LV’s operating profit fell by £9mn to £31mn as the mutual grew its new business across savings, retirement and protection.
The mutual said in its full-year financial results, published today (March 29), this was driven by the “significantly improved” trading profit generated by new business, which jumped from a £6mn loss to a profit of £17mn.
Last year the business expressed concerns about its outlook as it encouraged members to vote for its acquisition by private equity firm Bain Capital.
At the time LV said was "sub-scale", with an "insufficiently strong capital structure and a loss-making new business unit, in need of investment".
Members voted against the Bain deal and merger talks with Royal London came to nothing, leading LV to announce last month it would continue as an independent mutual in light of "improving business performance".
The mutual’s Smoothed Managed Funds - which are expected to become the “dominant part” of its overall with-profit fund - doubled inflows to £437mn.
LV will add new funds to this range during the second quarter and is currently converting all Smoothed Managed Funds investors to with-profit member status.
New business also grew notably in LV’s savings and retirements division, where trading profits climbed to £22mn, compared to £8mn in 2020.
This saw the new business sales of this division increase 21 per cent, reaching £1.3bn after hitting £1bn a year previously.
Over in the mutual’s protection business, new business sales increased 32 per cent to £332mn compared to £252mn in 2020, taking trading profit from new protection sales to £5mn. In 2020, the insurer had posted a £3mn loss.
Although the mutual’s operating profit dipped £9mn last year, from £40mn to £31mn. In-force business - ie the amount of paid-up and current insurance policies - posted a trading profit of £12mn, which was down from £15mn in 2020. And the loss made from LV’s Heritage business went up by £1mn, to £2mn.
“We have refocused the business to serve mass affluent customers providing financial resilience for families,” said Mark Hartigan, LV’s chief executive
“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.”
Hartigan also said LV’s 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”.
It shared £38mn with with-profits members through a mutual bonus of £28mn and an exit bonus of £10mn introduced following the sale of the general insurance business.
With around 274,000 of these members, this equates to a payment of £138.69 per member.
ruby.hinchliffe@ft.com
