Global private investment firm Bain Capital has agreed to buy LV’s savings, retirement and protection businesses for £530m.
Under the proposal, LV’s with-profits business will be ring-fenced in a separate fund and closed to new business.
As a result of the deal, the capital available for distribution is expected to increase by up to 40 per cent, which will be used to increase payments to with-profits members as their policies mature.
The acquisition is subject to both regulatory approval and approval by LV members. It is expected to complete by the end of 2021.
Alan Cook, LV's chairman, said significant long-term investment was needed for the provider to remain sustainable as a standalone life and pensions business.
Mr Cook said: “The board is delighted to have secured an attractive price and unanimously agreed that the transaction with Bain Capital presents an excellent financial outcome for all our members, as well as offering an unrivalled commitment to LV’s future prospects, business and people.
“We look forward to engaging fully with our members in advance of a member vote in the first half of 2021.”
All members are expected to benefit from a cash payment to compensate for loss of mutual membership upon full completion of the acquisition.
Matt Popoli, global head of insurance at Bain Capital Credit, said: “We are investing in a unique company with an impressive management team and employee base, that is already well positioned in the market, with a clearly established product set, strong IFA relationships and a reputation for customer excellence.
“We have been impressed by LV’s initiatives to further improve its market position, the benefits of which are already emerging. Our principles and values are in direct alignment with those of LV and we firmly believe in a shared vision for the future of the business.”
Back in September there were reports Royal London was looking to take over LV to create a large-scale mutual.
But LV quickly confirmed it was in exclusive talks with Bain Capital and was not talking to any other businesses.
Back in June, it was reported LV had sought advice as to whether the sale of its life and pensions business would be in the best interest of it 1.3m customers.
It also said it was looking into a joint venture option, similar to the one it struck with German insurance giant Allianz when it sold its general insurance business in 2017.
The mutual sold a 49 per cent stake in its general insurance business to Allianz for £500m in December 2017 and on December 31 the remaining 51 per cent holding was sold to the German company.
According to LV, it was paid a total £1.08bn for its general insurance arm.
amy.austin@ft.com
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