You’re taking LV members for FOOLS!
Insulting £100 offer to policyholders in private equity deal
BOSSES at LV were accused of ‘taking members for fools’ after they finally published details of the mutual’s £530m buyout by private equity giant Bain Capital.
Takeover documents released yesterday show LV’s 1.2m members would get just £100 each for giving up their ownership stake in the historic life insurer.
Even the 297,000 members who have ‘with-profits’ policies – and who share in the performance of the company – will only get an extra £52.
A small number of members with more valuable investments will see a larger payout – £630 – though this will still be only be a tiny fraction of the size of their policy.
The deal offered to LV’s members contrasts sharply with the millions of pounds the LV bosses could make once the insurer is in private equity hands.
Chief executive Mark Hartigan, who earned £1.2m last year, looks set for an even more generous package under Bain. Chairman Alan Cook will hold on to his job for another two years – pocketing £410,000 on his current fees.
Labour MP Gareth Thomas, chairman of the All-Party Parliamentary Group for Mutuals, said: ‘We thought members didn’t have enough information to judge what’s in their interests. Now we can categorically say that this is a bad deal.
‘A paltry £100 in return for membership rights to hand over a business focused on its customers to a private equity shark intent on screwing the maximum profit for itself.
‘LV bosses are taking members for fools, offering them £100 each to facilitate this plan to line their pockets.
‘Another £410,000 for the chairman and countless millions for the chief executive.’
LV, formerly known as Liverpool Victoria, was set up in 1843 to give poorer residents of the city a chance to give their loved ones a decent funeral. It is currently structured as a mutual, meaning it is owned by policyholder members instead of shareholders.
This ensures it is run entirely for the benefit of its customers, not profit-hungry investors.
Tory peer Baroness Altmann, a former pensions minister, said: ‘Members’ interests are not necessarily best served by this deal.
‘Regardless of the £100 payout, we don’t know whether in the long run it might cost more if prices are increased, as the new owners will be out to make a profit. I would urge all members to vote and really think carefully if £100 will be enough to compensate them for higher prices.’
Hartigan and Cook have insisted they will not get any bonuses associated with the deal. But, speaking in Parliament last week, Cook admitted Hartigan would be given a generous pay package if he was kept on as chief executive under Bain.
Unveiling the terms of the deal yesterday, Hartigan said: ‘The company going forward will be financially strong and will be structured with less debt.
‘This transaction will enable LV to continue to look after over 1m customers, while creating investment in our business that will enhance the services we provide.’
Cook added: ‘Bain Capital was the only option that offered both an excellent financial outcome for members and gave unrivalled support for the LV brand, our people and locations.’
Past demutualisations have rewarded members much more generously. The average windfall for Scottish Widows policyholders when it ditched its mutual status in 2000 was £6,000, according to the Association of Financial Mutuals (AFM).
Standard Life in 2006 gave an average payout of £1,250, while Friends Provident in 2001 handed out £1,200.
Martin Shaw, chief executive of the AFM, said the £100 Bain offer to LV members was ‘low compared to previous demutualisations’, and added: ‘Members are being asked to sell their rights in the business for less than the cost of a good meal out.’