Mutual bonus scheme

Rewarding our members

LV= is a mutual insurer which means we're owned by our 1.1m members. The LV= mutual bonus was introduced in 2011 and rewards eligible members for their continued investment in the Society.

Each year the LV= Board considers whether to declare a mutual bonus and, if so, the level and form of the bonus and which policies should receive it. This takes into account:

• the performance of LV=’s trading business in life and general insurance;
• LV=’s capital position; and
• the contribution to LV= made by various groups of policies (for example, the risks taken by them in supporting the establishment and growth of LV=’s trading businesses).

Most eligible members will receive the mutual bonus when their with-profits policy ends. The LV= mutual bonus is not a guaranteed benefit and is at the sole discretion of the LV= Board. Previously declared mutual bonus can only be taken away in exceptional circumstances, for example if it were required to protect our financial strength.

Our performance in 2017 has enabled us to allocate a discretionary mutual bonus of £26 million (2016: £17 million). We have applied the mutual bonus by uplifting the asset share of relevant policies as follows:

Policy group	Uplift % 2017	Uplift % 2016
Conventional with-profits policies and with-profits annuities	1.0%	0.5%
Accumulating and unitised with-profits policies except Flexible Guarantee policies	1.0%	0.5%
Flexible Guarantee Bonds Series 1 and 2 / Flexi Guarantee Plan / Flexible Guarantee Funds Series 1	0.5%	0.5%
Flexible Guarantee Bonds Series 3 / Flexible Guarantee Funds Series 2	0.0%	N/A

The different enhancements applied for 2017 reflect the contribution to the Society made by these different groups of policies. For Flexible Guarantee Bonds Series 3 and Flexible Guarantee Funds Series 2, the mutual bonus has been declared at zero, however this does not mean that these plans will never receive a mutual bonus.

Since the launch of the mutual bonus in 2011, LV= has allocated a total mutual bonus of £155 million to eligible member policies.

The 2017 mutual bonus will typically add the following to eligible with-profits policies assuming they are currently worth £10,000:

Policy group	Addition
Conventional with-profits policies and with-profits annuities	£100
Accumulating and unitised with-profits policies except Flexible Guarantee policies	£100
Flexible Guarantee Bonds Series 1 and 2 / Flexi Guarantee Plan / Flexible Guarantee Funds Series 1	£50
Flexible Guarantee Bonds Series 3 / Flexible Guarantee Funds Series 2	£0

It will form part of the amount payable when the policy matures, pays a death claim or is cashed in, except for eligible annuitants which receive an increase in their income. For most with-profits policies it is added by increasing any final bonus or top-up bonus (or reducing any Market Value Reduction) that otherwise would be paid.