The latest from LV= who are facing some policyholder criticism of the de-mutialisation aspects of the Bain deal, and the rather low sums being offered by way of compensation. Any possible deal with Royal London looks a bit less likely after this update;
LV= undertook the sale of its General Insurance business in 2018 and 2019 in response to the need to improve its capital position. Following the sale, LV= was left with a sub-scale life insurance business that required investment in IT modernisation, business operational improvements, product development and customer service.
As part of our proposal to convert to a company limited by guarantee, we explained to our members that we were considering options to create two separate funds in order to give our business more flexibility to grow and prosper, without our With-Profits members having to bear the burden of future investment.
Against this backdrop, the Board of LV= initiated a strategic review in early 2020. The strategic review considered:
- continuing to operate LV= on a ‘business as usual’ basis;
- closure to new business and distributing the Inherited Estate to members over time; and
- an external transaction with a strategic partner which would de-risk existing With-profits members from the risks of future investment.
The strategic review concluded that an external transaction offered members the best possible outcome. Throughout this strategic review and the subsequent process, LV= kept both the FCA and PRA fully updated on its progress including full details of the proposals received from third parties.
As part of exploring an external transaction, the Board led a structured, competitive auction process with a timetable applying to all parties invited to participate in the process. This resulted in the receipt of 12 indicative, non-binding proposals. Of these, four parties were invited to participate in more detailed discussions with LV= about a possible transaction and were provided with access to confidential information to carry out due diligence and substantially reduce conditionality in their proposals. This resulted in LV= receiving three offers of which one was materially lower from a value perspective.
The two remaining parties were Bain Capital and Royal London and both were asked to clarify certain aspects of their proposals, advance their outstanding due diligence and submit a best and final binding offer.
In comparing the final proposals from Bain Capital and Royal London, the Board of LV=, taking advice from the With-Profits Committee, the With-Profits Actuary and its advisers, unanimously concluded that Bain Capital offered the best outcome for LV= members. The Board continues to recommend members vote in favour of the transaction for the following reasons: