3 Who we are ~ We are a leading financial mutual employing over 6,000 people and serving over 5.8 million customers with a range of financial products. We are also the UK's largest friendly society. G> 0 When we started in 1843 our goal was to give financial security to more c5 3 than just a privileged few and for many decades we were most commonly Ql ::, associated with providing a method of saving to people of modest means. 0 CD Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products. We are currently the UK's number one brand for Insurance and Investments, according to the 2015 YouGov Brandlndex Buzz Rankings. 0 We offer our services direct to consumers, as well as through IFAs and !:; brokers, and through strategic partnerships with respected organisations. ~ 0 0 C: ;:l. "' u1iUTUAL RE313''f:~t·:flUN DEPARTM~NT 2 i .APP. 2016 ' . 3 Who we are -v We are a leading financial mutual employing over 6,000 people and serving over 5.8 million customers with a range of financial products. We are also the UK's largest friendly society. G) 0 < When we started in 1843 our goal was to give financial security to more CD than just a privileged few and for many decades we were most commonly 3 :::, associated with providing a method of saving to people of modest means. 0"' CD Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products. We are currently the UK's number one brand for Insurance and Investments, according to the 2015 YouGov Brandlndex Buzz Rankings. 0 We offer our services direct to consumers, as well as through IFAs and !:i brokers, and through strategic partnerships with respected organisations. ~ 0 0 C: :::, (t~!J~ YouGovBrandlndex h lii ~~ 111iUTUAL RE31S''f:~!!J'l"N DE?A~TM~NT 2 i .A.PP. 2016 , . ; . I '- --'{·9 : ,, -:.~ ~~'-:7 ,,if~·_"~~-.ff'"/ .. ..._, ,,,,. \ ~ , .¢,, __ ''::.--- I 7 5 Contents ---v' 4 Highlights 6 Our Members 13 Strategic Report 14 Key Performance Indicators 16 Chairman's Review 18 Chief Executive's Review ~ ol 20 Our Objectives, Strategy co and Business Model 00.s ::0 CD "O 28 Group Finance Director's Review 0 / ;::::. 36 General Insurance Review 40 Life Review 44 Heritage Review G) 0 < CD ~ 3 46. Risk Management Q) :::, "CD 58 Corporate Responsibility Report 73 Governance 74 Corporate Governance Report 0 !:; Br,,11rJ orormse ~-Jo. -1 92 Directors' Report )> 0" C:" ;:'. bood vallf_e) 96 Report on Directors' Remuneration (/l e= ua/ues 110 Glossary Offering affordable well-designed products but not at the expense 113 Our Accounts of doing the right thing. 114 Independent Auditors' Report to the Members of Liverpool Victoria Friendly Society Limited Quiclc and. ea.s11 to set up) 122 Statement of Comprehensive Income after belf18 wlth the same 123 Statement of Financial Position c0Mpa.J11f for 11ea.rs I was sw-pnsed 124 Statement of Cash Flows how coMpetltlve lV== was. As I Notes to the Financial Statements also htwe life tnsararce with theM I {eel the'f are a trlf.dworth'f coMpa.J'J'f to he wlth. Ver'f pleased. William from Durham 6 LV= Anoue eport 2015 Everything we do revolves around our members LV= is a modern and leading financial mutual. We were established in 1843 to help families protect and provide for their dependents and cherished possessions. LV= still has this aim at the heart of its business today. We are owned by, and run for the benefit of, • The payouts that were paid to maturing our members and are therefore different from policies during.the year. These compare .·,~ other organisations which may be owned by well with our industry, with all nine of our shareholders, employees, private equity groups, benchmarked payouts well above market or government. We believe this difference is average and top quartile in five out of nine important in serving customers, engaging with cases. Further details can be found on employees and to fulfil our primary goal of page 8. creating long-term value for our members. --:0 ·mf-i ,nu.um: Mutual Bonus :;,1•;if-;•li~'!f.:1[,nl Our members are customers who have certain The LV= mutual bonus was launched in 2011 and C ..• i;if ~ilJ!.OE•~ longer-term financial products with us, such as life rewards eligible members for their ownership of insurance, protection, investment or retirement the Society. The LV= board considers the financial policies. They have voting rights and can expect performance of the LV= trading businesses each to influence the key decisions in the Society. year along with its current and projected financial strength to determine whether, at what level, and in what form, any mutual bonus should be Returning value declared, and which members should be eligible to receive it. Most eligible members will receive to our with-profits the mutual bonus when their with-profits policy matures or is cashed in. The LV= mutual bonus members is not a guaranteed benefit and is at the We have returned good value to our with-profits discretion of the LV= board. members in 2015 through: Our performance in 2015 has enabled us • The investment returns achieved on to allocate a discretionary mutual bonus of their policies. During 2015 the main LVFS £27 million (2014: £24 million). We have applied 0 with-profits fund delivered good relative the mutual bonus by enhancing the asset share performance for our with-profits members of relevant policies. with an absolute performance of 3.8%. This is 1.1% above the market benchmark Since the launch of the mutual bonus in 2011, of 2.7%. Performance has been above LV= has allocated a total mutual bonus of benchmark in four of the last five years. £113 million to eligible member policies. • The vast majority of with-profits members are eligible to receive the LV= mutual bonus. For 2015 this amounts to a 1% enhancement to the eligible policies' asset shares (£27 million in total). Our Members 7 A meeting of( G) members ~ CD 3 Q) ::, 0 CD With-profits policyholders' bonuses We manage our with-profits fund and set bonus In addition to the LV= mutual bonus, we added rates with the aim of being fair to all policyholders £113 million (2014: £108 million) of bonuses invested in the fund. When we decide bonus MOST to members' with-profits policies during 2015. rates we need to consider the policyholders who RECOMMENDED This increase reflects the increased level of will remain in the fund as well as those whose policies maturing, with bonus rates not materially policies mature or are surrendered. We also changing year-on-year. need to maintain the strength of the fund and protect the long-term interests of current and future members. 8 LV= Annual Report 2015 Favourable payouts relative to the market LV= with-profits policyholders continue to benefit from excellent returns on their investments, with equivalent annual rates of return for the policies listed below ranging from 4.0% to 9.1%, which includes the mutual bonus. Conventional with-profits II @n!~•11111·~ 1·,lti'lil11a1Mmm II~ :: lml11hl•ili!fVal!IIHlliil I ·[25 years ' Ordinary Branch £37,983 6.8% ] Endowment ( I[ ] ( 25 years b Industrial Branch £3,612 5.8% J Endowment [ ][ ] a: Regular premium of £50 per month for a male aged 30 next birthday at entry, maturing 01/03/2016. b: Regular premium of £5 per four week period for a male aged 30 next birthday at entry, maturing 01/03/2016. Unitised with-profits regular premium policies II @n!1tm1s11111·~ II~ :: IFl11iil•iliH!:al!llllihil I [10 years> ][ £7,989 ][ 5.6% ] [15 years• ][£14,606 [6.2% ] [10 years b ][ £36,411 ][ 8.1% ] (15 years b ][£61,953 ][6.9% ] a: Regular premium of £50 per month for a male aged 30 next birthday at entry, maturing 01/03/2016. b: Regular premium of £200 per month for a male retiring at age 65 on 01/03/2016. Unitised with-profits bonds . - . 5 years? Flexible £54,190 Guarantee Bond Cautious Series 2 DD As above, [ £56,905 I[ £54.213 5.0% but without l[ a guarantee l 5 years > Flexible £53,523 Guarantee Bond Balanced Series 2 DD As above, £58,743 £55,195 % but without l[ I[ •.• a guarantee I I 5 years s Flexible £52,276 £49,865 Guarantee Bond 11 ···% Managed Growth I I! I As above, [ £60,284 £55.920 7.8% but without JI l[ a guarantee l (10 years b With Profits [ £19,549 ][ £17,922 9.1% ] Growth Bond ]( ] a: Single premium of £45,000, for a male aged 30 exact at entry, with a 5 year guarantee, surrendering 01/03/2016. b: Single premium of £10,000, for a male aged 30 exact at entry, surrendering 01/03/2016. sG') ::,~ a, ::, (') CD ® WINNER InvestmentMoneyfa;;tJ Life & p Award 2015 Best Income ProtecUonProvider 10 LV= Annual Report 2015 Nicola and Jeremy's story Critical illness customers Nicola and Nicola: Insurance companies as a whole tend Jeremy were devastated when their son Sam to have that reputation of if they can get out of was diagnosed with Hodgkin's Lymphoma. it they will. So we thought, we'll look into it but We have a short film of them talking about we didn't expect too much to come from it.