Last week, Liverpool Victoria (LV=) , the 178-year old mutually owned life insurance and pensions provider, turned down an improved offer from its competitor Royal London, which had proposed dismantling the business.
The development came amid increasing criticism over a £530m proposed takeover of LV= by Bain Capital, as non-profit members would receive just £100 each with-profit members around £50 to £630 from the sale to Bain. Also, the deal would mean the end of LV’s status as a mutual after 178 years.
However, today LV= CEO Mark Hartigan hits back as he sits down with City A.M.‘s Michiel Willems to explain why Bain Capital was – and still is – the preferred bidder from the 12 offers the company received last year, following a board-led strategic review of its options.
With less than ten days to go until what is arguably LV=’s most important vote in its 178-year existence, Hartigan discusses the mega deal – including the criticism it has received – and why LV= is not able to continue in its current state.
There has been a lot of noise around the proposed deal with Bain Capital as some members would receive just £100 each from the £530m sale to Bain, and will end LV’s status as a mutual after 178 years. So why are you doing this?
Quite simply, we’re recommending that our members vote in favour of the transaction with Bain Capital because it is the only outcome that saves the future of LV=. Not only does it provide an excellent financial outcome for our 1.16m members, who will benefit by over £600m in distributions when you also take into account the sale of the general insurance business, but it is also the one deal that safeguards both the future of the LV= brand, our three sites and that of our 1,300 employees.
“It really is not fair or practical to ask our members to finance a future that many won’t benefit from.”LV= CEO Mark Hartigan
Why could you not continue as you are?
We find ourselves at a crossroads. LV= is a sub=scale, open market mutual with declining market share and a loss-making new business unit. To change this we need significant investment of at least £100m to overhaul the business and make it viable in a very competitive market.
However, as a mutual we have limited access to capital. We cannot increase our debt, so any investment would need to be funded by our With-profit members, who share the risk and reward of the business. The low demand for With-profits policies means these members are reducing in number quickly 65 per cent will stop being members over the next 10 years.
Last week, you turned down an offer from your main rival, Royal London. Was Royal London not a better option?
Absolutely not, and we have been very clear on this. Last week we published a side by side comparison of the Royal London and Bain Capital offers. What this made clear is that there is no serious proposal which is superior to Bain Capital. Royal London’s offer and recent statements make clear its plans to breakup LV=.
Crucially, at no point have Royal London’s proposals included an offer for LV= members to retain membership rights. So Bain Capital offered an excellent financial outcome, a better future for our people and the only future for LV= to continue as a stand-alone brand.
“Royal London’s offer and recent statements make clear its plans to break-up LV=.”LV= CEO Mark Hartigan on the rejected bid from its main rival
What happens if your members vote against?
We are strongly recommending this deal and are confident that members will carefully read all the information we share and vote in favour. All members have received a 70 page member pack, which has all of the details on the proposed transaction and how they can make an informed decision.
Of course, but what if they do reject the deal?
Clearly, if they say ‘no’ we have a responsibility to once again go through a process to assess the fairest outcome for them. I am in no doubt that this would lead us to exactly the same conclusion as today, but members would be worse off and the future of LV= and our employees livelihoods would be at risk. We urge all members to vote to save the future of LV= and a great British brand.