finance

LV= boss defends Bain deal decision



LV= has defended the decision to accept a bid for the business from a private equity firm.

The mutual insurance group has faced criticism for proposing members accept an offer from Bain Capital.

Senior independent director David Barral said: “Our board carried out a careful and detailed strategic review in 2020.

“We examined all the options, drawing on our own wide business and transaction experience and that of our professional advisers.

“We all came to the firm conclusion it would not be fair for us to ask our with-profit members to finance a future that requires significant investment, which many would not benefit from.”

Chairman Alan Cook added: “There have been numerous theories and opinions about the process and decision – so that members can vote with the facts in front of them, we are showing the analysis we did and the conclusions we reached.”

He pointed out that LV=’s sale of its general insurance business to Allianz for £1.1bn was not enough for the life and pensions business to run successfully.

LV=, formerly known as Liverpool Victoria, found last year that it had “an insufficiently strong capital structure and a loss-making new business unit, in need of investment”, according to the strategic review.

Continuing to run a “business as usual” strategy was not fair for members given the need for investments, with more than £100m needed to upgrade systems and customer services. Members would ultimately have to fund a reorganisation, as the risks were “too high”.

The Bain deal would see the firm invest £212m and hand out £533m to 271,000 LV= main fund with-profit members.

LV= executives defended the £100 one-off payment to members from the sale, claiming the full amount being returned would be £533m “over time”, versus £404m under a “business as usual” position if it remained successful.

Continuing to run the business would also have risked current members not seeing the benefit of investment before their policies matured, with the membership base at the mutual falling 40% since 2017.

One option was to close the business, but bosses said this would create significant job losses and costs involved.

LV= received 12 bids for the business and said the Bain offer was accepted by the board unanimously, with the private equity firm the only one promising to preserve the “brand, heritage and values” of the mutual.

The firm said: “These benefits were not available under other external proposals.”

Rival mutual Royal London had attempted to disrupt the deal, but LV= said the proposal would see the business split up and result in redundancies.

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