Melanie Tringham talks to the managing director, life and pensions, of LV= about how he has restructured the business, bringing in more than 3m new customers – and that controversial name change.
Any executive of LV=, past or present, will talk about the culture of the company, how its people are proud to be associated with the mutual, and how it is designed to put the customer first.
But Richard Rowney, managing director, life and pensions of LV= is in an interesting position. He came in as chief operating officer, shortly after chief executive Mike Rogers, and was instrumental in restructuring the business.
Moreover, he used to work at Barclays along with Mr Rogers, and perhaps had an insight into the process needed to instil cultural change.
Of Barclays, he said: “[It’s about] managing shareholders’ expectations and then being absolutely ruthless. There will be people in those organisations who have to be accountable for some of the challenges of the past, and that will now be really hard.”
With Mr Rogers, Mr Rowney executed a plan that saw the business rebrand and turn itself into a more profited-oriented company. Some divisions were closed, and other companies were bought. But he said it was a necessary thing to do.
He said: “We had a very strong reputation as a company that had a very strong capital position but didn’t have the ability to be a modern consumer brand. We’ve now got well over 5,000 employees – we had 1,900 in 2006 – and if you went back to 2006 we had 2m customers, now we’ve got 5.5m.
“If you saw last year’s results announcements, we had a £150m profit before tax – it’s a really exciting case study of how a mutual organisation can compete with the big plcs, and the value of doing the right thing by its customers.”
However, one of the aspects of the restructuring was the rebranding from Liverpool Victoria into LV=, with the ‘=’ proving especially controversial, and generating some bafflement among observers.
Mr Rowney said: “People get hung up on the semantics of the ‘=’ sign. At the time is was a modern expression of mutuality, it gives the LV logo associations of ‘love’ or ‘live’. If you ask people about the awareness of Liverpool Victoria and LV=, our brand awareness is up 70 per cent.”
The profit before tax of Mr Rowney’s division makes up nearly a third of the entire group’s pre-tax profits, coming in at £48m; general insurance is more at £77m.
The business is comprised of enhanced annuities, income drawdown and protection, and it is a blend of the first two that is likely to stand LV= in good stead in the new world of post-Budget pensions.
He said: “Those companies that have purely focused on the annuity market will always find it slightly hard in the short-term, because they’ve got their business models based on growth. Most of the competition has said that business volumes are 50 per cent down.”
Mr Rowney said in the future there would be much more choice for consumers, which would reflect the service that LV= offers. He said: “There will be a range of products to customers – this blending of a proportion of income drawdown products, accessing products in a tax-efficient way, but combined with a guaranteed income.
“We will see retirement as a series of stages. People will almost view retirement on an annual basis – perhaps making a decision on a three- to five-year basis. Someone making a decision at 60 will be very different at 80.”
One of the unforeseen consequences of the Budget pensions announcement is that companies more adversely affected by the announcement and who are forced to shed people have prompted many of them to contact Mr Rowney in the quest for work.
He said: “I can say that I get one or two phone calls a day asking us whether we have job positions – in the last three or four months we have been recruiting a number of people that have come from the competition.”
This is one of the biggest arguments against demutualisation, according to Mr Rowney. If it became clear LV= could not attract suitable candidates because it was perceived as a “sleepy” institution, they might have to think again.
The other argument is whether mutuality inhibits LV=’s ability to do its job properly.
He said: “We did a very successful debt raise last year which gives us more than sufficient money to fund our growth.” That debt call achieved £350m, raised from fixed income investors. Plus there are so many bad examples of demutualisation that the question is simply off the agenda. Instead, there will be more product innovation in the future, according to Mr Rowney.
He said: “I think we need to look at some of the overseas examples, some of the European countries. There are some examples of very different products that will be suited to the UK marketplace – annuity products where people plan out their retirement, assume where their life expectation is and take out an insurance policy against living longer.”
But above all, he thinks life offices will survive, long term. He said: “I think in the medium to long term they have skills and expertise that can be applied to understanding longevity risk.”
There must be several life office executives hoping the same thing.
Melanie Tringham is features editor of Financial Adviser
CV
2007 LV= to present, joined as chief operating officer, now managing director, life and pensions
2005 - 2007 Barclays Bank, integration director
2003 - 2005 Barclays Premier Banking, chief operating officer
2001 - 2003 Barclays Bank, risk director, small business
2000 - 2001 Barclays Bank, programme director, UK banking
1992-2000 Barclays Bank, Various roles
