MPs have criticised LV’s plans to demutualise and sell to private equity firm Bain Capital saying the deal has been rushed and that LV has not been “open and transparent” with its members about its intentions.
In a 76-page report by the All Party Parliamentary Group (APPG) for mutuals, published last night (April 7), MPs criticised LV’s leadership, stating it has not been clear to its members about its intentions for the business.
The report said despite repeated assurances there was no intention to alter the mutual status of the company, it was clear that plans were in place to “seek alternative arrangements” which included a change of corporate status, if not full demutualisation.
MPs alleged that although a deal had been agreed with Bain Capital, LV was also exploring potential sales to other non-mutuals at the same time as the company provided public reassurance to its members, which could be seen as misleading to its members.
The report stated: “We do not expect any business to give a running commentary on matters in the boardroom, but in this case, the LV leadership chose to re-affirm its commitment to mutuality at the precise moment that it had instructed its advisers to seek a purchaser of the business, regardless of its ownership status.”
According to the report, LV is now claiming that it needs to sell to Bain Capital to raise capital, but will not “disclose how much it needs or for what purpose”.
This is despite the LV board stating the company was very well capitalised twelve months ago, having raised about £1.5bn through the sale of its general insurance business and on corporate debt markets.
LV said it was "disappointed" by the report.
A spokesperson for LV 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.
"At all times this has been the absolute driving force and guiding principle behind any decision made or action taken at LV=.
"We therefore welcomed the opportunity to provide written and oral evidence to the APPG hearing to explain why Bain Capital was singular in offering an excellent financial outcome for members as well as an unrivalled and long-term commitment to LV=’s future prospects, business and people."
They added: "We are disappointed by the report and we have always recognised the importance of equipping our 1.25m members with all of the information they need to help them make an informed decision in advance of the vote and this continues to remain our absolute priority.
“We have been clear that the business, while well capitalised, requires significant further investment to compete in an increasingly competitive market. This investment would need to come from our existing capital, and this creates an inherent tension between balancing the requirement to invest for the future success of the business while providing meaningful returns to with-profits policyholders.