Under-fire LV bosses today insisted their £530million sale of the historic UK life insurer to an American private equity firm was the only way to keep the business running.
The former Liverpool Victoria-based business, Bournemouth, has been heavily criticized for suggesting that members take a Bain Capital offer.
While concerns were raised over possible job cuts, the sale of the firm with 178-years-old history would make it no longer owned by the members.
Alan Cook, chairman of LV, stated that the LV board was interested in showing how they arrived at their decision to sell LV.
However, LV today stated it was the only way to maintain the business as it attempted its work.
David Barral is a senior independent director and stated that “our board performed a detailed and careful strategic review on LV in 2020.
“We looked at all possible options and drew on both our vast business and transaction experience, as well the advice of professionals.
“We came to the conclusion that it was unfair for us all to ask our With profit members to fund a future that would require significant investment and which few would benefit from.
Chairman Alan Cook stated that there have been many theories and opinions regarding the decision-making process.
“So that members are able to vote on the facts presented before them, we will show our analysis and conclusions.
He pointed out that LV’s sale of its general insurance business to Allianz for £1.1 billion to prop up the organisation was not enough for the life and pensions business to run successfully.
LV conducted a 2020 strategic review and found that the business was’subscale…with an insufficiently solid capital structure, and a loss making new business unit in need of investment.
The firm added that trying to continue running a ‘business as usual’ strategy was not fair for members given the need for investments, with more than £100 million needed to upgrade systems and customer services.
As the risk was too great, the members of the organization would have to pay the costs.
Bain would invest £212 million and hand out £533 million to 271,000 LV main fund with-profit members, it added.
Bosses attempted to defend the £100 one-off payment to members from the sale, claiming the full amount being returned to them will be £533 million ‘over time’ versus £404 million under a ‘business as usual’ position if it remained successful.
While concerns were raised over possible job losses, the sale of the mutually owned firm with a history of 178 years would not result in the company being sold.
It would have also been risky for current members to not be able to see the investment benefits before their policies matured. The mutual membership base fell 40% in 2017 and has added another 40,000.
The business could be closed, however bosses stated that this would result in significant job loss and increased costs.
LV was offered the business by 12 potential bidders and accepted the Bain proposal unanimously. The private equity firm is the only one that will preserve the mutual’s ‘brand heritage, values, and values,’ bosses stated. This includes offices in Bournemouth and Hitchin as well as Exeter.
According to the firm, “These benefits are not possible under any other proposals.”
Rival Mutual Royal London tried to disrupt the agreement, but LV claimed that the proposal would lead to the business being divided and resultant in redundancies.
Boss Mark Hartigan said last week to the PA news agency that he was disappointed with the timing.
He said, “Royal London could have offered a better deal to Bain but they did not.”