The Financial Conduct Authority has published its “non-objection” on LV putting proposals for its demutualisation to a member vote just months after MPs condemned LV’s sale to private equity firm Bain Capital.
In a letter to stakeholders today (October 26), the financial watchdog said it had “scrutinised” the fairness of the proposed transaction, as well as “the process for how it is decided”.
The FCA said its decision to not oppose the member vote followed “extensive engagement with LV”, during which it “challenged their proposals where necessary to ensure the fair treatment of their policyholders”.
The FCA wrote: “As a result, we have now provided our non-objection to LV proceeding to the court and to putting the proposals (on both the overall Bain transaction and the scheme of arrangement) to member votes, subject to LV meeting some additional requirements.”
MPs had previously criticised LV for being misleading in its communication with its members in the process leading up to the sale to Bain Capital.
The next step for LV is a convening hearing on the ‘scheme of arrangement’, which is essentially the compromise it hopes to come to between itself and its members following the transaction. LV’s intention is to compensate its members for their loss of mutual membership.
Pending the outcome of this hearing, LV can start sending voting packs to its members, ahead of a special general meeting where members will vote on whether or not they want the demutualisation to go ahead.
If the insurer secures a positive vote, it can return to court for a sanction hearing, which will determine the final outcome.
But the FCA caveated its greenlight by highlighting that alongside this, the PRA’s and FCA’s consideration of the change in control application is ongoing, and "approval of this would be required for the transaction to proceed, regardless of the outcome of the member votes".
The FCA’s non-objection with regards to LV’s vote on demutualisation also comes with a number of requirements placed on the firm.
These include extended opening hours for their customer helpline until the date of the vote, further webinar sessions for policyholders and members “with a focus on responding to questions rather than presenting more information”, a focus on responding to requests running up to the vote, regularly updated FAQs, individual accountability for service standards if the transaction goes through.
LV first announced the sale of its savings, retirement and protection businesses to Bain Capital for £530m in December.
Backlash from MPs to the deal was published in April through the All Party Parliamentary Group (APPG) for mutuals.
It criticised LV’s leadership, stating it has not been clear to its members about its intentions for the business.
A 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.