Boss of insurer LV= defends sale amid backlash

The boss of a well-known insurer has defended its potential sale to a US private equity firm amid criticism from politicians and some of its members.

Mark Hartigan, chief executive of LV=, said that a takeover by Bain Capital marked the "best financial outcome" for its members.

The £530m deal would see the company lose its status as a mutual.

Under its current structure, LV= is owned by its 1.2 million member-customers.

Its members are being asked to vote on the deal on 10 December. If 75% of voters are in favour of the takeover, another vote will follow on whether the business is fully transferred to Bain Capital, or if the US firm can carry out business under the LV= brand.

But politicians from several parties and some LV= members have raised concerns about selling the company to a US private equity firm, as well as the size of the payout due to members if the deal goes through.

Mr Hartigan told the BBC's Today programme: "It's the only bid that safeguards the LV brand that our members loved."

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The company started out as the Liverpool Independent Legal Victorian Burial Society in 1843. Its first agents collected penny premiums on doorsteps, which often went towards policies that covered funeral costs.

Mr Hartigan joined what is now known as LV= last year to review the business and help decide its future.

The Bain deal was first announced last December, when LV= said it had received 12 formal bids.

Defending the deal, Mr Hartigan said that Bain Capital was "the only business that is prepared to invest in our growth".

"That means saving the jobs that we have and the sites that we operate in, and also the future-serving of the communities that LV serves," he said.

However, he would not confirm whether or not Bain Capital had assured the insurance and pensions provider that all of its employees would be kept on.

Too good to miss?

Analysis by Dharshini David, BBC Today business presenter

Financial predators intent on loading up debt and stripping assets? Or those with sufficiently deep pockets and the acumen to safeguard the future of heritage brands?

As UK businesses embark from the pandemic, private equity has been on a buying spree - but it's the sale of LV= that has reignited the debate about their role and intentions.

The government is on a drive to attract investment to the UK, and private equity - awash with funds - can come in many forms, including our own pension and other investment funds.

Critics argue though, that on the whole, private equity isn't in it for the long term, cutting costs and jobs in hope for a quick buck.

However, Mark Hartigan, LV='s chief executive, told me that of the dozen bids he'd received only Bain Capital had the resources to safeguard the 175-year-old brand, and claimed it did plan to inject the necessary investment funds required to preserve sites.

But he did not expand on the numbers involved. Nor would he share the details of other bids - the transparency politicians and other commentators say is needed if they are to duly evaluate the merits of this sale or the motivations of Bain Capital. That's not to say it won't be intent on reinvigorating the brand - but he may not have won over the sceptics.

Whatever happens with this deal, we're likely to see more UK brands bought by private equity. For many funds it's too good an opportunity to miss.

'Deeply concerned'

The potential takeover has come under fire from politicians and some of its own members in recent days.

Speaking to the Daily Mail, shadow business secretary Ed Miliband said on Wednesday: "I am deeply concerned at the details of the proposed takeover and demutualisation of LV by Bain Capital."

He urged its members to "make their voices heard during this process".

Former Conservative business secretary Lord Heseltine also spoke out against what he described as a "derisory" offer to LV='s members.

If the takeover is approved, £111m will be shared out among the company's members, giving them about £100 each.

"With-profits" policyholders would receive an additional sum of anything up to £600, based on the length and size of their insurance policy.

Mr Hartigan said that he would "100%" respect the outcome of the vote.

If LV= members approve the proposals, the takeover will still need to be approved by the UK's financial watchdog.

The Financial Conduct Authority said last month that it had no objection to the deal, despite one report by the All Party Parliamentary Group for Mutuals saying that it was difficult for LV= members to assess whether demutualisation was their best option.