Royal London and its rival LV have ended talks about a possible merger, just two days after both companies confirmed they were in discussions.
LV said it had become clear "that our different mutual models mean such a merger would not be in the best interests of LV= members".
Barry O’Dwyer, group chief executive of Royal London, said the insurer’s offer “to preserve LV‘s mutuality through a merger” was based on an understanding that LV did not have a viable future as an independent company.
Back in November, LV’s outgoing chairman Alan Cook had described the mutual as “sub-scale” with a loss-making new business unit and “in need of investment”.
Having put forward its offer in September 2020, Royal London was cast to one side for a time in favour of US private equity firm Bain Capital.
When this deal wasn’t voted through by members, Royal London’s deal was once again back on the table.
But in an announcement today (February 9), Royal London confirmed: “Discussions between Royal London and LV on the potential for a mutual merger have ceased.”
It said for Royal London’s customers and members “nothing changes” and it anticipates sharing “a substantial level of profits” with its eligible customers in April.
Seamus Creedon, interim chairman at LV, said: “We thank Royal London for its engagement and we look forward to operating alongside it as part of a vibrant mutual sector.
"The strength of LV’s business performance over the past 18 months combined with its operational progress has strengthened the board’s belief in, and commitment to, the continuation of our status as an independent mutual."
Creedon said the firm had listened to members about the importance of being a mutual and for the LV brand to continue.
He added: "We continue to maintain our strong capital position, are trading well and building a successful future for LV, its members, employees and wider communities. We will shortly update our members on our business strategy and will continue to engage with them over the coming weeks and months.”
The end of talks comes after advisers called for clarity on LV’s ownership, dubbing the ‘will they, won’t they’ position “bad press”.
Advisers had also argued a deal with Royal London would create less consumer choice and fewer mutuals - both of which they said would ultimately be bad for the intermediary industry.
LV had already started to overhaul its board following the failed Bain deal last year. Outgoing chairman Cook is to be succeeded by non-executive director Seamus Creedon in the interim, whilst three other board members’ exits were announced this week.
These included David Barral, who the insurer said will reach his six-year term on March 7, alongside Alison Hutchinson and Luke Savage, who will step down as non-executive directors and board members at the end of March.
ruby.hinchliffe@ft.com
