LV losses swell to £265m as retirement profits plummet and the insurance mutual shares £35m of bonuses among members
- LV generated a loss before tax and member bonuses of £265m, results show
- Profit generated by savings and retirement new business fell to zero
LV generated a loss before tax and member bonuses of £265million in 2022, against £66million in 2022, as its investment portfolios took a hit from volatile markets.
LV savings and retirement trading profits sank by 55 per cent from £22million to £10million in the year to December, the group said on Thursday.
Trading profit generated by new business within its savings and retirement operations slipped to zero over the period, compared to a new business trading profit of £12million in 2021.
Results: LV saw the trading profit across its savings and retirement arm fall by 55%
Short-term investment fluctuations had a £133million ‘adverse impact’ on profit, driven by a £58million impact from widening credit spreads.
Year-on-year sales of annuities increased by 91 per cent, while sales of equity release products and protection products increased by 19 per cent and 8 per cent respectively, exceeding sales targets.
LV’s overall group operating profit remained ‘stable’ for the year, coming in at £31million.
LV added: ‘In addition to this, the overall result was further reduced by mutual and exit bonuses allocated to our eligible with-profit members of £35million (2021: £38million) and adverse pension remeasurements of £127million (2021: £23million favourable), partially offset by the tax credit of £97million (2021: £11million charge).’
The group also revealed it shared £35million worth of bonuses among eligible members.
On investment returns, LV, said: ‘2022 was a difficult year for balanced portfolios which are traditionally designed to balance the investment risks from equities (stocks and shares) and the risks from fixed income assets such as bonds. The investment return on both equities and bonds were negative in the majority of global markets.’
The group’s main with-profits fund did not manage to escape headwinds seen across global markets, delivering a negative 14.3 per cent return,
David Hynam, LV’S 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.’
He added: ‘The business continues to have strong foundations, and despite increasing inflationary pressures, we have maintained tight and largely flat operating costs.’
In July last year, the group’s interim chief executive, Mark Hartigan, announced plans to step down once a permanent replacement was found. Upon quitting the group, Hartigan was contractually entitled to a payment of £120,000 which has £72,000 deferred for three years, payable in three equal instalments, 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 totalling £412,545.’
David Hynam, who is also a non-executive board member of HomeServeUK, was appointed as 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.
The insurer, previously known as Liverpool Victoria, abandoned a proposed takeover of by private equity group Bain Capital in December 2021 after losing a member vote. Rival Royal London provided an alternative proposal for the insurer, but this intervention also ended without an agreement.