Row over sale of insurer LV= escalates
The row over the sale of insurance firm LV= has escalated, with the company accusing a rival of “grossly misleading” its members.
LV= said suitor Royal London had thrown a “hand grenade” to try to disrupt its planned £530m sale to US private equity firm Bain Capital, which would see LV= lose its mutual status.
Royal London says it could keep LV= as a mutual.
But LV= says Royal London wants to dismantle the business.
At the moment, LV= is a mutual, which means it is owned by its 1.2 million member-customers.
The proposed sale of LV= to Bain Capital has been controversial, drawing criticism from politicians from several parties. Some LV= members are also unhappy over the size of the possible payouts if the deal goes through.
Its members are being asked to vote on the deal on 10 December.
LV= chief executive Mark Hartigan told the BBC that for the business to survive it needed to demutualise.
The Royal London deal had been similar to the Bain offer, he said, but the latter offered better income and more security for members and staff.
Mr Hartigan said Royal London had had nine months to make a better offer for LV=, but had not done so.
Instead, Royal London had thrown a “hand grenade” in an interview with the BBC’s Today programme on Tuesday, he said.
This was “disrespectful to the [LV=] membership”, Mr Hartigan said.
Royal London boss Barry O’Dwyer told Today that the proposed Bain deal had met with “near universal dismay”, and that “there is a significant risk now that members won’t support that proposal”.
“We think that hundreds of thousands of people invested their life savings with LV= partly because it was a mutual, and therefore we think that they should do everything possible to retain that status.
“If there is an option available to them to join forces with another mutual to preserve that heritage and to make sure that those customers continue to get what they bought, then they should explore that fully,” he said.
“It’s really difficult for LV= members and observers to believe that a US private equity company is going to safeguard member benefits and UK jobs more than a UK mutual does,” he said. “I just don’t believe that that’s credible.”
He added: “My message to LV= is: Let’s talk. There must be a better way.”
LV= attracted a number of bids when it first proposed a sale of the business, including from Royal London.
On Tuesday, LV= said in a statement to members that it had received an updated email offer from Royal London last week that “proposed the dismantling of LV=” with “significant headcount reductions”.
“To describe Royal London’s proposal as offering ‘a mutual alternative, more favourable to LV= members’, is grossly misleading,” LV= said.
Alan Cook, chairman of LV=, said “The board of LV= is clear that at no point have any of Royal London’s proposals included an offer for membership rights or continuation of mutuality for LV= members, contrary to media speculation.
“Given this context, the board of LV= believes it is unfair and misleading to characterise any proposal from Royal London as preserving mutuality or offering a real mutual alternative.”
LV=’s Mr Hartigan also hit back at reports that LV= bosses were acting in their own interests by selling the mutual to Bain, and that he was in line for a job at Bain after the deal goes through.
He told the BBC “the only job I have in front of me” is getting the best deal for LV= members and staff, adding that he would be willing to lose his role if the LV= board thought that would be in the best interests of the business.
“I don’t have a contract in hand” from Bain, he added. “I don’t know what the future holds for me.”
He said the proposed Bain deal had been scrutinised by regulators and a judge in a legal process.
The idea that “somehow this is some plot because I want to get rich” is “ridiculous”, he added.
Royal London said in a statement: “Royal London has long wished to find a way to combine the UK’s two biggest insurance mutuals, in order to deliver the best long-term value for our respective members.
“We do not want to break up LV= and would be delighted if the LV= board would engage in discussions.
“Our recent email to LV= recognised that they have signed a contract with Bain Capital which we believe would preclude them from having bilateral discussions with Royal London and so we proposed a three-way conversation between Royal London, LV and Bain Capital.
“Royal London can confirm that staying mutual is an option if LV makes this a priority and engages in talks with us.”