Insurer LV fails to win member backing for takeover by Bain

Members of LV, one of the UK’s oldest mutually owned life insurers, have rejected a takeover by private equity group Bain after months of mounting controversy over the deal.

At a meeting on Friday afternoon, 69 per cent of those voting approved the deal, falling short of the three-quarters majority needed for the sale to go through.

After the result was announced, LV’s chair Alan Cook said he would step down “as soon as a way forward is agreed”, while chief executive Mark Hartigan is to stay on.

The board said it would “move swiftly to reassess its strategic options and explore alternative ways to structure a transaction”, including whether mutuality could be retained “either on a standalone basis without undue risk to members, or through a merger with a larger mutual organisation.”

LV’s management has come under increasing pressure in recent months from pro-mutual members and politicians over the rationale for the deal and the choice of Bain over rival bidder — and fellow mutual — Royal London.

Royal London issued a statement immediately after the result saying it had “offered to enter into immediate and exclusive discussions with LV to agree a mutual merger” that would give LV members the option to become Royal London members: something that was not on offer last year.

Cook said on Friday the board was “disappointed not to have achieved the outcome that we believed was in the best interests of LV and its members”, and was “deeply appreciative” of members who had taken the time to vote.

Just over 174,000 of LV’s 1.2m members turned out for the vote. The £530m demutualisation and sale to Bain was agreed a year ago and offered a £100 payout to each LV member and more for those holding with-profits policies.

LV said the result would have “no impact on trading; the business will continue to serve its customers as usual and member policies remain secure and protected by the same safeguards.”

LV, formerly known as Liverpool Victoria, traces its roots back to 1843 when its agents went door to door selling “penny policies” that would help those on modest incomes save to cover the costs of a decent funeral.

After disposing of its general insurance operations to Germany’s Allianz a few years ago, LV conducted a strategic review last year, concluding that the remaining life insurance business was “subscale” and capital-constrained. A sale, management decided, would be the best outcome for the members who own the mutual.

The deal has turned the spotlight on rules governing mutuals, which supporters believe make it too difficult for them to raise capital and too easy for them to be taken over. Earlier this week, more than 100 MPs and peers signed a letter calling for a formal review of these rules.

Gareth Thomas MP, who has led the political opposition to the deal as chair of the All-Party Parliamentary Group for Mutuals, had warned a yes vote could encourage other private-equity buyers and trigger a new wave of demutualisations.

Such deals rewarded senior managers “very handsomely” and allowed investors “to plunder assets accumulated carefully over many years”, said Angela Eagle MP, a former shadow business secretary, last month.

LV’s management had consistently argued the Bain offer was the only option for the insurer that would allow it to safeguard jobs, maintain and invest in the open business as well as providing the best financial outcome for members.

Bain said it respected that the outcome was “not enough for our transaction to proceed”, adding: “It remains crucial that members are looked after and protected. We have always wanted LV to flourish and become a leading company in the sector, that offers more consumer choice and creates more jobs.”

In a further statement, LV said it would consider Royal London’s latest proposal “seriously”.