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LV committed to Bain deal despite Royal London interest

LV committed to Bain deal despite Royal London interest

LV remains committed to completing its buyout by Bain Capital and is not engaging with rival Royal London's reignited bid for the insurer, FTAdviser understands.

Over the weekend, The Mail on Sunday reported Royal London’s chief executive Barry O'Dwyer sent a proposal to his counterpart at LV, Mark Hartigan, for a joint takeover of the insurer alongside its existing private equity buyer, Bain Capital.

But according to sources, Royal London's bid would result in significant job losses due to the fact the mutual is only interested in LV's back book. 

FTAdviser also understands Royal London's latest bid would not preserve LV’s mutual status. In its previous proposal, Royal London's focus was on creating a large-scale mutual, which included an emphasis on LV retaining its mutual structure.

According to reports, O'Dwyer suggested Royal London buy the bulk of LV’s existing policies, while Bain Capital would buy the LV brand in an effort to attract new customers. 

This proposal was put forward by O’Dwyer in the event that Bain Capital’s £530m takeover of LV, set to be voted on by members on December 10, is voted down. 

LV and Bain declined to comment on Royal London's fresh bid for the firm.

Bain's deal

If Bain Capital’s individual takeover bid is approved by LV’s 1.2m members next month, the insurer intends to pay them anywhere between £60 and £100 each, depending on the type of deal they vote for. 

The private equity firm has also promised “policy payout enhancements” for with-profits members, ranging from £52 to £630, depending on the policy.

In a statement published today (November 15), Bain laid out further aims, including increasing policyholders from 1.2m to "over 2m", reclaiming LV's position as a "top three provider" of life insurance, and doubling smooth managed products sales, as well as expanding the reach of LV's equity release mortgage product.

In a statement published by LV just earlier this month, LV's chairman Alan Cook said Bain Capital “was the only option” which offered members “both an excellent financial outcome” and gave “unrivalled support for the LV brand”.

Cook continued: “Whilst none of the bids would have allowed LV to remain as a standalone mutual, this deal provides the highest distribution to with-profits policyholders compared to continuing with 'business as usual' or closing to new business.”

In a statement Royal London confirmed it had contacted LV and asked the mutual to consider if its current proposals could be "enhanced".

It said: "We are ready to explore any option for the business that delivers a better member outcome, and we believe there are significant benefits for LV members in being part of another mutual. This could involve the business as a whole or just the with-profit members.

"The board of LV has not taken up our offer to discuss other possible options but our door is open and we remain ready to engage.”