What does £530m LV takeover mean for YOU?
The planned sale of LV to Bain Capital has set alarm bells ringing among customers, members and staff.
If it goes ahead, the £530m deal will see one of Britain’s oldest financial institutions, formerly Liverpool Victoria, fall into US private equity hands.
It will also bring to an end LV’s cherished status as a mutual some 178 years after it was set up to give poorer residents of Liverpool a chance to hold a funeral for their loved ones. The plans – backed by the LV board – require approval from financial regulators and members in a crucial vote.
Here we answer the questions you need to know about the deal.
Missing the beat: An advert for LV car insurance
What does demutualisation mean?
If the takeover goes ahead, ownership of LV will pass from its members to Bain Capital – demutualising the group in the process.
It would end LV’s 178-year history of putting members first without chasing profits for shareholders or owners.
Who gets to vote?
Anyone who has been a member for at least a year. That number stands at 1.16m people. Member ship comes through owning an eligible policy such as life insurance, income protection or a pension.
What about general insurance customers?
They are not members. The general insurance arm – which includes LV-branded products like car, home and pet cover – has been sold to German multinational financial services company Allianz. These policies and policyholders will not be affected by the deal.
When is the vote?
The date of the vote has not been set but LV expects it to be this year. It was supposed to happen before July but working with regulators on its ‘information pack’ has taken longer than it expected.
How many members need to vote in favour?
For the vote to pass, 75 per cent of members must vote in favour with an overall turnout of 50 per cent. But the mutual’s chairman Alan Cook has accepted it is ‘frankly impossible’ to get half of members to vote – so there will be a second vote allowing LV to change its rules.
If 75 per cent of the members who vote support the rule change, LV will apply to a court to drop the turnout rule.
The plot was branded ‘reprehensible’ and LV bosses were accused of shifting the goalposts in order to force a deal through against the majority of members’ interests.
What will members get if it is approved?
There are two different payments – but the amounts have yet to be decided.
The first is a one-off one made to eligible members.
Policies taken out after March 1 this year are not entitled to this, however.
The second payment is for eligible LV ‘with-profits’ policyholders who will get an enhanced payout when their policy matures.
LV says details on the value of these payouts will be shared with members before the vote.
What is a with-profits policy?
With-profits members hold a long-term investment product where the premiums are pooled together in a fund and invested. They receive bonuses that reflect the performance of the investments.
Non-profit members have an insurance policy where the sum insured and benefits are fixed such as income protection or critical illness cover. These don’t attract bonuses.
In charge: LV chairman Alan Cook
What happens to members’ policies?
LV says the deal will not affect the product and the terms and conditions remain unchanged. But mutuals and co-operatives advocacy organisation Mutuo warns that when policies come up for renewal there could be price hikes or less choice.
So is it a good deal for members?
LV claims it is an ‘excellent’ deal. Others are not so sure. It is feared that the focus under private equity ownership may shift from members to maximising profits. An investigation by the All Party Parliamentary Group for Mutuals found demutualisation would be bad for members. In its report, the MPs said: ‘The experience of past demutualisations is that members do not benefit from this change and that short-term payments for loss of membership rights are soon recouped through higher costs and lower benefits.’
Is it a good deal for staff?
LV insists one of the benefits of the deal was continued support for its 1,500 staff and UK offices.
But Mutuo warned the deal was as bad for employees as members. It said promises from Bain over keeping offices open were ‘short term’ and private equity companies are focused on maximising profit.
Is there an alternative?
LV argues that is requires ‘significant investment to ensure future success’ – something it would struggle to do in its current state.
But it was reported that fellow mutual Royal London was the preferred choice of a panel representing LV’s 340,000 with-profits policyholders when it offered to take over the firm.
It reportedly offered £10m more than Bain at £540m. Mutuo also questioned why a deal was necessary after LV sold the remainder of its general insurance arm to Allianz, raising up to £365m.