LV's bosses want to flog it to US private equity predators

Lock out the Vultures: It’s one of our last great mutual insurers. Today, 1.2million rely on it to keep them protected. Yet now LV’s bosses want to flog it to US private equity predators… and fix the vote to get their way

  • Bosses at Liverpool Victoria want to flog the insurer to equity giant Bain Capital
  • Deal would see policyholders awarded £100 and give up their ownership rights
  • Takeover means 178-year-old insurer will no longer be owned by 1.2mil members 
  • Lord Heseltine has urged LV members to vote against the Bain deal next month
  • It comes after a summer of pandemic plundering in the UK as result of pandemic 

For 178 years, Liverpool Victoria has helped its members through good times and bad.

Now those members hold the fate of the cherished mutual insurer in their hands – only they can stop LV being bought up by private equity giant Bain Capital, with potentially disastrous results.

However the deal struck by bosses awards a paltry £100 to the 1.2million policyholders who, in return, must give up their ownership rights.

Members were outraged last week when they found out how little they would get.

Even for those 340,000 members with more generous ‘with-profits’ policies – who share in LV’s fortunes – Bain is offering only a small uplift to their eventual pay-out.

The offer follows a summer of pandemic plundering, as businesses from Morrisons to defence giant Ultra Electronics have found themselves in the crosshairs of private equity.

Bosses Mark Hartigan and Alan Cook (pictured above) plan to stay on if the deal goes through – other offers would have seen them lose their jobs

Buyout groups spent £33billion on snapping up British companies in the first half of 2021 alone – more than double the next-best first six months on record, according to figures from data firm Refinitiv.

The growing presence of private equity firms on UK shores, as they hunt for companies at bargain-basement prices due to the country’s pandemic-related economic woes, has worried business leaders and MPs across the political spectrum.

And private equity firms often engage in brutal job-cutting, asset-stripping and loading firms with debt to increase their own profits in the short term.

Lord Heseltine, a Tory grandee and former deputy prime minister under John Major, said: ‘There needs to be a way for the Government to overrule takeovers when it’s in the national interest – not just on the current narrowly defined grounds.’

Previous deals have left companies floundering years after the buyout firms have made off with their profits.

Debenhams collapsed in 2019, laden with debt following its years in private equity ownership.

And care home chain Southern Cross tumbled into administration after Blackstone profited from selling off all its properties.

Urging LV members to vote against the Bain deal next month, Lord Heseltine said: ‘The only reason anybody is offering you £100 to vote to demutualise your business and sell to overseas companies is because it’s worth a great deal more than the £100.’

While bosses line up for bumper pay packets after the deal, policyholders who own company will get just £100 each and give up ownership (photo of company’s Bournemouth office)

LV members who have contacted the Daily Mail have branded the £100 payment ‘deplorable’, and said bosses were ‘selling off the silver’.

The deal will see LV lose its mutual status – meaning it will no longer be owned by its members but by a profit-hungry investor.

As opposition grows, LV’s bosses have been accused of trying to ‘rail-road’ the deal through.

The insurer’s rules say that at least half its 1.2million members must take part in a vote to demutualise the company – a turnout which LV’s chairman Alan Cook has conceded is near-impossible.

So instead, LV bosses are asking members to drop the threshold. Labour MP Dame Margaret Hodge said: ‘This appears to be a devious and underhanded way of getting what they want, and lining the pockets of a few including the directors at the expense of the many.’

A senior source in the life insurance industry described the tactics as ‘legal chicanery designed to ride a coach and horses through the mutual lock that previous members and management put in place to prevent this happening’.

In an impassioned plea, Lord Heseltine urged LV members to vote against the deal next month

Past demutualisations have handed out much greater rewards to investors. When Scottish Widows lost its mutual status in 2000, the average windfall for members was £6,000.

And when Scottish Provident went through the process the same year, its members bagged £3,636.

Martin Shaw, of the Association of Financial Mutuals, said members were being asked to ‘sell their rights in the business for less than the cost of a good meal out’.

He added: ‘Historically, demutualisation means managers focus less on customer service and policyholder returns, so the value of any payment may soon be lost.’

Former pensions minister and Tory peer Baroness Altmann said LV was threatening to be the ‘latest in a long line of great British names that have fallen to private equity, and have all too often found that their traditions of great service have not been maintained as well as you might expect’.

Peter Hunt, managing partner of consulting group Mutuo, said Bain’s offer for LV had ‘stunk from start to finish’. The insurer said it decided to seek a buyer because it desperately needed cash for investment.

It claimed Bain’s offer was the only option that made sense financially and supported the brand, its staff and its UK-based locations.

Chairman tainted by Post Office shambles

By Daily Mail Reporter 

The LV boss behind the sale of the 178-year-old mutual to private equity vultures played central roles in the Post Office IT scandal and the rollout of deadly smart motorways.

As chairman of the board, Alan Cook has played a decisive part in the move to sell LV to Bain Capital.

LV members said they were ‘dismayed and bewildered’ that he was allowed to head a major and much-loved organisation responsible for the policies of 1.2million members.

As chairman of Highways England from 2010 to 2013, Mr Cook oversaw a push to change the design of smart motorways to place refuge areas up to 1.5 miles apart – four times farther than before.

As chairman of Highways England from 2010 to 2013, Mr Cook oversaw push to change design of smart motorways to place refuge areas 1.5 miles apart – four times farther than before

A document produced by the government agency from June 2012 said: ‘By rationalising refuge areas savings can be made on a significant item of capital infrastructure.’

Yesterday, a former minister claimed this was against the wishes of the Department for Transport, which agreed an initial £2billion of funding on the basis there would be more regular refuges for broken-down vehicles.

Sir Mike Penning, a parliamentary under-secretary in the Department for Transport between 2010 and 2012, said: ‘We trusted them. The only people who could have authorised that to happen was Highways England. The buck stops with him [Alan Cook].’

Mr Cook was managing director of the Post Office from 2006 to 2010, when it prosecuted more than 200 postmasters and postmistresses for thefts and frauds later found to be the result of computer glitches.

It has taken over a decade for victims to clear their names and hundreds are still fighting for compensation. Several have died waiting for justice.

The decision to sell LV to a private equity firm rather than Royal London, another mutual, is likely to ensure Mr Cook keeps his £205,000 job for another two years.

The Post Office scandal saw hundreds of postmasters being sacked or prosecuted for thefts and frauds later found to be the result of computer glitches (file image) 

Chief executive Mark Hartigan, who was paid £1.2million last year, is also expected to bag a bumper pay package under the new owners.

Mr Hartigan, 58, is a former Army colonel who joined as LV’s chief executive last year, shortly before the sale process began.

Pensioner Clarissa Johnson, from Dorset, who has been with LV since 2011, said: ‘I’m dismayed and bewildered that LV, a very well established mutual, is being led by someone with such a chequered past.

‘I can’t actually understand how someone with his track record managed to become the chair of LV at all.

The board has demonstrated they are not trustworthy. It’s a very sad situation. I’m very upset and will be voting against the deal.’

An LV spokesman said: ‘While it would not be appropriate for LV to comment on Post Office matters relating to Alan Cook’s tenure with them, I can assure you that he has deep sympathy for those postmasters wrongly prosecuted.

Furthermore he is supportive of the recently announced Post Office Horizon IT Inquiry as it seeks to provide critical answers to everyone affected.’

A month left for members to save a great institution

By Lucie White for the Daily Mail 

WHAT’S HAPPENING TO LV?

The 178-year-old life insurer is being sold to Bain Capital, an American private equity firm. Bosses at LV agreed the deal last year, claiming they needed investment to expand and introduce digital technology. But it has taken several months for LV’s management and Bain to agree terms with City regulators, and figure out how much members will be paid. The 1.2million members – its customers – are being asked to vote on the deal.

WHY THE CONCERN?

Because LV is a mutual it is owned by its customer members who hold life insurance and pension policies. This ensures the business is run purely for the benefit of policyholders, and not to make profits for investors. Formerly known as Liverpool Victoria, it was founded in 1843 to help poor citizens in the city pay for a decent burial for loved ones. Its mutuality was an important principle – members could be sure their money was being put to good use. But private equity firms like Bain are notorious for hiking prices and slashing jobs. MPs and members fear the quality of LV’s business will deteriorate and the cost of policies will rise.

WHO DECIDES ON THE DEAL?

Policyholders who are eligible to cast their ballot should receive an information pack by November 18 – they can vote online between now and December 8, or during two online conferences on December 10. LV members include only those with life insurance, pension policies or annuities. Anyone with a different type of LV-branded policy, such as home insurance or car insurance, will not be eligible to vote as this arm of the business has already been sold off.

IS IT A GOOD RESULT FOR MEMBERS?

Bain is planning to pay most members just £100 in return for giving up their ownership of LV – a sum described as ‘paltry’. Around 340,000 members who hold more ‘with-profits’ policies will get a slightly greater payout.

IS THERE AN ALTERNATIVE?

LV’s bosses said they weighed up 12 formal bids and the final two were understood to be Bain and Royal London, another British mutual. It has been rumoured that Royal London offered £10million more. Its bid would have meant LV could remain part of a mutual, putting members front and centre. LV’s own with-profits committee, which represents members, is understood to have initially favoured Royal London. The rival mutual is understood to be waiting in case Bain’s deal collapses.

WHO PICKED BAIN?

LV’s board, led by chairman Alan Cook and chief executive Mark Hartigan, plumped for the Bain deal, claiming it was the ‘only option that offered both an excellent financial outcome for members and gave unrivalled support for the LV brand, our people and UK based locations’. Bain’s offer is likely to see Mr Hartigan keep his role and it is understood he would be awarded a higher salary and an ownership stake potentially worth millions. Mr Cook will also retain his £205,000-a-year post. Both would probably have lost their roles under Royal London.

WILL THIS AFFECT MY POLICY?

Anyone with LV-branded general insurance, such as home or car insurance, will not be affected as this arm has already been sold off to Allianz. But those with life insurance and other similar policies will be affected – they will no longer own the business. Bain has promised that the so-called mutual bonus which with-profits members are paid in years when the business does well will be maintained ‘at current levels’. But this suggests LV members will miss out if performance picks up. Future customers may be the most at risk, with costlier policies as Bain seeks profits.

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