Insurance mutual LV sees sales from its savings and retirement arms fall

LV generated a loss before tax and member bonuses of £265m in 2022, up from £66m in 2022, as its investment portfolios took a hit from volatile markets.

Profits from LV savings and pension trading fell 55 percent from £22m to £10m in the year to December, the group said on Thursday.

Trading profit generated by new business within the savings and retirement business fell to zero over the period, compared to a new business trading profit of £12m in 2021.

Short-term investment fluctuations had a £133m negative impact on earnings, driven by a £58m impact from widening credit spreads.

Year-over-year sales of annuities were up 91 percent, while sales of equity release products and protection products were up 19 percent and 8 percent, respectively, surpassing sales targets.

LV’s total operating income remained ‘steady’ this year, standing at £31m.

LV added: “In addition, the overall result was further reduced by reciprocal and exit bonuses allocated to our eligible with-profit members of £35 million (2021: £38 million) and unfavorable pension revaluations of £127 million (2021: £23 million favorable), partially offset by the £97 million tax credit (2021: £11 million cost).’

The group also revealed it was sharing £35 million in bonuses among eligible members.

On investment returns, LV said, “2022 has been a difficult year for balanced portfolios traditionally designed to balance the investment risks of equities (shares and shares) and the risks of fixed income assets such as bonds. Investment returns on both equities and bonds were negative in most global markets.’

The group’s leading profit-oriented fund failed to escape headwinds in global markets, returning a negative 14.3 percent.

David Hynam, CEO of LV, said: ‘There is no doubt that the current economic challenges and uncertainty are affecting businesses in the UK.

High inflation, rising interest rates and low growth pose challenges to businesses and consumers. We are not immune to this and we know our members will be no less affected, not least by the rising cost of living. Despite these challenges, and as a result of our focused business strategy, the outlook for LV= remains positive.

“Despite difficult market conditions, we performed well with our protection, equity release and annuity products, all of which surpassed their sales levels for 2021.”

He added: “The business continues to have a strong foundation and despite rising inflationary pressures, we have maintained tight and largely flat operating costs.”

Last July, the group’s interim chief executive, Mark Hartigan, announced plans to step down once a permanent replacement is found. On leaving the group, Hartigan was contractually entitled to a £120,000 payment of which £72,000 was deferred for three years, payable in three equal installments, LV said.

LV added: ‘Mark will receive the equivalent of 10 months’ salary and the cash value of benefits in accordance with his contractual entitlement totaling £412,545.’

David Hynam, who is also a non-executive director of HomeServeUK, was appointed chief executive of LV on 26 September 2022 and joined the board on 24 October 2022. Hynam’s total remuneration for 2022 was £423,000.

Formerly known as Liverpool Victoria, the insurer abandoned a proposed takeover of by private equity group Bain Capital in December 2021 after losing a member vote. Rival Royal London came up with an alternative proposal for the insurer, but this intervention also ended without an agreement.