Mergers and acquisitions  

Could LV members go through demutualisation unscathed?

Could LV members go through demutualisation unscathed?
Credit: Element5 Digital from Pexels

The final deadline for LV members to vote on the business’s acquisition is fast approaching, almost a year after LV announced it had agreed the terms with private investment business Bain Capital.

The proposed deal has not come without criticism, with an online petition to “stop the demutualisation of LV” receiving more than 1,460 signatures. And in April the All-Party Parliamentary Group for Mutuals concluded, among other things, that the planned demutualisation “damages the diversity of financial services providers in the UK and weakens the mutual sector unnecessarily”.

The regulator has also come under fire. Martin Shaw, chief executive of the Association of Financial Mutuals, answered in the negative when MP Siobhain McDonagh asked in a Treasury Committee session if he was convinced the Financial Conduct Authority and Prudential Regulation Authority had done “all that they might to stand up for the consumer or members’ interests”.

What is being promised?

Bain Capital has issued reassurances, saying it is committed to the long-term growth and success of LV, and that its aims include increasing policyholders from 1.2m to more than 2m, doubling smooth managed fund product sales and “[extending] the footprint” of LV’s equity release mortgage product.

The investment company adds that it plans to reinvest capital in the business that will enhance the provider’s IT infrastructure, operations, product development and customer service.

“This will ultimately lead to better products and greater choice for LV policyholders as well as improve upon the company’s competitive position in the market,” it says.

“Additionally, to ensure the long-term financial stability of LV, no new debt will be added to LV’s balance sheet from this transaction.”

In an explanatory booklet to members, the provider echoes Bain Capital’s assurances, saying the business's investment will deliver better technology, new products and develop its service for customers.

According to LV, the life and pensions market is becoming increasingly competitive, driven by large insurers with access to capital. “We would need significant investment to be able to compete effectively, especially with the rapid change in technology and digital services that our customers now expect,” it adds.

A report on the strategic landscape for mutual insurers and friendly societies, published by the AFM and Whitecap Consulting last month, found nine in 10 AFM members agreed that digital technology would be critical for operating effectively in their markets.

A similar proportion (88 per cent) believed that digital technology would be required to keep pace with other providers and customer needs going forward.