LV= has announced details of the expected financial benefits for members as part of the proposed transaction with Bain Capital. The details will be included in the Member Vote Pack and distributed to all members ahead of the two votes at a Special General Meeting (SGM) and Members’ Meeting to be held on 10th December 2021.
After an extensive strategic review in 2020, the LV= Board unanimously concluded that the transaction with Bain Capital presents the most positive outcome for all members, the future of the LV= business and its people. The Independent Expert has described the deal as fair and reasonable for members and policyholders. Confirmation has also been received from the Financial Conduct Authority and the High Court, that the transaction can proceed to a member vote.
Key highlights for members:
- £111m in one-off member payments, with every eligible member receiving a payment of £100, should the proposals go ahead in full.
- £101m increase in future With-profit policy payout enhancements for all members holding eligible LV= With-profits policies.
- For With-profits policyholders:
‑ Highest distribution to With-profits policyholders compared to continuing with ‘business as usual’ or closing to new business.
‑ Bain Capital will assume responsibility for supporting the ongoing business and exposure to future business risks – currently assumed by With-profits members.
‑ With-profits business to be placed in a ring-fenced, separate fund, inaccessible to Bain Capital and closed to new business. The long-term interests of With-profits members will continue to be protected by an experienced and independent With-Profits Committee.
‑ As part of the transaction significant assets will be set aside to support the two existing staff defined benefit pension schemes which are the responsibility of the With-Profit Fund to support.
Full detail is provided in a comprehensive Member Vote Pack that LV= has published online at lv.com/future and will be sent to every member by 18 November 2021. This contains all the information members need to make an informed decision, including reports from the Independent Expert and the With-Profits Actuary. Members will be asked to cast two votes: firstly, on the partnership with Bain Capital and secondly on the most effective way to implement the transaction.
Should the proposals go ahead in full, the £530m paid by Bain Capital replaces the value of the non-profit business. The transaction enables the surplus assets, after allowing for other commitments, to be distributed to members. As a result, members will receive the following financial benefits:
- £212m will be distributed in the form of payments to members, totalling:
‑ £111m in one-off member payments, with every eligible member receiving a payment of £100.
‑ £101m increase in future With-profit policy payout enhancements for all eligible With-profits members. This represents a percentage uplift of 0.1% for each year members have held their policy from 1996 until the policy pays out.
- In addition, as part of the transaction significant assets will be set aside to support the two existing staff defined benefit pension schemes, which are the responsibility of the With-Profit Fund to support.
For all members:
- Continuation of existing customer policy benefits, including discounts on LV= General Insurance products.
- Investment by Bain Capital to deliver technology improvements, development of existing and launch of new products and service enhancements for customers.
- LV= to remain a UK regulated entity, providing ongoing protection from the Financial Services Compensation Scheme.
- Continuation of the LV= brand, with Bain Capital taking ownership of the operational infrastructure and as the employer of staff.
For members holding eligible LV= With-profits policies:
- Bain Capital taking responsibility for support of the ongoing business and exposure to future new business risks, currently assumed by With-profits policyholders.
- The With-profits business will be ringfenced in a separate dedicated fund which Bain Capital will be unable to access..
- Current bonus arrangements – mutual bonus and exit bonus – continuing for eligible policies, consistent with current practice.
- Greater clarity around costs with defined cost schedules for the administration services and investment management provided by Bain Capital.
- Continued oversight from the With-Profits Committee at the same level of governance as received today.
Details of the Special General Meeting and Members’ Meeting
Each eligible member will be asked to vote twice:
Firstly, at the SGM on 10 December 2021 at 2pm, members will be asked to vote on a Special Resolution to approve the acquisition of the LV= business by Bain Capital .
Secondly, at the Members’ Meeting on 10 December 2021 at 4pm, members will be asked to vote on the most effective way to complete the transaction through a Scheme of Arrangement to make a change to Article 14.23.
NOTE: The acquisition is subject to certain regulatory approvals, the approval of the Court to the Scheme of Arrangement and the Part VII transfer and approval from LV= members. If the proposals go ahead in full it is expected to fully complete by the end of October 2022, at which point LV= will no longer be a mutual and members will no longer have voting rights or share in the profits or losses of the non-profit business Should the Part VII not go ahead for any reason then the transaction with Bain Capital will complete however in an alternative way, subject to this being deemed appropriate by the regulators.