LV bosses face questions over the windfalls they stand to make from £530m sale to private equity giant Bain
The bosses of LV are facing calls to come clean over the money they stand to make after agreeing to sell the 178-year-old insurer to private equity.
Chief executive Mark Hartigan was left red-faced after a damning report into the £530million takeover by US giant Bain Capital called his motives into question.
Campaigners, MPs and industry experts have now accused LV’s management of ‘selling its heritage down the river’ – and are pressing executives to reveal how they stand to benefit.
Selling out: LV= chief executive Mark Hartigan (pictured) was left red-faced after a damning report into the £530m takeover by US giant Bain Capital called his motives into question
Originally called Liverpool Victoria, it was set up in 1843 to give poorer Liverpudlians a chance to hold a funeral for their loved ones.
But soon after taking charge in 2019, Hartigan kicked off a sale process despite reassuring the firm’s members that it had plenty of money to continue on its own and would remain a mutual.
The Bain deal will see LV ditch its mutual status, and hand any profits to its private equity owners, if a majority of LV members vote in favour of the bid later this year.
James Daley, of research and ratings agency Fairer Finance, said: ‘It seems LV has sold its heritage down the river.’
A spokesman for LV said none of the firm’s management would receive any of the £530million which Bain is paying – instead this will be split between LV’s 1.3m members.
But should they stay on following the takeover, private equity ownership could yield huge rewards in future.
In its report into the deal, the All Party Parliamentary Group (APPG) on Mutuals said: ‘Bain is clearly interested in making a profit from the acquisition, through the implementation of the management’s business plan.
Executive management may well likewise benefit from enhanced remuneration and incentives attached to this and we might expect departing directors to be compensated for loss of office.
It is likely that the rewards to Bain and the leadership will dwarf any payments made to members.’
The report called for the deal to be scrutinised by the Competition and Markets Authority. Industry sources were left baffled last year when LV plumped for the Bain deal – especially as Royal London, the UK’s biggest mutual, had put in its own offer for the insurer.
But this was shunned by LV’s board, who changed their tune on the firm’s prospects. Despite having recently sold LV’s general insurance arm to Allianz for more than £1billion, they began to say that the firm didn’t have enough capital to sustain its future without a further cash injection.
In its report into the deal, the APPG cast doubts on these claims.
The MPs said: ‘On the one hand, both before and after the Allianz deal was concluded, [LV] stated that it is a well-capitalised business, but then on the other hand, that it is unable to raise sufficient capital as a mutual to continue trading independently. Both statements cannot be correct.’
An LV spokesman said: ‘We have always been clear to our members that the strategic review and subsequent proposed transaction with Bain Capital has been solely driven by their long-term interests.’