REG - LV= Liverpool VictoriaFS - LV= ANNOUNCES 2022 FINANCIAL RESULTS

CPPGroupAnnouncement

30/03/2023 08:15

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RNS Number : 7520U  LV=  30 March 2023

LV= ANNOUNCES 2022 FINANCIAL RESULTS

- Continued positive momentum despite challenging economic conditions -

 

Protection, investment and retirement specialist LV= announces its financial
results for the year to 31 December 2022 and publishes its Annual Report
(LV.com/annual-report).

 

Operational highlights:

·    Year-on-year sales of annuities (+91%), equity release (+19%), and
protection products (+8%) increased and exceeded sales targets

·    Continued progress on stabilising operational costs with expenses
remaining largely flat despite a backdrop of high inflation

·    Strengthened senior leadership with appointment of David Hynam as LV=
Chief Executive and Simon Moore as LV= Board Chair

·    Two funds - Extra Cautious and Impact Growth - added to the LV=
Smoothed Managed Fund range broadening appeal to a wider range of investors

·    Launched further affordable critical illness cover - LV= Life and
Critical Illness Cover

·    Mortgage Advice Bureau added the full LV= Flexible Protection Plan
range of products and options to its protection panel

·    A one-off payment of £750 made to help LV= colleagues with the cost
of living crisis

 

Financial highlights:

 ·         ·    Present value of new business premiums (PVNBP) £1.5 billion (FY
           2021: £1.6 billion)

           ·    Operating profit remains stable year-on-year at £31 million (FY
           2021: £31 million)

           ·    Trading Profit £28 million (2021: £29 million)
 ·         ·    £35 million of bonuses shared with eligible members
 ·         ·    Solvency II operating capital generation £91 million(i) (FY 2021:
           £110 million)
 ·         ·    Group Solvency II Capital Coverage Ratio 174%(ii) (FY 2021: 187%)

 

David Hynam, LV= Chief Executive, said:

 

"There's no doubt that the current economic challenges and uncertainty are
affecting businesses around the UK. High inflation, rising interest rates and
low growth are posing challenges for businesses and consumers alike. We are
not immune to this and we know that 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 have traded well with our protection,
equity release and annuities products all exceeding their 2021 sales levels.

 

"Since joining LV=, I've been focused on driving forward the next steps in our
business strategy.

 

"My goal is to forge a collaborative, inclusive business environment where we
do all we can to achieve the best outcomes and returns for our mutual members.

 

"We are already delivering on our members-first philosophy, having shared
member bonuses of £35 million.

 

"Our products also reflect LV's values-driven approach, with our protection
policies - critical illness, income protection and life insurance - helping
individuals and families across the nation guard against serious accidents or
illnesses that prevent them from working.

 

"We have expanded our range of protection products including launching a more
affordable critical illness product providing more choice and flexibility for
customers at different life stages.

 

"Our pensions and equity release products are helping members secure the
retirement they want, and our Smoothed Managed Fund range remains popular with
financial advisers and their clients who are looking for a range of
lower-volatility investments. Sales of the Smoothed Managed Fund range have
been affected by difficult economic conditions but net fund flows are broadly
neutral.

 

"We added two funds last year. The new funds - Extra Cautious and Impact
Growth - broaden the LV= Smoothed Managed Fund range to appeal to a wider
range of investors. The Smoothed Managed Fund range will continue to be a core
product and play an important role in helping to secure opportunities that
extend LV's distribution reach.

 

"The business continues to have strong foundations, and despite increasing
inflationary pressures, we have maintained tight and largely flat operating
costs.

 

"LV= members can be confident that we are doing our utmost to deliver the
value for money they rightly expect in tough economic times."

 

 

Financial highlights:

                                   FY2022               FY2021               Change (%)
 Operating profit                  £31 million          £31 million          (0%)
 Trading profit                    £28 million          £29 million          (3%)

 Savings and Retirement            £10 million          £22 million          (55)%

 Protection                        £19 million          £9 million           111%

 Heritage                          £(1) million loss    £(2) million loss    50%
 New business sales (PVNBP basis)  £1,454 million       £1,589 million       (8%)

 Savings and Retirement            £1,097 million       £1,257 million       (13%)

 Protection                        £357 million         £332 million         8%

 

New business sales on a Present Value of New Business Premiums (PVNBP) basis
decreased by 8% to £1,454m (2021: £1,589m). Sales of annuities, equity
release and protection products increased but sales of Smoothed Managed Funds
(SMF) and other pensions products have fallen due to difficult economic
conditions. However, net fund flows into the SMF range of funds remain broadly
neutral.The business has been impacted by the reduction in SMF and pension new
business sales, although this has been mainly offset by increased sales across
our other products, leading to trading profit decreasing slightly to £28m
(2021: £29m). Trading profit generated by new business fell to £14m (2021:
£17m), while the trading profit generated from in-force business increased to
£14m (2021: £12m). Operating profit is stable year-on-year at £31m (2021:
£31m), with the impact of reduced trading profit largely offset by beneficial
model and basis changes and other items.

 

2022 saw a continuation of the strong cost disciplines embedded within the
business with targeted operating expenses remaining flat at £105m (2021:
£105m), despite a backdrop of high inflation. This allowed the business to
make a one-off payment of £750 in order to help LV= colleagues with the cost
of living crisis.

 

Non-operational items, such as strategic investment and business restructuring
costs have reduced to £80m (2021: £90m) and the overall year-on-year result
before economic impacts has therefore improved. Control of non-operational
spending was stated as a key area of focus in last year's Annual Report and
provides another example of management's commitment to embedding strong cost
disciplines within the business.

 

As a mutual, we do not consider the International Financial Reporting
Standards (IFRS) results to be a key metric for our members, we therefore
manage the business primarily on a Solvency II basis. Despite the economic and
market turmoil, our Solvency II capital position remains strong, with a
capital surplus of £391m(iii) (2021: £637m) and a Capital Coverage Ratio of
174% (2021: 187%), well within our risk appetite range of 140% - 200%.
Operating capital generation of £91m (2021: £110m) includes £89m (2021:
£87m) from our trading businesses.

 

The £246m decrease in capital surplus during the year is mainly driven by
economic fluctuations. As well as impacting the value of the pension scheme
and fund used to pay discretionary bonuses to eligible with-profits members,
these have also restricted the capital benefits associated with our
subordinated debt and deferred tax assets. This leaves our solvency position
less reliant on lower-quality regulatory capital. IFRS results have also been
impacted by external economic fluctuations, leading to a loss before tax and
member bonuses of £265m (2021: £66m).

 

Despite the market volatility and economic turbulence, our Savings and
Retirement business has proved resilient. New business sales totalled £1,097m
(2021: £1,257m) on a PVNBP basis. Profitability of new business has been
impacted by the reduction in SMF and pension new business sales with the
trading profit generated by Savings and Retirement new business decreasing to
£nil compared to a new business trading profit of £12m in 2021.

 

We continue to develop our Smoothed Managed Funds franchise, which offers
clients protection from market volatility while facilitating access to
potential growth upside. Throughout the year we made a number of enhancements
including adding two funds to the SMF range and overall inflows totalled
£280m.

 

Our Protection business has continued to grow with new business sales
increasing by 8% to £357m (2021: £332m) on a PVNBP basis, outperforming the
market and growing our market share in the segments we have chosen to compete
in. As a result our new business trading profit increased to £14m (2021:
£5m).

Ends

 

For further information:

 

 David Gwyer  David.gwyer@lv.com (mailto:David.gwyer@lv.com)  07798 796 907

 

The full LV= results can be found at: LV.com/annual-report

 

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 29 March 2023. It is
possible that the capital position will be adjusted prior to the publication
of the group Solvency and Financial Condition Report later in 2023.

 

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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