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Catch up with the latest press releases from LV=

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LV= announces strong life business performance

Press release: 09/04/2013

Mutual insurance, retirement and investment provider LV=, the UK’s largest friendly society, announces its 2012 life and pensions business results, with increased sales and profit compared to 2011.

2012 financial highlights:

  • Underlying operating profit [1] up 7% to £26.3 million (2011: £24.5 million)
  • Sales up 15% at £156.6 million on an APE basis [2] (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
  • 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% [3]

Richard Rowney, LV= Life and Pensions Managing Director, said: “2012 was another very successful year for LV=’s life and pensions business, as we increased sales across our key business areas. As well as growth in underlying profit, an £89 million year-on-year improvement in short-term investment fluctuations contributed significantly to the overall growth in group profits before tax for the year.

“Our strategy of remaining focused on market segments with good growth potential, where we have considerable expertise, continues to differentiate us in an increasingly competitive industry.”

LV= has maintained strong market positions in 2012. It is 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).

LV=’s life business has also maintained strong cost disciplines, with costs as a percentage of its liabilities improving from 4.2% to 3.6%. LV=’s with-profits policies also continue to be among the best-performing in the market with 12 of 14 payouts being in the top quartile [4].

Highlights of performance by product:

  • Pensions: 19% increase with APE £55.6m (2011: £46.7m)
  • Protection: 15% increase with APE £32.2m (2011: £28.0)
  • Annuities*: 13% increase with APE £59.9 (2011: £53.0m)
  • Equity release: 5% increase with APE £8.9m (2011: £8.5m)

* Annuities includes enhanced, investment linked and fixed term annuity products

Richard Rowney continued: “Our focus in 2013 remains unaltered. We want to be the UK’s leading retirement and protection specialist, through being in profitable, fast growth markets where we have relative scale. We plan to maintain our growth with the launch of new propositions in the protection and retirement markets. We are also continuing to invest heavily in the training and development of our people, to ensure we can provide outstanding service to advisers and customers.”

LV= Group 2012 business results:

  • Group underlying operating profit 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)

LV= General Insurance 2012 business results:

  • 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%)

Mike Rogers, LV= Group Chief Executive, said: “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 leaves us well placed for continued growth in 2013.”

Notes to editors:

[1] 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

[2] APE = Annual Premium Equivalent

This is a measure comprising new regular premium sales plus 10% of single premiums.

[3] 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

[4] Money Management 2013

Payout (£)

2012

LVFS
2013

Product and term (years)

Industry

LVFS
2012

Lower
Quartile

Median

Upper
Quartile

Endowment

10
15
20
25

UWP
UWP
CWP
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
39,589

Bond

5
10

UWP
UWP

10,446
14,443

11,484
15,671

11,758
16,698

12,060
17,519

-
-

Pension (regular)

5
10
15
20

UWP
UWP
CWP
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
10
15
20

CWP
CWP
CWP
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

LV=

LV= employs 5,600 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. We are a leading player in our chosen markets with top five positions in personal motor insurance, protection and enhanced annuities.

In 2012 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, Standard Life, Nationwide Building Society and a range of trade unions.

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

Registered address: County Gates, Bournemouth BH1 2NF. www.LV.com

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