Normally when an insurance company reveals its financial results, the headlines are taken by its profit or loss figures – but not this time. Major UK insurer LV= has taken the spotlight away from its financials – which, incidentally, saw falls in operating profit, GWP and underwriting profit for its general insurance business – with a significant announcement.
The insurer has unveiled plans to convert to a company limited by guarantee.
LV=, of course, is currently a friendly society (a type of mutual insurer) meaning it is governed by the Friendly Societies Act. However, in a statement released this morning it described many of the Act’s provisions as “out of date” and therefore its board believes they restrict its ability to manage the business effectively.
As such, it wants to move to being governed by the Companies Act rather than the Friendly Societies Act – although it will retain its mutual status.
“Our friendly society status has served us well for many years but the Friendly Societies Act is becoming outdated and restricts our opportunities for growth and future development,” explained LV= group chief executive Richard Rowney. “While our ethos remains the same, we need the right mutual structure in place to truly flourish moving forward. Converting to a company limited by guarantee provides the foundations from which to build on our heritage and strong brand to create a better mutual for the future, where being a member has more meaningful benefits.”
This change remains subject to a vote among LV= members at a Special General Meeting on May 22.
“2019 will be another important year for LV= as we complete the second phase of the transaction with Allianz, through which it will take a controlling stake in our general insurance business,” added Rowney. “We start the year with a robust capital position and some exciting plans to build on our mutual heritage and well-respected reputation to deliver for our customers, members and IFA partners.”
So, what about the existing state of the company’s business then?
Overall, it saw operating profits climb from £134 million to £136 million, but profit before tax slipped from full-year 2017’s £122 million to just £20 million for full-year 2018. This was despite group operating expenses falling from £366 million to £347 million.
Focusing in on the general insurance business, GWP fell by 1% from £1.60 billion to £1.58 billion; underwriting profit dropped 3% from £102 million to £99 million; and operating profit slumped 11% from £120 million to £107 million. Its combined ratio climbed from 91.8% to 92%.
Notably however, the operating profit figure includes the discontinued commercial lines business – if this were removed, profit from the personal lines business would actually be up 7% to £135 million, compared to the prior year’s £126 million. Total customer numbers have also increased by 7% to reach 5.2 million.
“Our general insurance strategic partnership with Allianz which came into effect at the start of 2018 is working well,” claimed Rowney. “We will complete the process of transferring the renewal rights for Allianz personal lines business to LV= in May and remain on track to complete the operational separation of the general insurance business ahead of plan.”
The firm also commented on changes in its broker division.
“2018 has been a year of significant changes in the broker division with the successful new business transfers between LV= and Allianz which have enabled us to broaden our personal line product range with five new products,” it said. “Broker premiums were down 8% at £583 million (FY 2017: £636 million) reflecting the impact of the planned transfer of commercial lines business to Allianz but personal lines premiums continue to grow strongly.”