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Catch up with the latest press releases from LV=

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LV= announces strong group results for 2012 with mutual bonus up 12%

Press release: 09/04/2013

Mutual insurance, retirement and investment group LV=, the UK’s largest friendly society, announces results for the year to 31 December 2012.


2012 financial highlights

  • Group underlying operating profit [1] up 19% to £126.2 million (2011: £105.8 million)
  • IFRS profit before tax and mutual bonus of £103.2 million (2011: loss of £16.9 million)
  • Life underlying operating profit up 7% to £26.3 million (2011: £24.5 million) with sales up 15% at £156.6 million on an APE basis (2011: £136.2 million)
  • General Insurance underlying operating profit increased by 53% to £117.1 million (2011: £76.4 million)

Mike Rogers, LV= Group Chief Executive, said: "These results for 2012 show a 19% increase in underlying operating profit which is an excellent achievement and makes 2012 our fifth successive year of growth and increased underlying profits. As a result of our performance I am delighted to confirm a mutual bonus of £20.9 million. This will be added to eligible with-profit members’ policies on payout.

"We have invested significantly in our external brand and our proposition of offering good value products backed up by great customer service and this approach is clearly paying dividends. We place a great deal of focus on enabling and empowering our people to do the right thing for customers and as a result we have record high levels of employee engagement as well as very high levels of customer satisfaction."

The results were driven by an outstanding performance by the general insurance business which achieved a 53% increase in underlying operating profits during the year with premium income growing to £1.49 billion. We are now the third largest personal motor insurer in the UK with 11% market share.

2012 was also a strong year for the life business as year-on-year sales increased to record levels across a number of key business lines. Total sales for 2012 were £156.6 million, a 15% increase on the previous 12 months. As well as growth in underlying profit, within life an £89 million year-on-year improvement in short-term investment fluctuations contributed significantly to the £120 million growth in group profits before tax for the year.

LV=’s with-profits policies continue to be among the best-performing in the market with 12 of 14 payouts being in the top quartile [ii].


Life and Pensions business

  • Underlying operating profit up 7% to £26.3 million (2011: £24.5 million)
  • Sales up 15% at £156.6 million on an APE basis [iii] (2011: £136.2 million)
  • Retirement and protection businesses both saw a 15% growth in sales with APE of £124.4 million (2011: £108.2 million) and £32.2 million (2011: £28.0 million) respectively [iv]
  • A £50 a month 25 year savings endowment policy maturing on 1 March 2013 (for a male aged 30 next birthday at entry) will pay out £39,585, equivalent to an annual yield of 7.0%

Within life our strategy of remaining focused on market segments with attractive margins and good growth potential where we have relative scale and expertise, has resulted in a continued strengthening of our market share positions. We are the market-leader for advised income protection and a top five provider for pension drawdown, enhanced annuities and equity release.

This was achieved against a challenging regulatory backdrop for the life and pensions industry as a whole, driven by the implementation of a number of regulatory and legislative changes including the retail distribution review (RDR).

We have also maintained strong cost disciplines, with costs as a percentage of our liabilities improving from 4.2% to 3.6%.


General insurance business

  • Underlying operating profit increased by 53% to £117.1 million (2011: £76.4 million)
  • Underwriting profits impacted by adverse weather, with a combined ratio of 99.7%
  • Strong investment returns of 5.8% (2011: 2.8%)
  • Premium income grew to £1.49 billion with increased new business sales in direct (2011: £1.46 billion)
  • Significantly improved pre-tax return on capital now at 17.7% (2011: 12.9%)

Underlying operating profit increased by 53% to £117.1 million (2011: £76.4 million) Underwriting profits impacted by adverse weather, with a combined ratio of 99.7% Strong investment returns of 5.8% (2011: 2.8%) Premium income grew to £1.49 billion with increased new business sales in direct (2011: £1.46 billion) Significantly improved pre-tax return on capital now at 17.7% (2011: 12.9%)

Within general insurance, the two core business areas of direct and broker now underwrite 2.7 million and 1.4 million policies respectively. Both channels contributed to the underlying operating profits at £64 million and £53 million respectively.

The combined operating ratio for 2012 of 99.7% meant that the business delivered an underwriting profit of £5 million. The reduction in underwriting profits relative to 2011 was primarily driven by claims arising from adverse weather conditions which impacted profits by about £25 million, together with a further increase in personal injury claims frequency. This was partly mitigated by a further improvement in the expense ratio.

Active, but conservative management of the investment portfolio and a general uplift in markets during 2012 produced a total return of 5.8% (2011: 2.8%), contributing strongly to the overall record trading profits.

Mike added: "In a challenging year LV= has been able to deliver record profits. Despite the uncertain outlook for the UK economy, we are confident that our successful business model and strong competitive position in our chosen markets leaves us well placed for continued growth in 2013."


Notes to editors


LV=

LV= employs 5700 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.

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.


[i] Underlying operating profit is IFRS profit before tax adjusted for basis and methodology changes, short-term investment fluctuations, amortisation of intangibles and other one off costs

[ii] Money Management 2013.

Payout (£)

2012

LVFS 2013

Industry

LVFS 2012

Product

Term and years

Lower quartile

Median

Upper quartile

Endowment

10 UWP
15 UWP
20 CWP
25 CWP

6,479
10,324
17,168
29,350

6,701
11,057
19,144
32,435

7,115
12,009
21,756
36,052

7,407
12,603
24,283
46,521

-
-
22,675
39589

Bond

5 UWP
10 UWP

10,446
14,443

11,484
15,671

11,758
16,698

12,060
17,519

-
-

Pension (regular)

5 UWP
10 UWP
15 CWP
20 CWP

13,461
30,065
45,271
72,145

13,787
31,124
48,314
79,627

14,322
31,969
50,944
85,744

14,349
33,549
51,410
106,788

-
-
-
106,788

Pension (single)

5 CWP
10 CWP
15 CWP
20 CWP

11,364
16,077
17,767
32,486

11,756
17,400
20,612
36,277

12,263
18,506
22,759
41,935

12,038
18,456
23,203
50,356

-
-
-
50,356

[iii] APE = Annual Premium Equivalent - This is a measure comprising new regular premium sales plus 10% of single premiums.

[iv] Table below showing final bonus rates and payouts 2012.

Conventional with-profits

Policy duration

Policy description

Payout

Final bonus rate

Equivalent annual rate of return over the full term

25 years [a]

Ordinary Branch Endowment

£39,585

39.7%

7.0%

25 years [b]

Industrial Branch Endowment

£3,784

42.5%

6.2%

Notes

[a] Regular premium of £50 per month for a male aged 30 next birthday at entry, maturing 01/03/2013.

[b] Regular premium of £5 per four week period for a male aged 30 next birthday at entry, maturing 01/03/2013.