LV= announces 2021 financial results

Significant operational progress made towards a sustainable future.

Life, pensions and investments business LV= announces its financial results for the year to 31 December 2021 and publishes its annual report.

Operational highlights:

  • Outperformed targets for sales and profitability and enhanced the sustainability of the business 
  • Doubling of inflows into Smoothed Managed Funds which will all convert to a with-profits basis
  • Continued progress on IT transformation programme including the successful migration of Equity Release onto a new system
  • Continued steady progress on reducing operational costs
  • Strengthened executive team with a new Chief Financial Officer, Chief Operating Officer and Chief Risk Officer
  • Launched Mortgage and Rent Cover and Executive Income Protection products
  • Repositioned the business to target customers where the LV= brand and products are most competitive
  • Listened further to members following the Special General Meeting vote

Financial highlights:

  • New business PVNBP £1.6 billion (FY 2020: £ 1.3 billion)
  • IFRS trading profit £29m (FY 2020: £9 million)
  • £38m of bonuses shared with eligible members
  • Solvency II operating capital generation £110 million [i] (FY 2020: £103 million)
  • Operating profit £31 million (FY 2020: £40 million)
  • Group Solvency II capital coverage ratio 187% [ii] (FY 2020: 198%)

Mark Hartigan, LV= Chief Executive, said:

“LV= has outperformed both our new business volumes and profitability targets with significant growth in sales and trading profit. Thanks to the progress of our plan to transform the business we start 2022 well capitalised and clear in our future plans.

“We look forward with confidence to a sustainable future for LV= as part of a vibrant mutual sector.

“I am pleased that we have been able to share £38 million with our with-profits members through a mutual bonus of £28 million and an exit bonus of £10 million introduced following the sale of the general insurance business.

“Through the success of our Smoothed Managed Funds we are replacing smaller legacy policies in the With-Profits Fund with larger investments.  We will be adding new funds to the range during the second quarter and converting all Smoothed Managed Funds investments to a with-profits basis. A thriving With-Profits Fund is better able to support the future levels of investment required in our business plan, while ensuring that the reasonable expectations around returns to members are still met.

“Over the past two years we have driven up premium volumes, gained market share and reduced costs and through this improved the commercial outcomes of the business and enhanced its sustainability. We have refocused the business to serve mass affluent customers providing financial resilience for families. This is built around access to low volatility smoothed investment solutions supported by Income Protection & Critical Illness propositions and the ability to access housing wealth via our Equity Release offering. We still have more to do, but our plan is working.

“We have made good progress on our IT transformation including the successful migration of Equity Release onto a new system and our recently announced partnership with Embark, a platform provider to widen the access of our Smoothed Managed Funds range to financial advisers.  Our IT investment plan is sustainable, providing more certainty on the future investment needs of the business while maintaining the expected distributions to with-profits members.

“The proposed transaction with Bain Capital was put to a member vote at a Special General Meeting in December 2021 but was not approved by members. Since the vote we have listened to our members. It’s clear they value stability and security for their policies above all else and are supportive of an independent future for LV=.

“I would like to thank all of our people who have worked so hard to support our customers and advisers over the last twelve months. LV= is a great business and we’re determined to build a successful future.”

Financial highlights:

 

FY 2021

FY 2020

Change (%)

Operating profit

£31 million

£40 million

(22%)

Trading profit

Savings and Retirement

Protection

Heritage

£29 million

£22 million

£9 million

£(2) million loss

£9 million

£8 million

£2 million

£(1) million loss

222%

175%

350%

(100%)

New business sales (PVNBP basis)

Savings and Retirement

Protection

£1.59 billion

£1.26 billion

£332 million

£1.29 billion

£1.04 billion

£252 million

23%

21%

32%

 

New business sales on a Present Value of New Business Premiums (PVNBP) basis have increased by 23% to £1,589m (2020: £1,291m) with increases in both Savings and Retirement and Protection.

The underlying performance of the business is strong with trading profit increasing to £29m (2020: £9m), driven by the significantly improved trading profit generated by new business of £17m (2020: £6m loss). Trading profit generated from in-force business decreased slightly to £12m (2020: £15m). Operating profit has decreased year-on-year by £9m to £31m (2020: £40m), with the improved trading profit more than offset by a reduction in positive impacts from model and basis changes.

2021 also saw a continuation of the strong cost disciplines embedded within the business with targeted operating expenses reducing by 3% to £105m (2020: £108m). We remain committed to reducing our targeted operating expenses below £100m and continue on the trajectory required to achieve this.

Our Solvency II capital position remains strong, with a capital surplus of £637m [iii] (2020: £690m) and a capital coverage ratio of 187% [i] (2020: 198%), still at the top of our risk appetite range of 140% - 200%. Operating capital generation of £110m (2020: £103m) includes £87m (2020: £58m) from our trading businesses. The £53m decrease in capital surplus during the year reflects planned distribution of proceeds from the sale of the general insurance business through bonuses, both those paid during 2022 and the investment strategy that supports ongoing bonuses.  Monies to pay future bonuses have been invested in a portfolio which better keeps pace with the With-Profits Fund to ensure future bonuses continue at intended levels.

We are reporting a loss before tax and mutual/exit bonus for the year of £66m (2020: £37m profit) with the year-on-year reduction mainly driven by interest rate swaps hedging the Solvency II capital position. Operating profit of £31m has also been offset by £90m (2020: £96m) of non-operational items, which includes strategic investment of £30m, £24m of debt interest, £21m strategic review costs and £15m of other restructuring and one-off costs. We are focused on reducing the level of spend on non-operational items over the next two to five years. Profit was also reduced by the one-off impact of £20m generated by the switch from the LIBOR to SONIA yield curve. 

Our Savings and Retirement business has experienced excellent growth in both sales and profitability. New business sales have increased by 21% to £1,257m (2020: £1,039m) on a PVNBP basis, primarily due to the significant outperformance of our Smoothed Managed Funds franchise which exceeded our 2021 target by 77%. This has once again led to increasing market share during the year. Profitability of new business has also improved with the trading profit generated by Savings and Retirement new business increasing to £12m compared to a new business trading loss of £3m in 2020.

We continue to develop our Smoothed Managed Funds franchise, which offers clients protection from market volatility with a track record of facilitating access to potential growth upside and have seen a doubling of inflows to £437m. Throughout the year we made a number of enhancements to the range including amending the investment strategy to include greater emphasis on environmental, social and governance criteria and introducing Smoothed Pensions and Smoothed Bonds.

We have made significant progress on our programme to improve the volumes and profitability of the Protection business. New business sales increased by 32% to £332m (2020: £252m) on a PVNBP basis, outperforming the market and growing our market share in the segments we have chosen to compete in. These sales generated £5m of trading profit (2020: £3m loss), driven by strong protection volumes during the year, particularly in Term Life.

Within Protection we made further enhancements to our flagship Income Protection proposition launching Mortgage and Rent Cover for those with fluctuating incomes, as well as regular earners and a new Executive Income Protection product enabling small businesses to pay sick pay benefits to key employees.

Notes to editors

These numbers are unaudited.

i, ii, iii The Solvency II capital metrics reported in this press release are based on the estimate of the year end results as at 28 March 2022. It is possible that the capital position will be adjusted prior to the publication of the group Solvency and Financial Condition Report later in 2022.

Certain statements in this press release may constitute "forward-looking statements". These statements reflect the Issuer's expectations and are subject to risks and uncertainties that may cause actual results to differ materially and may adversely affect the outcome and financial effects of the plans described herein. You are cautioned not to rely on such forward-looking statements. The Issuer disclaims any obligation to update their view of such risks and uncertainties or to publicly announce the result of any revisions to the forward-looking statements made herein, except where they would be required to do so under applicable law. 

For further information please contact:

David Gwyer
Media Relations Manager – Life & Pensions
07798 796907

About LV=

LV= is a leading financial mutual and serves over 1.3 million members with a range of financial products. 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. 

LV= and Liverpool Victoria are registered trademarks of Liverpool Victoria Financial Services Limited and LV= and LV= Liverpool Victoria are trading styles of the Liverpool Victoria group of companies. Liverpool Victoria Financial Services Limited, registered in England with registration number 12383237 is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, register number 110035. Registered address: County Gates, Bournemouth, BH1 2NF.