LV’s planned sale to Bain Capital has raised alarm bells among customers, members and employees.
If it goes ahead, the £530m deal will see one of the UK’s oldest financial institutions, formerly Liverpool Victoria, fall into US private equity hands.
It will also end the LV’s cherished status nearly 178 years after it was established to give poor residents of Liverpool the chance to perform funerals for their loved ones. Plans endorsed by the LV Board require approval in a significant vote from financial regulators and members.
Here we answer the questions you need to know about the deal.
Missing the Beat: An Advertisement for LV Car Insurance
What is meant by demonetisation?
If the acquisition goes ahead, ownership of the LV will pass from its members to Bain Capital — demutualizing the group in the process.
This would end the 178-year history of the LV without pursuing the profits of the shareholders or owners.
Who gets the vote?
Any person who has been a member for at least one year. This number is 1.16m people. The member ship comes through being the owner of an eligible policy such as life insurance, income protection or pension.
What about general insurance customers?
They are not members. The general insurance arm – which includes LV-branded products such as car, home and pet covers – has been sold to German multinational financial services company Allianz. These policies and the policyholder will not be affected by the deal.
When is the vote?
A date for the vote has not been set but LV expects it to happen this year. It was supposed to happen before July, but it has taken longer than expected to work with regulators on its ‘information pack’.
How many members are required to vote in favour?
For the vote to pass, 75 percent of the members must vote in favor with an overall turnout of 50 percent. But mutual chairman Alan Cook has acknowledged that it is ‘clearly impossible’ to vote for half the members – so a second vote would be to allow the LV to change its rules.
If 75 percent of the voting members support the rule change, then L.V. shall apply to the Court to waive the voting rule.
The conspiracy was termed ‘reprehensible’ and the LV owners were accused of moving the goalposts to force a deal against the interests of most members.
What will the members get if it is approved?
There are two separate payments – but the amount hasn’t been decided yet.
The first is a one-off designed for eligible members.
However, policies made after March 1 this year are not entitled to it.
The second payable LV is for ‘With Benefits’ policyholders, who will get an enhanced payout on maturity of their policy.
LV says details on the value of these payments will be shared with members ahead of the vote.
What is the policy with benefits?
With Benefits members hold a long-term investment product where the premiums are pooled and invested together in a single fund. They get bonus which reflects the performance of the investment.
Nonprofit members have an insurance policy where the sum insured and benefits are fixed such as income protection or critical illness cover. These do not attract bonuses.
In charge: LV President Alan Cook
What happens to the members’ policies?
LV says the deal will not affect the product and the terms and conditions will remain unchanged. But Mutual and Co-operatives’ advocacy organization Mutuo warns that there could be a price hike or fewer options when the policy comes up for renewal.
So is this a good deal for members?
LV claims this is an ‘excellent’ deal. Others are not so sure. It is feared that the focus may shift from members to maximizing profits under private equity ownership. An investigation by the All Party Parliamentary Group for Mutuals found that demonetisation would be bad for the members. In their report, the lawmakers said: ‘The experience of past demonetisation is that members do not benefit from this change and that short-term payments for loss of membership rights are soon met through higher costs and fewer benefits.’
Is this a good deal for the employees?
LV stressed that one of the benefits of the deal was the continued support for its 1,500 employees and UK offices.
But Mutuo warned that the deal is as bad for employees as members. It said the ban promises on keeping offices open were “short-term” and that private equity companies are focused on maximizing profits.
Is there any option?
LV argues that this requires a ‘significant investment to ensure future success’ – something it would struggle to do in its current state.
But it was reported that mutual Royal London, a panel partner representing policyholders with LV’s 340,000 profit, was the preferred option when it offered to take over the firm.
It reportedly offered £10m more than Bane at £540m. Mutuo also questioned why a deal was necessary after LV sold its remaining general insurance arm to Allianz, for up to £365m.
LV. raise your voice
We are encouraging LV members, customers, or others who wish to retain their mutual status to write it, rather than having it purchased by private equity.
You can use the words of the letter printed in the City pages of the Granthshala newspaper (pictured here).
We’ve included words for you to copy and paste in one letter below.
Send this to Alan Cook, LV= President, Liverpool Victoria, County Gates, Bournemouth, BH1 2NF
Dear Alan Cook,
I, the undersigned, urge you to reconsider your decision to sell LV= to Bain Capital and instead retain its mandated position.