Press release

LV= announces 127% increase in group operating profit to £195 million for 2015

Mutual insurance, retirement and investment group LV=, the UK's largest friendly society, announces its financial results for the year to 31 December 2015 and publishes its annual report.

Financial highlights:

  • Group operating profit [1] £195 million (2014: £86 million)
  • General Insurance operating profit £72 million (2014: £92 million)
  • Life operating profit £41 million (2014: £7 million loss)
  • Heritage operating profit £88 million (2014: £9 million)
  • The LV= with-profits fund earned an investment return of 3.8% [2], 1.1% above market benchmarks
  • Profit before tax [3] £124 million (2014: £37 million)
  • Mutual bonus £27 million (2014: £24 million)
  • Group solvency [4] £854 million (2014: £689 million

Strategic highlights:

  • YouGov Most Recommended Insurer for the second year running [5].
  • Employee engagement up to 86% (2014: 85%), 13% higher than the UK financial services organisations norm [6].
  • Further progress with strategy to diversify general insurance earnings with proportion of non-personal motor policies up from 29% in 2013 to 36% at the end of 2015.
  • Launched LV= Legal Services, a non-insurance legal services solution, and acquired a majority stake in Wealth Wizards Limited the UK based automated advice experts as part of strategy to explore adjacent business areas.
  • Transaction to take over the majority of Teachers Assurance business lines on schedule to complete in the first half of 2016, subject to regulatory approval.
  • Fully compliant with Solvency II capital regime effective from 01 January 2016 on a standard formula basis. Intention to transition to an internal model over time.

Mike Rogers, LV= Group Chief Executive, said: "The challenging market conditions experienced in 2014 with depressed investment returns and pressure on home insurance rates, have continued in 2015. Against this backdrop LV= has performed very strongly and delivered an operating profit of £195 million, an increase of 127% over the prior-year.

"Today we have announced an increased mutual bonus of £27 million (2014: £24 million) taking the total allocated to eligible members over the last five years to £113 million. We exist to grow member value and it's very pleasing to be able to reward them as a result of our financial success.

"Our general insurance business results have been impacted by a range of factors in 2015. On the upside we started to see rates in the car insurance market harden in the second half of the year but much of this benefit was eroded by an increase in claims inflation. The underwriting result once again benefited from significant favourable prior-year reserve development of £93 million (2014: £109 million). While we expect to see continued positive reserve run-off in future years it will be at lower levels. In line with the rest of the industry our operating profit of £72 million was affected by the impact of the December storms. The business is in good shape and we're confident that the management actions taken during 2015 position it well to deliver profitable growth in 2016 and beyond.

"The impact of government pensions' reforms continues to be felt in the retirement market where we've seen a marked change in buying behaviour with more pensions savers shopping around for retirement income solutions. New business volumes have grown significantly and we continue to develop new products and services to position LV= at the forefront of the changing pensions environment.

"We retain our position as the leading provider of individual income protection and during 2015 entered the business protection market. Total new business sales of £272 million were up 25% on 2014 and protection remains an area where we see potential for future growth."

General insurance business

  2015 2014 Change (%)
Combined ratio 96.1% 96.1%  -
Operating profit

£72 million £92 million  (22)
Underwriting profit

£44 million £51 million  (14)
Gross written premiums
£1.47 billion
£1.39 billion

2015 was another good year for our general insurance business in what remain challenging market conditions. Gross written premiums are up 6% to £1.47 billion with growth in both the broker and direct channels. While we began to see rates harden in the motor market in the second half of the year, rates in the home and SME markets continue to be soft.

Despite on-going pressure on top line and the impact of the December storms we achieved a strong combined operating ratio of 96.1%. Against this backdrop and with a sustained low interest rate environment we continue to believe that the general insurance market remains under-priced and will need further rate increases in 2016.

Record operating profits for our direct business of £91m were partly offset by an operating loss of £19m in our broker business largely driven by the weather claims in December where costs, across both divisions of £36m particularly impacted our commercial business. We remain committed to the broker market and are confident that the pricing and underwriting actions we took in 2015 will restore this business to profitability in 2016.

Policy count increased by over 100,000 and we now have more than 4.7 million policies in force (direct 3.3 million and broker 1.4 million). Our strategy to diversify our general insurance business continues and more than half of the net growth in policy numbers has come from non-motor lines.

Looking ahead to 2016 our priorities are continued growth in SME, targeted growth in home and motor where market conditions are favourable and further investment in technology to make it easier for brokers and clients to do business with us.

Life and pensions business

  2015  2014 Change (%)
Operating profit
£41 million
£7 million (loss)
Overall new business contribution [7]
£47 million
£25 million
Retirement new business sales (PVNBP basis)
£1.55 billion
£1.28 billion
Pensions £801 million
£636 million
£309 million
£387 million
Flexible Guarantee Bonds £379 million
£153 million
Equity Release £63 million
£105 million
 Protection new business sales (PVNBP basis)
£272 million
£217 million

Our life and pensions business had a very successful year in 2015 turning an operating loss of £7 million in 2014 to a £41 million operating profit, partly as a result of favourable one-off model and valuation changes. Overall new business contribution before investment in new propositions has increased by 88% to £47 million (2014: £25 million) driven by strong interest in our protection, flexible guaranteed bonds and draw-down products.

In retirement we have seen good growth in blended solutions as consumers start to fully exercise their range of options following the pension freedom reforms announced in 2014. In response we were the first to launch a Retirement Account combining fixed term annuities and flexible guarantee funds in a single solution. To cater for the needs of people in defined benefit pension schemes who want to explore their income options at retirement we created Pension Compass, a range of tools that allow members to compare the new income options to the guaranteed benefits offered by their final salary arrangements.

As part of our aim to make financial advice affordable and accessible to the mass market we launched LV= Retirement Wizard, the UK's first fully regulated online advice solution with a low fixed cost and a money back guarantee. We are seeing a significant rise in interest for automated advice from a range of organisations seeking to white label this technology and we expect to announce a number of partnerships in 2016.

In protection we have seen strong growth in an overall flat market. New business contribution before investment in new propositions of £21 million is up 110% on the prior year (2014: £10 million). In September we launched our first range of business protection products. Designed to protect small and medium sized businesses against the financial impact of death or critical illness we are already seeing a steady increase in the number of advisers choosing LV= to protect their customers.

The outlook for our life and pensions business is positive as we continue our growth strategy. The building blocks are in place and the focus for 2016 will be on driving adoption of our Retirement Account, Pension Compass and Retirement Wizard solutions. We will also continue to invest in technology to make it easier to do business with us and in ongoing support for IFAs.

Heritage business

  • Operating profit of £88 million (2014: £9 million).
  • Overall return on with-profits assets of 3.8% against a benchmark of 2.7% (2014: 11.4% against a benchmark of 11.3%).
  • A 25-year policy covering a £50,000 mortgage is currently paying a surplus of £13,611 (for a customer aged 30 next birthday at entry, the maturity value for a 25-year low cost mortgage endowment maturing on 1 March 2016 is £63,611)

The heritage business consists of policies that are closed to new business or not actively marketed. Operating profit of £88 million (2014: £9 million) is driven by model and valuation changes of £91 million. Our with-profit returns at 3.8% have outperformed the benchmark (2.7%) for the fourth year running with outperformance in UK equities and a broadly in-line performance of UK gilts, which together form over half of the fund's assets.

LV= a decade of successful change

2016 marks ten years since LV= embarked on a transformation programme following the appointment of Mike Rogers as CEO in May 2006. Over that period the business portfolio has been restructured, a successful rebranding has been undertaken and there has been significant growth in customers, member returns and employee engagement.

  Year ending 31 December 2006
Year ending 31 December 2015
Business structure
Broad business model incorporating life, general insurance, banking, IFA and asset management operations.
Focused model with a composite structure providing diversification benefits.
Gross earned premium
£630 million
£2,408 million
Group operating profit
£20.1 million loss
£195 million profit
Customer numbers
2 million
5.8 million
Total assets
£8,194 million
£14,539 million
Employee engagement
63% (in 2007, the first year of the survey)
Liverpool Victoria, single digit awareness
LV=, 80% awareness
Investment return on main with-profits fund
The investment return on the main with-profits fund over 2006-2015 (before tax and policy charges): total return 92.5%, average annual return 6.8%
Mutual bonus
Mutual bonus introduced in 2011, total allocated over the last five years £113 million


Notes to editors: 

For a full copy of the Annual Report & Accounts see

  1. Operating profit excludes short-term investment fluctuations, amortisation of intangibles and other one off costs.
  2. Gross of tax.
  3. Profit before tax is IFRS profit before mutual bonus, tax and transfer to or from the unallocated divisible surplus.
  4. On a Peak 2 basis
  5. Research conducted by YouGov found LV= in the top position on the BrandIndex Recommend measure when assessing the data collected between 01 November 2014 and 31 October 2015. All data was collected using an online survey and respondents are members of the YouGov panel. The 33,752 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; 13% above other financial services companies
  7. Overall new business contribution is before investment in new propositions.

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.
Kaidee Horton
Head of Corporate Communications, General Insurance
07738 274568