DORSET insurer LV= is planning to cease being Britain’s biggest friendly society and become a company limited by guarantee.

It made the announcement as it revealed pre-tax profit had dropped by almost 84 per cent last year.

It said it would remain a financial mutual but would have more freedom to compete if it were not subject to the Friendly Societies Act of 1896.

Chief executive Richard Rowney said: “Our friendly society status has served us well for many years but the Friendly Societies Act is becoming outdated and restricts our opportunities for growth and future development. While our ethos remains the same, we need the right mutual structure in place to truly flourish moving forward.

“Converting to a company limited by guarantee provides the foundations from which to build on our heritage and strong brand to create a better mutual for the future, where being a member has more meaningful benefits.”

Although operating profit for the group was up from £134million to £136m last year, pre-tax profit fell from £122m to £20m.

Trading in life insurance was “tough” and although operating profit in that division stayed steady at £60m, new business was down 13 per cent to £1.8billion.

Mr Rowney said the £60m operating profit from life insurance and £107m from general insurance had been offset by strategic investment and group items of £31m. “Profit before tax was hit by deteriorating financial markets in 2018, leading to a significantly reduced profit of £20m,” he said.

He added: “Following the actions taken in 2017 to strengthen our capital position, 2018 has been all about putting the foundations in place from which to build a sustainable future as a focused, independent life and pensions business.”

A partnership with rival Allianz was “working well” and LV= was ahead of schedule with plans to transfer the German insurer’s personal insurance policies to LV=, while giving Allianz a controlling stake in LV=’s general insurance business.

The transformation of LV= from a friendly society to a company limited by guarantee will be put to a vote by members at a special general meeting on May 22.