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Wednesday, December 8, 2021

Boss of insurer LV= defends sale amid backlash


The boss of a well-known insurer has defended its potential sale to a US private equity firm amid criticism from politicians and some of its members.

LV= CEO Mark Hartigan stated that a takeover by Bain Capital would result in the “best financial outcome” for the company’s members.

The £530 million transaction would result in the company losing its status as a mutual.

LV= is owned by its 1.2 million member-customers under its current structure.

On December 10, its members will be asked to vote on the agreement. If 75% of voters approve the takeover, another vote will be held to determine whether the business is fully transferred to Bain Capital or if the US firm can conduct business under the LV= brand.

However, politicians from various parties, as well as some LV= members, have expressed reservations about selling the company to a US private equity firm, as well as the size of the payout due to members if the deal is approved.

“It’s the only bid that safeguards the LV brand that our members loved,” Mr Hartigan told the BBC’s Today programme.

In 1843, the Liverpool Independent Legal Victorian Burial Society was founded. Its first agents collected penny premiums on doorsteps, which were frequently used to purchase policies that covered funeral expenses.

Mr Hartigan joined what is now known as LV= last year to conduct a review of the company and help determine its future.

The Bain deal was first announced in December of last year, when LV= announced that it had received 12 formal bids.

Mr Hartigan defended the deal, saying that Bain Capital was “the only business that is willing to invest in our growth.”

“That means preserving the jobs we have and the sites where we operate, as well as the future of the communities that LV serves,” he said.

He would not, however, confirm whether Bain Capital had assured the insurance and pensions provider that all of its employees would be retained.

Too good to miss?

Analysis by Dharshini David, BBC Today business presenter

Financial predators out to rack up debt and steal assets? Or those with deep enough pockets and the foresight to ensure the future of heritage brands?

Private equity has been on a buying spree as UK businesses deal with the pandemic, but the sale of LV= has reignited debate about their role and intentions.

The government is attempting to attract investment to the UK, and private equity, which is awash in funds, can take many forms, including our own pension and other investment funds.

Critics argue that, on the whole, private equity isn’t in it for the long haul, instead cutting costs and jobs in the hope of making a quick buck.

However, LV=’s CEO, Mark Hartigan, told me that of the dozen bids he’d received, only Bain Capital had the resources to protect the 175-year-old brand, and that it planned to inject the necessary investment funds to preserve sites.

However, he did not go into detail about the figures involved. He also refused to share the details of other bids, which politicians and other commentators say is required if they are to properly evaluate the merits of this sale or the motivations of Bain Capital. That’s not to say he won’t work hard to revitalise the brand, but he might not have won over the sceptics.

Whatever happens with this transaction, more UK brands are likely to be acquired by private equity. It’s too good an opportunity to pass up for many funds.

‘Deeply concerned’

The potential takeover has come under fire from politicians and some of its own members in recent days.

Speaking to the Daily Mail, shadow business secretary Ed Miliband said on Wednesday: “I am deeply concerned at the details of the proposed takeover and demutualisation of LV by Bain Capital.”

He urged the group’s members to “make their voices heard throughout this process.”

Lord Heseltine, a former Conservative business secretary, also spoke out against what he called a “derisory” offer to LV= members.

If the takeover is approved, £111 million will be distributed among the company’s members, with each receiving approximately £100.

Policyholders with “with-profits” insurance would receive an additional sum of up to £600, depending on the length and size of their insurance policy.

Mr Hartigan stated that he would “completely” respect the outcome of the election.

If the proposals are approved by LV= members, the takeover will still need to be approved by the UK’s financial watchdog.

The Financial Conduct Authority said last month that it had no objection to the deal, despite one report by the All Party Parliamentary Group for Mutuals saying that it was difficult for LV= members to assess whether demutualisation was their best option.

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