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LV= announces half year results for 2014

8 September 2015 | Press release

Mutual insurance, retirement and investment group LV=, the UK’s largest friendly society, announces interim results for six months ended 30 June 2014.

Financial highlights:

  • Group operating profit up 18% to £39 million (H1 2013: £33 million) (i)
  • Net earned premiums increased to £1.1 billion (H1 2013: £1.0 billion)
  • Profit before tax for the group down 47% to £47 million (H1 2013: £88 million), reflecting short-term investment fluctuations (ii)
  • General insurance combined ratio improved and operating profits up 7% to £46 million (H1 2013: £43 million)
  • Group solvency remains strong at £718 million surplus on a Pillar 1 (Peak 2) basis (YE 2013: £720 million)

Strategic and operational highlights:

  1. The UK’s most recommended insurer according to research by YouGov amongst 30,000 consumers
  2. First provider to launch a one year annuity to help customers affected by the budget – just ten days after the announcement
  3. General insurance business continues diversification into non-motor lines
  4. Number one provider of income protection insurance sold by advisers
  5. High renewal rates of 79% and 83% on direct motor and home insurance
  6. UK Institute of Customer Satisfaction Index shows LV= is the leading insurer for customer satisfaction

Mike Rogers, LV= Group Chief Executive, said: “We are reporting a group operating profit of £39 million for the first half of 2014, up 18% compared to this time last year. This is a good achievement in what have been tough trading conditions for both our general insurance and life businesses. We continue our focus on providing a great level of service to our customers and in the first six months of the year we were voted most recommended insurer by YouGov, and the highest performing insurer for customer service in the UK Customer Satisfaction Index.

“We’ve seen events affecting both businesses, with continued pressure on motor premium rates impacting general insurance and the Budget affecting our life business, so given this backdrop, we can be pleased with our performance for the year-to-date.”

General insurance business

  • Operating profit up 7% to £46 million (H1 2013: £43 million)
  • Underwriting profit increased by 24% to £21 million (H1 2013: £17 million)
  • Combined ratio of 96.9% (H1 2013: 97.6%)
  • Commercial lines premium income up 22% to £117 million (H1 2013: £96 million)
  • Active management of the investment portfolio resulted in returns of 2.4% (H1 2013: 2.5%)
  • Premium income down 4% to £720 million due to falling rates in motor (H1 2013: £748 million)
  • Pre-tax return on capital of 12.4% (H1 2013: 11.7%)

In general insurance operating profit is £46 million and we continue to diversify our business in line with our strategic objective to increase our customer base in home and commercial insurance. Premium income is down overall slightly but the profit figure shows the impact of our disciplined approach and our decision not to take on unprofitable business.

Both the direct and broker channels contributed to the operating profits at £29 million (H1 2013: £23 million) and £17 million (H1 2013: £20 million) respectively, with the latter being impacted by uncompetitive personal lines pricing in intermediated motor.

The overall underwriting profit of £21 million, up 24% on H1 2013, benefited from favourable prior-year claims run-off of £58 million, and this has mitigated the impact of lower margin business earning through in H1 2014 due to the continuing severe market price competition. The underwriting result also benefited from a decrease in operating expenses resulting from a continued focus on cost control. We have continued to grow our customer base, welcoming 130,000 new policyholders, mostly non-motor, during the six months to June, taking the general insurance customer total to 4.5 million demonstrating the attraction of the LV= brand, as well as high renewal rates amongst existing customers.

Life and pensions business

  1. Underlying operating profit decreased to £7 million (H1 2013: £11 million) reflecting lower margins on enhanced annuities sales and increased sales of less profitable fixed term annuities
  2. New business contribution of £6 million (H1 2013: £5 million)
  3. Total life business sales increased by £55 million (9%) compared to H1 2013 (£662 million v £607 million) measured on a present value of new business premiums (PVNBP)(iii) basis
  4. Retirement business saw an 11% increase in sales (PVNBP) to £566 million (H1 2013: £510 million)
  5. In a competitive market Protection maintained sales (PVNBP) at £96 million (H1 2013: £97 million)
  6. With-profit sales of £70 million (PVNBP) in six months to June (H1 2013: £44 million)

The life business has produced an underlying operating profit of £7 million for the six months to end of June. The reduced profit has primarily been driven by reducing margins on new business following the changes to pension freedom announced in the Budget in March. As well as taking positive actions to help our customers immediately impacted by the Budget, we also quickly implemented some consumer focused initiatives including the launch of a new one year annuity and a new simplified drawdown product. Despite the Budget impact, we have seen strong sales across our retirement solutions range, up £55 million on a PVNBP basis compared to H1 2013, with equity release performing particularly well, over 50% up year-on-year.

LV= is a top five provider for a range of retirement income products and is positively positioned to take advantage of the changes in the market next April when the new regime comes in. We believe that more people will look at blended solutions and the certainty and guaranteed income that our annuities provide will also continue to have a place in the new retirement landscape.

Protection sales are comparable to 2013 and we continue to be the number one provider for income protection policies sold through advisers, a further demonstration of the strength of the LV= brand, and our customer focused proposition. In April we enhanced our critical illness cover to be market-leading and even easier for customers to claim on and in May we launched a new personal sick pay policy to protect the income of a wider range of customers.

In our heritage business, which is mainly with-profit, sales have performed strongly in the first half of 2014. We remain committed to this market and these strong sales demonstrate that with-profit bonds in particular continue to be attractive to certain market segments.

Commenting on the outlook, Mike Rogers said: “With our mutual model, focus on an excellent level of customer care, and diverse business lines LV= is well placed for continued business growth.

“We expect to see motor rates start to improve to more sustainable levels later in the year and into 2015. A degree of uncertainty will remain for our retirement solutions business until more clarity is provided on the new pensions landscape, however we are supportive of the Government’s decision to ensure that guidance offered to all retirees is provided independently as we believe this will help ensure the right consumer outcomes. We have a well-recognised, strong brand and we remain financially strong and fit for the future.”


i) Operating profit excludes short-term investment fluctuations, amortisation of intangibles and other one off costs.

ii) Profit before tax is IFRS profit before mutual bonus, tax and transfer to or from the unallocated divisible surplus.

iii) 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.

Liverpool Victoria Financial Services Limited, registered in England with registration number 12383237. County Gates, Bournemouth, BH1 2NF, UK