2024 LV= Member Community ‘Ask our CEO’ session

2024 LV= Member Community ‘Ask our CEO’ session – Full recording transcript

Hi, I'm Samantha Preece, Chief Brand and Communications Officer, and I'm delighted to welcome you to another LV= Member Community question and answer session with LV= Chief Executive David Hynam. Before we get underway, I'd like to thank members of our online Community who have asked a question. We've had a great response. If you're familiar with the format, due to the volume of questions, we group and by topic and theme, which helps limit repetition.

So, without further ado, David, let's get started.

Mutuality

A few of our members have asked about LV=’s mutual future and whether there was any financial impact on members as a result of the proposed demutualisation back in 2021.

Thanks, Sam and look, it's great to be here again. I think being clear about my and LV's commitment to mutuality feels like a good place to start. So I'm now into my third year of leading LV=, and since I joined, I've been very clear about my own commitment to LV's future, remaining mutual and also delivering value for our members, and my focus has been on making sure we have the right plan in place, the right people in place to drive the success for our business, and the strong results we showed at the AGM in June this year shows that focus is working.

I think our mutual status is a real differentiator for LV=, means we can take a longer, broader view.

We can reinvest for our members now and in the future and we've also reinforced our role as a major contributor to the wider mutual sector. On the specific points about the financial effect on members of the historic proposed demutualisation while funds set aside to settle claims and provide returns on investments were not impacted. And in addition, if members want to see the further detail around the other financials of that year, then the 2021 Annual Report can be found on our website.

I'll say it again. It's a privilege to be a mutual business. So when I'm wholly committed to LV= as a mutual and I'm very clear we will remain one.

That was very clear, thank you and continuing to look to the future. A couple of members would like to learn more about where you see LV= going? Victoria is interested in what 2025 looks like and James is looking ahead for the next 5 to 10 years.

Thank you, Victoria, thank you. James. Look, I think it's very important that we focus on the years to come, as well as the day to day.

We have a clear purpose, which is to help our members lead financially confident lives and as a mutual with roots that go back over 180 years, that was what we looked to achieve then.

It's what we're still doing today. Our strategy is very much future focused. We retain a diversified but  focused set of products, services and advice sitting across investments, pensions protection and equity release and we need to have the right digital capabilities. We need to have strong cost management and we need to have brilliant member and advisor experiences to look after our members today and also tomorrow.

I think that's a pretty special combination. Now, that's one of the really great things about mutuals when they're well-run. It's to the benefit of multiple generations. So yes, we are ambitious about near-term growth, but we're not so short sighted as to neglect the long term health of the business. If we go even further forward. Where do I see ourselves in 5 to 10 years?

Well, doing and delivering exactly as we said we would, which is delivering great commercial outcomes that we can return to members and we can reinvest for future growth.

Member engagement

We've had some questions around working with members.

Chris would like to know if LV= would consider creating a membership council and Marcus is asked if there will be any panel meetings, Richard has asked about whether we would incentivise the LV= Member Community.

Thank you all for your questions there. Our aim is to engage with our members in a variety of ways, recognizing that one size really doesn't fit all. So that's two things like the LV= Member Community, by sharing news and updates with our newsletters and the annual general meeting, which we hold every year.

So we're keen that as many members as possible can engage with us in a way that suits for them our experience of councils and panel meetings is it can be difficult for some members to be part of that.

So instead, we've taken a slightly different approach and we've seen great success from our online Member Community. We've almost 2,000 members now on the platform, and since launch we've shared over 100 surveys, polls, discussions, and we're edging ever closer to having 10,000 responses.

I'm really proud of what our members have helped to build and as a thank you for member contributions, they're entered into a monthly prize draw and that applies to all Community activity. So the more activities members take part in, the more entries they'll get.

Diversity, equity and inclusion

We've had a question about our gender pay gap. Alison, I'd like to know why it remains at 31%. Can you share your thoughts on that?

Thanks, Alison. Diversity, equity, inclusion is something I'm very passionate about and our gender pay gap has remained steady over the last couple of years at 31% and the pay gap is driven very much by our workforce structure and the various roles held by women and men.

Now we're committed to closing the gap. But as many companies are finding, it's, a level of change that's not easy or quick to achieve, but we're not sitting on our hands.

We're fostering a culture that positively supports progress with initiatives and policies. For example, we've signed up to the Women in Finance Charter and we've introduced some new family policies. All the senior team at LV= are absolutely committed to taking continued action to improve the results.

Products and services

It's really great to hear that members are using the My LV= portal. David has a question, it's about functionality and how we can assess the performance of his investments.

David, I'm really pleased you're accessing and using the portal. It's been designed to give members up to date information, such as recent values on their personal pensions, their bonds, and their ISA policies and it gives the ability to view current valuations, transactions and recent policy documents.

Now, at the moment, to review fund information and the performance of the funds you're invested in, that does involve contacting your financial advisor, and they'll be able to calculate investment growth against both past and present fund values, and to see what other funds are available to you.

Thanks, David. Paul would just like to check if members living abroad can access My LV=.

Thanks, Paul. Since the launch of My LV=, the team have kept looking for ways to improve access and functionality. Now, some overseas members can now use My LV=, which is great. And if you email [email protected] with your policy, number one of our team will be happy to help you.

And we have one final question about My LV= from Richard will the platform house all historical documents and up to date key features.

Thanks, Richard. The My LV= portal will display documents from the moment you registered. So that would be the original terms and conditions and the key features at that time.

And from then on, annual statements and reviews gets uploaded for any current key features and any historical documents you'd like for your own records. A colleague is really happy to help you.

You just need to email [email protected].

Great, thanks, David. Marcus has recently looked into taking LV= Equity Release and wondered what factors drive the rate offered.

Well, rates are driven by a combination of individual circumstances at the time as well as your own requirements. So it's hard obviously to comment on a particular quote. But what I would say is that our equity release products are very highly rated in the industry and for the seventh consecutive year, we've received Defaqto five star ratings.

We have a question about Bitcoin. James would like to ask when we're likely to allow financial advisors to offer Bitcoin.

Thank you James an interesting question. Bitcoin continues to be an area that we would consider at our board investment committee. When we review our strategic asset allocation. What we call SAA and the SAA is designed to reflect our investment risk appetites on behalf of our members. I think that a similar question about Bitcoin last time, and we still don't currently think the Bitcoin exposure is appropriate, but of course, we're watching the market as we do for all asset types.

Investments

Turning to investments now. David is interested to learn more about the Great Victoria partnership and what the board are doing to enhance this particular investment for LV=?

Thanks, David. Great question. The Great Victoria partnership is a joint venture we have with Great Portland Estates in the lease, sold the property on Oxford Street in London and it's a long held direct property asset and forms part of our With-Profits Funds exposure to the property asset class.

So working with Great Portland Estates, our focus now is to maximise the total value by securing good quality tenants rather than redeveloping the building.

Richard is looking for maximum investment performance and he's curious to understand if we offer non ESG funds as part of our offering to give members more choice?

Investment performance is a key driver. Our objective is to deliver a strong and stable fund performance for our members. Working with our primary asset manager now, Blackrock, we know that companies that consider environmental, social and governance factors can focus on achieving strong performance whilst investing in a responsible way. We never ignore investment performance.

Richard would also like to ask about our smoothing mechanism. If smoothing was suspended, would we inform members before we move to the underlying or gradual average prices?

It's worth noting that since launch 19 years ago, we've never needed to suspend smoothing, including during the financial crisis in 2008 and the Covid pandemic in 2020. So for members who aren't familiar with smoothing, let me just step it through. Our smoothing mechanism takes the average of a fund's daily price over the past six months, and that produces an average fund price.

And we call that the smoothed price. The smooth price is the one we use when we quote policy values.

So that means the effect of large daily stock market fluctuation is dampened by the smoothing mechanism and that delivers a calmer investment journey.

In the event of sudden stock market growth, smooth funds will not reflect that immediately. But equally, if markets quickly fall, the smoothing mechanism helps to cushion the impact.

And although it's unlikely, we may at our discretion, need to suspend smoothing to protect our members and our business and to pay the underlying daily fund price until smoothing is reintroduced. Now we’d only do that in exceptional circumstances. It's a very common feature amongst smooth investment funds in the industry, and it prevents LV= from incurring the loss caused by paying out values which are higher than the underlying investments, which also protects other members through bonus distribution over time.

Product performance and bonuses

Richard would like to know when our fund valuations will show the performance of underlying assets, and which ESG funds are adding to, or reducing fund values?

Thank you, Richard. Our investment products are made up of several underlying collective or pooled funds, and they're typically each made up of many underlying stocks or bonds in order to diversify risk. In totality, our investment products will invest in thousands of underlying stocks and bonds, so it's not practical to include the individual valuations for each within policy reports. In well diversified investment products

The asset allocation is the main driver of risk and return, and that's a focus within our reports.

This year we published our task force on Climate Related Disclosures TCFD reports, which discloses greenhouse gas emissions information for each of our investment products.

A key intention of that disclosure is to allow investors to compare emissions across different investment products. And you can view those reports on our website.

David, we all know that the investments landscape has been tricky over the past few years. A couple of members would like to understand what the impact of that might be?

Whilst I can't comment on a member's individual investments, what I can say is that the mini budget in 2022 did impact the performance of many investment funds, and since then, we've seen much better results as the market recovers.

Our main With-Profits Fund delivered a 9.3% return over 2023, partly due to strategic allocation towards overseas equity and UK fixed income, both of which performed well.

We've now transitioned our assets to Blackrock, and we maintain a strong focus on generating investment returns for members.

It's important always to check with your financial advisor to review your investments, making sure they're still working for you in the way that you want them to.

John's interested in your view on what you anticipate annuity rates will do over the coming year?

Thank you. John. Look, predictions are risky, but annuity rates depends on a number of factors. So just a bit more clarity perhaps around how rates are set. Well investment markets will always have a strong influence on annuity rates, as the amount of investment return that providers can earn is a key factor in setting customer rates.

Other factors include how competitive the market is at a particular time, and also what demand there is for annuities relative to alternative options such as keeping pension funds invested.

As always, speak to your financial advisor for any specific advice there.

Thank you David. Moving on to policy bonuses, Brian is looking for clearer information on how LV= bonuses are calculated.

Brian, thank you for your feedback. In addition to regular and final bonuses on our with-profits policies, our aim is for eligible members to share in the success of our business, and we've been doing this since 2011 through the LV= mutual bonus and our aim is to distribute our profits via the mutual bonus in a broadly stable and sustainable way.

And that means we want to distribute a bonus to members. But we also need to maintain the strength of our business for both current and future generations.

The decision to award a mutual bonus is guided by the board's overriding responsibility to balance the need to deliver for members, both today and in the future, alongside LV's investment needs and the projected financial strength of the fund.

Our annual policy statements are designed to show how bonuses are worked out and what rates are added to policy values.

One of our colleagues would be really happy to go through your policy with you in more detail if you'd like them to. So please feel free to give our customer service team a call. If you'd like to know a bit more.

So David, that brings us to the end of our Ask Our CEO session. I think you'll agree that we've had a great range of member questions.