LV and Allianz bosses reveal logic behind creation of Britain's third largest personal insurer

Oliver Gill
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LV and Allianz touched down their joint venture partnership earlier this month (Source: Getty)

Size, we are told, isn’t everything. But the new head of what will soon be the UK’s third largest personal insurer doesn’t quite agree.

“Although it pains me to say, size does matter in the insurance market,” says Steve Treloar, who has been picked to run UK mutual LV’s new joint venture with German behemoth Allianz.

After months of speculation, the insurance duo revealed the terms of their partnership earlier this month. Allianz will first pay £500m for a 49 per cent stake in a new general insurance joint venture run by LV.

City analysts have highlighted motor insurer valuations are nearing their peak. But Treloar’s counterpart at Allianz, UK chief executive Jon Dye, bats away suggestions his firm has overpaid.

“It may or may not be the top of the market. I don’t think it is at all clear... Even if it were, this is a long-term joint venture that we’ve entered into here,” he says.

Read more: Allianz snaps up stake in LV='s general insurance business

Long lens

Allianz has been around for 127 years, Dye highlights, while LV’s heritage can be traced back to 1843.

“You’re dealing with a couple of businesses here with a long lens,” he adds.

Allianz will have the option of paying a £213m for a further 29 per cent shareholding in 2019, with LV having an option to sell all or part of its remaining interest. The joint venture will generate £1.7bn in premiums and boast over 6m UK customers.

Eyebrows may be raised by Allianz’s decision to spend big while in Westminster and Brussels politicians shape the economic landscape that will affect the JV.

Dye says Allianz is unperturbed. The UK is the biggest insurance market in Europe and Brexit can be navigated. He adds:

Allianz is shaping to spend £713m on the UK insurance industry. It must believe the UK insurance industry is important and is not going to be damaged or negatively influenced by whatever happens in Brexit. It couldn’t be a clearer statement in terms of the Allianz group.

Read more: LV in sale talks with Allianz

LV managing director of general insurance Steve Treloar (right) with Jon Dye, Allianz UK chief executive (Source: LV/Allianz)

Brexit uncertainties are one thing, but UK insurers are also facing a shopping list of regulatory challenges. Near the top for many is the discount, or Ogden, rate, which is used to calculate lump sum personal injury payouts. There is also the thorny topic of plans to cap whiplash payouts.

Discount rate

In February, the justice ministry’s decision to slash the discount rate from 2.5 per cent to minus 0.75 per cent hit the finances of insurance firms. In April, LV revealed a painful £139m provision, leaving operating profits of just £20m.

Dye and Treloar were among a handful of selected insurance bosses invited to a hastily convened meeting with chancellor Philip Hammond, a day after the February announcement.

Hammond was left in no uncertain terms from those around the table that “this really won’t do” and pledged to find a way to alter legislation. Then the General Election came.

“Other than that [meeting] there has been no bilateral discussions between Allianz and the government over what will happen with Ogden or whiplash reform,” Dye says.

Read more: Insurance discount rate: Chancellor is "personally committed" to solution

Treloar, listening to Dye’s comments, adds:

I genuinely believe that seeing the amount of change we are seeing in the UK motor market, it is the agile and the nimble and the smart organisations that stand to win in that.

In the cut-throat personal insurance market, Treloar evidently thinks the current environment of regulatory uncertainty will work to LV’s advantage.

“I believe that it definitely represents an opportunity,” he says.

“But the government does need to act. We want them to adjust that quickly, bearing in mind the government through the NHS is the single biggest compensator anyway.”

Although the joint venture is yet to be signed off by the European authorities, the Financial Conduct Authority and the Prudential Regulatory Authority, Treloar and Dye are confident that the necessary approvals and any cultural differences between the two firms can be overcome.

Read more: LV reveals £139m discount rate hit to annual profits


The pair insist the partnership is “about growth” rather than creating synergies or cutting jobs.

“It will be some time before we can completely understand the ramifications of this deal,” says Treloar.

The way I describe it to my team is that we have some business rolling off and some business rolling back onto the books of the business as we effectively do the swap of renewal rights.

Treloar and Dye live about 10 miles apart in leafy Surrey, both close enough to Allianz’s offices in Guildford and LV’s in East Croydon.

Treloar adds: “He seems to have the similar propensity to me in finding himself in Guildford high street shopping with his wife because we bumped into each other only a couple of weeks ago.”

Dye adds: “We are certainly not strangers.”

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