DORSET’S friendly society LV= saw pre-tax profits drop 47 per cent for the first half of 2014.

The mutual insurance, retirement and investment group, reported group operating profits up year-on-year from £33m to £39m in the first six months of 2014. But profit before tax was down from £88m to £47m against the same period last year.

It said the fall in profit before tax was due to short-term investment fluctuations, while changes affecting pensions annuities in the last Budget affected margins in the life insurance business.

Underlying profit was down from £11m to £7m in its life and pensions business, reflecting lower margins on enhanced annuities sales and increased sales of the less profitable fixed term annuities.

Mike Rogers, LV= group chief executive, said: “We are reporting a group operating profit of £39m for the first half of 2014, up 18 per cent compared to this time last year. This is a good achievement in what have been tough trading conditions for both our general insurance and life businesses.

“We continue our focus on providing a great level of service to our customers and in the first six months of the year we were voted most recommended insurer by YouGov, and the highest performing insurer for customer service in the UK Customer Satisfaction Index.”

He said pressure on motor premiums had hit general insurance, while George Osborne’s announcement that pensioners would no longer have to buy an annuity at retirement had affected margins in life insurance.

The group was the first institution to introduce a one-year annuity in response to the Chancellor’s announcement, as well as a simplified drawdown product.

Mr Rogers added: “We expect to see motor rates start to improve to more sustainable levels later in the year and into 2015. A degree of uncertainty will remain for our retirement solutions business until more clarity is provided on the new pensions landscape. However, we are supportive of the government’s decision to ensure that guidance offered to all retirees is provided independently as we believe this will help ensure the right consumer outcomes.”