TIDM51II
RNS Number : 3043G
LV=
29 March 2022
LV= ANNOUNCES 2021 FINANCIAL RESULTS
Significant operational progress made towards a sustainable
future
Life, pensions and investments business LV= announces its
financial results for the year to 31 December 2021 and publishes
its annual report (lv.com/annual-report).
Operational highlights:
-- Outperformed targets for sales and profitability and enhanced the
sustainability of the business
-- Doubling of inflows into Smoothed Managed Funds which will all convert
to a with-profits basis
-- Continued progress on IT transformation programme including the successful
migration of Equity Release onto a new system
-- Continued steady progress on reducing operational costs
-- Strengthened executive team with a new Chief Financial Officer, Chief
Operating Officer and Chief Risk Officer
-- Launched Mortgage and Rent Cover and Executive Income Protection products
-- Repositioned the business to target customers where the LV= brand
and products are most competitive
-- Listened further to members following the Special General Meeting
vote
Financial highlights:
-- New business PVNBP GBP1.6 billion (FY 2020: GBP 1.3 billion)
-- IFRS trading profit GBP29m (FY 2020: GBP9 million)
-- GBP38m of bonuses shared with eligible members
-- Solvency II operating capital generation GBP110 million(i) (FY 2020:
GBP103 million)
-- Operating profit GBP31 million (FY 2020: GBP40 million)
-- Group Solvency II capital coverage ratio 187%(ii) (FY 2020: 198%)
Mark Hartigan, LV= Chief Executive, said: "LV= has outperformed
both our new business volumes and profitability targets with
significant growth in sales and trading profit. Thanks to the
progress of our plan to transform the business we start 2022 well
capitalised and clear in our future plans.
"We look forward with confidence to a sustainable future for LV=
as part of a vibrant mutual sector.
"I am pleased that we have been able to share GBP38 million with
our with-profits members through a mutual bonus of GBP28 million
and an exit bonus of GBP10 million introduced following the sale of
the general insurance business.
"Through the success of our Smoothed Managed Funds we are
replacing smaller legacy policies in the With-Profits Fund with
larger investments. We will be adding new funds to the range during
the second quarter and converting all Smoothed Managed Funds
investments to a with-profits basis. A thriving With-Profits Fund
is better able to support the future levels of investment required
in our business plan, while ensuring that the reasonable
expectations around returns to members are still met.
"Over the past two years we have driven up premium volumes,
gained market share and reduced costs and through this improved the
commercial outcomes of the business and enhanced its
sustainability. We have refocused the business to serve mass
affluent customers providing financial resilience for families.
This is built around access to low volatility smoothed investment
solutions supported by Income Protection & Critical Illness
propositions and the ability to access housing wealth via our
Equity Release offering. We still have more to do, but our plan is
working.
"We have made good progress on our IT transformation including
the successful migration of Equity Release onto a new system and
our recently announced partnership with Embark, a platform provider
to widen the access of our Smoothed Managed Funds range to
financial advisers. Our IT investment plan is sustainable,
providing more certainty on the future investment needs of the
business while maintaining the expected distributions to
with-profits members.
"The proposed transaction with Bain Capital was put to a member
vote at a Special General Meeting in December 2021 but was not
approved by members. Since the vote we have listened to our
members. It's clear they value stability and security for their
policies above all else and are supportive of an independent future
for LV=.
"I would like to thank all of our people who have worked so hard
to support our customers and advisers over the last twelve months.
LV= is a great business and we're determined to build a successful
future."
Financial highlights:
FY2021 FY 2020 Change (%)
Operating profit GBP31 million GBP40 million (22%)
------------------ ------------------ -----------
Trading profit GBP29 million GBP9 million 222%
Savings and Retirement GBP22 million GBP8 million 175%
Protection GBP9 million GBP2 million 350%
GBP(2) million GBP(1) million
Heritage loss loss (100%)
------------------ ------------------ -----------
New business sales (PVNBP basis) GBP1.59 billion GBP1.29 billion 23%
Savings and Retirement GBP1.26 billion GBP1.04 billion 21%
Protection GBP332 million GBP252 million 32%
------------------ ------------------ -----------
New business sales on a Present Value of New Business Premiums
(PVNBP) basis have increased by 23% to GBP1,589m (2020: GBP1,291m)
with increases in both Savings and Retirement and Protection.
The underlying performance of the business is strong with
trading profit increasing to GBP29m (2020: GBP9m), driven by the
significantly improved trading profit generated by new business of
GBP17m (2020: GBP6m loss). Trading profit generated from in-force
business decreased slightly to GBP12m (2020: GBP15m). Operating
profit has decreased year-on-year by GBP9m to GBP31m (2020:
GBP40m), with the improved trading profit more than offset by a
reduction in positive impacts from model and basis changes.
2021 also saw a continuation of the strong cost disciplines
embedded within the business with targeted operating expenses
reducing by 3% to GBP105m (2020: GBP108m). We remain committed to
reducing our targeted operating expenses below GBP100m and continue
on the trajectory required to achieve this.
Our Solvency II capital position remains strong, with a capital
surplus of GBP637m(iii) (2020: GBP690m) and a capital coverage
ratio of 187%(i) (2020: 198%), still at the top of our risk
appetite range of 140% - 200%. Operating capital generation of
GBP110m (2020: GBP103m) includes GBP87m (2020: GBP58m) from our
trading businesses. The GBP53m decrease in capital surplus during
the year reflects planned distribution of proceeds from the sale of
the general insurance business through bonuses, both those paid
during 2022 and the investment strategy that supports ongoing
bonuses. Monies to pay future bonuses have been invested in a
portfolio which better keeps pace with the With-Profits Fund to
ensure future bonuses continue at intended levels.
We are reporting a loss before tax and mutual/exit bonus for the
year of GBP66m (2020: GBP37m profit) with the year-on-year
reduction mainly driven by interest rate swaps hedging the Solvency
II capital position. Operating profit of GBP31m has also been
offset by GBP90m (2020: GBP96m) of non-operational items, which
includes strategic investment of GBP30m, GBP24m of debt interest,
GBP21m strategic review costs and GBP15m of other restructuring and
one-off costs. We are focused on reducing the level of spend on
non-operational items over the next two to five years. Profit was
also reduced by the one-off impact of GBP20m generated by the
switch from the LIBOR to SONIA yield curve.
Our Savings and Retirement business has experienced excellent
growth in both sales and profitability. New business sales have
increased by 21% to GBP1,257m (2020: GBP1,039m) on a PVNBP basis,
primarily due to the significant outperformance of our Smoothed
Managed Funds franchise which exceeded our 2021 target by 77%. This
has once again led to increasing market share during the year.
Profitability of new business has also improved with the trading
profit generated by Savings and Retirement new business increasing
to GBP12m compared to a new business trading loss of GBP3m in
2020.
We continue to develop our Smoothed Managed Funds franchise,
which offers clients protection from market volatility with a track
record of facilitating access to potential growth upside and have
seen a doubling of inflows to GBP437m. Throughout the year we made
a number of enhancements to the range including amending the
investment strategy to include greater emphasis on environmental,
social and governance criteria and introducing Smoothed Pensions
and Smoothed Bonds.
We have made significant progress on our programme to improve
the volumes and profitability of the Protection business. New
business sales increased by 32% to GBP332m (2020: GBP252m) on a
PVNBP basis, outperforming the market and growing our market share
in the segments we have chosen to compete in. These sales generated
GBP5m of trading profit (2020: GBP3m loss), driven by strong
protection volumes during the year, particularly in Term Life.
Within Protection we made further enhancements to our flagship
Income Protection proposition launching Mortgage and Rent Cover for
those with fluctuating incomes, as well as regular earners and a
new Executive Income Protection product enabling small businesses
to pay sick pay benefits to key employees.
- ends -
For further information:
Jon Sellors Jon.sellors@lv.com 07711 701 806
David Gwyer David.gwyer@lv.com 07798 796 907
Ed Berry (FTI) edward.berry@fticonsulting.com 07703 330 199
Tom Blackwell (FTI) tom.blackwell@fticonsulting.com 07747 113 919
The full LV= results can be found at:
http://www.lv.com/about-us/company-information/investors
Notes to editors
These numbers are unaudited.
I, ii, iii The Solvency II capital metrics reported in this
press release are based on the estimate of the year end results as
at 28 March 2022. It is possible that the capital position will be
adjusted prior to the publication of the group Solvency and
Financial Condition Report later in 2022.
Certain statements in this press release may constitute
"forward-looking statements". These statements reflect the Issuer's
expectations and are subject to risks and uncertainties that may
cause actual results to differ materially and may adversely affect
the outcome and financial effects of the plans described herein.
You are cautioned not to rely on such forward-looking statements.
The Issuer disclaims any obligation to update their view of such
risks and uncertainties or to publicly announce the result of any
revisions to the forward-looking statements made herein, except
where they would be required to do so under applicable law.
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END
FR EAXDPAFFAEFA
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