freedoms. Earlier this year we became the first provider to create a fully regulated online advice service, LV= Retirement Wizard, which seeks to close the advice gap by making it easier for savers to access advice, and more cost effective for advisers to offer it, especially for those with smaller pots of money. As part of our innovation in this area, we have taken a majority stake in Wealth Wizards, who we developed LV= Retirement Wizard with, and who will be marketing an automated advice platform.

The protection business has performed extremely well in the first six months of the year and sales have increased by 50% across all core lines, including income protection, critical illness and term. We remain the number one provider for individual income protection policies, which further demonstrates the strength of the LV= brand, and our customer focused proposition. We plan to build on our existing range of products and broaden our offering and will be entering the business protection market later this year.

Commenting on the outlook, Mike Rogers said:

"We are a financially strong mutual with a well-known brand and our composite model means we are well positioned for the future with growth opportunities in both our trading businesses. We are focused on offering good value products and an excellent level of customer care. In general insurance we continue to diversify into non-motor lines and in life both our protection and retirement solutions businesses are well positioned in their respective markets to deliver future growth."

For further information please contact:

Jon Sellors,, 020 7634 4447 / 07711 701 806

The full LV= interim results can be found at:

About LV=

LV= employs over 6,000 people and serves over 5.8 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 are currently the UK's number one brand for Insurance and Investments, according to the 2015 YouGov Brand Index Buzz Rankings.

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.

These numbers are unaudited.

  1. Operating profit excludes short-term investment fluctuations, amortisation of intangibles and other one off costs.
  2. Aug 2014 – July 2015. Sample size: 34,506. Research conducted by YouGov found LV= in the top position on the BrandIndex Recommend measure when assessing the data collected between Aug 2014 – July 2015. All data was collected using an online survey and respondents are members of the YouGov panel. The 34,506 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?
  3. July 2015
  4. Present Value of New Business Premiums (PVNBP) is the total of new single premium sales received in the year plus the discounted value, at the point of sale, of the regular premiums we expect to receive over the term of the new contract sold in the year. For Equity Release this represents the amount of loans provided.