LV= widens profit as it gears up for transformational sale

Insurance giant LV= captured more of the market last year for the first time since 2016, as the business gears up for what could prove a transformative sale.

The company said that its pre-tax profit had widened to £37 million in 2020, up from £15 million a year earlier despite tough conditions at some of its units.

LV=, the trading name of Liverpool Victoria, managed to increase its market share and swing from a £16 million operating loss to a £40 million profit.

“Despite the unprecedented challenges presented by the pandemic, LV= has delivered a good financial performance in 2020,” said chief executive Mark Hartigan.

“Through the year we have created significant momentum in our trading businesses and I am particularly pleased that we increased market share in both savings & retirement and protection.”

It is this part of the business that LV= plans to sell for £530 million – next year, it hopes – to Bain Capital Credit, a wing of a US private equity giant.

The deal has been slated by management as the best thing for the business, bringing in cash it needs to invest elsewhere, but it has also faced criticism from some quarters.

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Martin Shaw, chief executive of the Association of Financial Mutuals, questioned the deal in an article for FT Adviser on Thursday.

He said the decades-long shift of mutual insurance companies to PLCs often come with promises to customers that if they give up their control they will be rewarded financially. However, some such promises have proven to be “hollow in retrospect”, he added.

LV=’s values put customers at the heart of how the business is run, he said. There is no guarantee this will change after the takeover by Bain, Mr Shaw said.

The deal will next need 75% approval at a shareholder vote in the first half of this year – if it achieves this, the move will then complete by March 2022.

Mr Hartigan said: “Success in 2021 will be determined by three simple objectives: to deliver the transaction with Bain Capital Credit; to hit our trading targets; and to continue to reduce the complexity of our business and improve efficiency.

“With the backing of Bain Capital Credit, the board is excited by the opportunities for LV= to develop as a major force in the UK life insurance market for the benefit of our customers, people and partners.”

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