Loyal LV members’ fight to save their mutual
Money Mail readers join growing backlash against plans to sell historic insurer to a private equity giant – and vow to vote down deal
HISTORIC insurer LV is facing a furious backlash from loyal customers over a controversial takeover by a private equity firm. Scores of Mail readers have vowed to vote against the deal, with some threatening to ditch LV in protest.
Many have been members of the mutual for decades, and chose the firm because they trusted it to look after their money.
They now say they feel bitterly let down amid concerns about what the sale would mean for their pensions and investments.
Formerly known as Liverpool Victoria, the investment and insurance giant was founded in 1843 to help impoverished Liverpudlians bury their dead. Since then, it has been owned by its members as a mutual, run with their benefit in mind and not for profit. But the firm is now considering accepting a £530 million bid from U.S. firm Bain Capital, which would see it stripped of its mutual status.
This has led to fears for members as private equity firms are notorious for slashing jobs, hiking prices and prioritising the pay packets of top bosses and shareholders.
The Mail has launched a campaign to save LV and today we are calling on members to ensure their voice is heard. Around 1.2 million LV members with life insurance, pension policies and annuities are eligible to vote on whether the sale goes ahead next month.
And many have already pledged to cast their vote against it.
Retired lecturer Clarissa Johnson says she was ‘horrified’ when she first heard that LV could fall into the hands of Bain Capital.
The 74-year-old grandmother took out an enhanced annuity with the mutual over a decade ago, which pays out just under £500 a month.
However, she now says she has lost trust in LV’s board and plans to vote against the deal next month.
Bain Capital has pledged to pay each member up to £100 if the takeover goes ahead.
And around 297,000 customers who have with-profits policies — where payouts depend on how much profit companies make — will receive an extra 0.1pc of the value of their policy for every year that they have held it. This is around £52 for most members.
LV bosses claim Bain’s bid is the only option that offers an ‘excellent financial outcome’ for members’ along with ‘unrivalled support’ for the brand, staff and UK-based offices. But, given that Scottish Widows members received an average windfall of £6,000 when it was demutualised and bought by Lloyds in 2000, many feel the cash payment they have been offered is derisory.
Clarissa, who lives in Dorset, says: ‘The sum of money they offered us not only sounds like a bribe, it’s a paltry amount.
‘How does it amount to an “excellent financial outcome” for me, like LV says?’
If LV is no longer a mutual, its members will have no say on any decisions made by the company. Bain Capital has pledged to keep ‘mutual bonuses’ received by withprofit customers at a similar rate.
BUT experts fear the firm could hike exit fees and premiums for new customers in the future. Malcolm Murray, 77, has been an LV customer for more than 50 years, just like his parents and grandparents before him. And in 2000 the father of two set up a mutual investment bond with his wife Sheila, 73, to ensure she would be financially secure if he died unexpectedly.
The with-profits policy has delivered returns of around 5 pc each year — and is now worth a five-figure sum.
But the retired chartered engineer says he will consider moving his bond to another firm if the Bain Capital bid is successful, and plans to vote against the deal.
Malcolm, who lives in Lincolnshire, says: ‘The cash which Bain is offering to members is derisory. LV needs to be kept as a mutual. If it ain’t broke, don’t fix it.’
Other customers are concerned about the perceived lack of transparency around the deal.
They are also worried that bosses want to change LV’s constitution to push the deal through.
Currently, 75 pc of voting members or more need to back the deal, with a turnout of at least 50 pc.
But LV is asking members to vote to ditch the 50 pc requirement, which means it could go ahead with just a fraction of its members’ support.
And even if the bosses lose this vote, they could still go ahead with the sale but members will be paid just £60 rather than £100 (see box, right).
Derek Eade, 76, who has a fivefigure sum invested in a with-profit growth bond, says all this uncertainty is unacceptable.
The retired accountant, who lives with wife Pam, 74, in Epsom, Surrey, says: ‘Policyholders need to know what they are voting for, especially the amount they will receive.’
Meanwhile, Joseph and Jennifer Schneider, from Bushey, Hertfordshire, are horrified that LV chairman Alan Cook is backing a move that would demutualise the business. The retired couple signed up to an LV pension plan more than a decade ago because they believed the firm cared about its members. But they have now lost trust in Mr Cook after discovering he was managing director of the Post Office between 2006 and 2010, when subpostmasters were falsely accused of theft. Joseph, 78, who has already voted against the deal, says: ‘I just do not trust Bain Capital — goodness knows what will happen to our pensions. I’m ashamed and disgusted with the deal and Mr Cook should be ashamed of himself.’ John James, 72, is concerned that other members will be tempted by a short-term reward of £100 in cash. The retired construction project manager took out an annuity (which pays a regular income in retirement) with LV more than a quarter of a century ago. John, who lives in Norfolk, says: ‘It is a terrifying thought that LV, a mutual, will be taken over by such a company. The £100 offer is a cheap joke, but other members could be easily influenced without looking at the long-term consequences.’ He is calling on City watchdog the Financial Conduct Authority to
intervene to stop the deal going ahead.
An LV spokesman says it needs ‘significant investment’ to compete in a ‘highly competitive’ market, adding: ‘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.’
Matt Popoli, a managing director of Bain Capital, says its proposed investment ‘maintains an independent LV’, adding: ‘To be sustainable and achieve longterm success, LV needs capital to address its heavy debt pile, fund its pension liabilities and invest for growth.’