LV losses reach £265m as pension profits plummet and insurance mutual splits £35m in bonuses between members
- LV generated a pre-tax loss and membership bonuses of £265million, according to the results
- Profit from new savings and retirement business fell to zero
LV generated a loss before tax and members’ bonuses of £265 million in 2022, compared to £66 million in 2022, as its investment portfolios were affected by market volatility.
Profits from LV’s savings and pensions transactions fell 55% from £22m to £10m in the year to December, the group said on Thursday.
Trading profit from new business in its savings and pensions operations fell to zero in the period, from a new trading profit of £12m in 2021.
Results: LV saw the operating profit of its savings and retirement branch fall by 55%
Fluctuations in short-term investments had a “negative impact” of £133m on earnings, due to a £58m impact from widening credit spreads.
Year-over-year, annuity sales increased 91%, while sales of equity release products and protection products increased 19% and 8% respectively, exceeding sales targets .
LV Group’s overall operating profit remained ‘stable’ for the year at £31m.
LV added: ‘In addition to this, the overall result was further reduced by mutual and exit bonuses allocated to our for-profit eligible members of £35m (2021: £38m) and revaluations unfavorable pensions of £127 million (2021: £23 million favorable), partially offset by the tax credit of £97 million (2021: £11 million charge).’
The band also revealed they are splitting £35million in bonuses between eligible members.
Regarding investment returns, LV said: “2022 has been a difficult year for balanced portfolios which are traditionally designed to balance the investment risks associated with equities (stocks and equities) and the risks associated with fixed income assets such than bonds. The investment performance of equities and bonds has been negative in most global markets.’
The group’s main for-profit fund failed to escape the headwinds seen in global markets, generating a negative return of 14.3%,
David Hynam, chief executive of LV, said: “There is no doubt that the current economic challenges and uncertainty are affecting businesses across the UK.”
“High inflation, rising interest rates and weak growth pose challenges for both businesses and consumers. We are not spared from this and we know that our members will be no less affected, in particular by the increase in the cost of living. Despite these challenges, and thanks to our focused commercial strategy, the outlook for LV= remains positive.
“Despite challenging market conditions, we traded well with our protection, equity release and annuity products all exceeding their 2021 sales levels.”
He added: “The business continues to be built on solid foundations and, despite rising inflationary pressures, we have kept operating costs tight and largely stable.”
In July last year, the group’s interim chief executive, Mark Hartigan, announced his intention to step down once a permanent replacement was found. On leaving the band, Hartigan was contractually entitled to a payment of £120,000, 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 line with his contractual entitlement totaling £412,545.”
David Hynam, who is also a non-executive member of the HomeServeUK board, was appointed chief executive of LV on September 26, 2022 and joined the board on October 24, 2022. Hynam’s total remuneration for 2022 was £423,000.
The insurer, formerly known as Liverpool Victoria, scrapped a proposed takeover by private equity group Bain Capital in December 2021 after losing a members’ vote. Rival Royal London provided an alternative proposal to the insurer, but that intervention also ended without agreement.