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LV= members to get extra £212m under Bain Capital deal

Insurer believes retaining mutual status means facing ‘higher execution risks’

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British insurance provider LV= is continuing to extol the benefits its members will have if they back the M&A deal proposed by US private equity firm Bain Capital.

The vote will take place on 10 December 2021.

Following the completion of the sale of its general insurance business in 2019 and a strategic review in 2020, the company said pursuing a ‘business as usual’ approach as an independent mutual would have not been fair on members.

LV= added that considerable investment was still needed, so retaining its existing structure would have meant “high execution risks and the possibility that many [members] would not see a return”.

The private equity takeover would result in a further £212m of capital available for distribution to members, “increasing the total expected member distribution to £616m ($825m, €720m) including the proceeds from the general insurance sale”.

The mutual estimates this would be approximately a 50% increase on the ‘business as usual’ scenario. The sum would be made up of:

  • £533m distributed to 271,000 with-profits members; and,
  • £83m for non-profit members.

With-profits members would receive a one-off £100 payment if the proposal is greenlit; pay-out enhancements of £101m from the Bain Capital transaction; and an exit bonus and maintenance of mutual bonuses totalling £404m.

Whereas non-profits members would only receive the one-off upfront payment of £100.

‘Save LV=’s future’

David Barral, senior independent director of LV=, said: “Our board carried out a careful and detailed strategic review of LV= 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. Therefore, we explored an external transaction and, having considered 12 bids, unanimously concluded that the best outcome for our members, employees and all of our stakeholders was the proposed transaction with Bain Capital.

“It was a decision we didn’t take lightly given our mutual heritage, but we know it is the right choice because it saves the future of LV=.”

Alan Cook, chairman of LV=, 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.

“We urge members to vote at the meetings on 10 December and vote in favour of the transaction with Bain Capital to protect both their interests and the future of LV=.”

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