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Bain Capital, the US private equity firm, said it was committed to the long-term growth and success of LV= and will invest significantly in the business.
Over the weekend reports emerged of Royal London trying to instigate a possible three-way deal between itself, LV=, Bain Capital. It is known Royal London had a bid rejected for its rival mutual insurer as LV= instead chose Bain Capital’s offer of £530m.
The Mail on Sunday reported at the week that Royal London chief Barry O’Dwyer had made the proposal to LV= chief executive Mark Hartigan.
The newspaper reported that the message sought to promote an “enhanced” deal that would be “attractive” to LV=’s membership.
Bain Capital, however, has set out a statement on Monday (15 November), saying its objectives in its proposed takeover of LV= were to: increase policyholders from 1.2 million to over 2 million; reclaim its position as a top 3 provider of life insurance products; and double smooth managed fund product sales and extend the footprint of its equity release mortgage product.
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LV= members will receive significant financial benefits from the firm’s investment, Bain Capital said, while simultaneously being safeguarded from substantial future liabilities. The firm also outlined “key benefits” of its proposed transaction from a member perspective:
- £212 million of increased payouts to approximately 1.1 million eligible LV= members
- £264 million to fund the liabilities of two with-profits fund staff defined benefit pension schemes, securing the pensions of 10,520 UK pensioners
- No new debt will be added as part of the transaction and, consistent with LV=’s intention following the sale of the GI business, LV= will reduce its debt at the first available call date
- £160 million investment in IT modernisation, business operational improvements, product development and customer service funded from operating cashflows as part of Bain Capital’s go-forward plan
Bain Capital MD Matt Popoli said: “Our proposed investment maintains an independent LV=, and is predicated on LV=’s inherent significance, its heritage and brand. To be sustainable and achieve long-term success, LV= needs capital to address its heavy debt pile, fund its pension liabilities and invest for growth. With-profits members should not bear the burden of this investment. As a result of the transaction, LV= will be strengthened with access to more capital and structured with less debt.”
Bain Capital said it wanted to reinvest in the business: “This substantial investment will enhance LV=’s IT infrastructure, operations, product development and customer service. This will ultimately lead to better products and greater choice for LV= policyholders as well as improve upon the company’s competitive position in the market.”
To ensure the long-term financial stability of LV=, no new debt will be added to LV=’s balance sheet from this transaction, the firm said. The transaction will also provide funding of £264 million to support and de-risk the two staff defined benefit pension schemes. The funding for these liabilities will safeguard With-profits members from a dramatic reduction in their future distributions, according to Bain Capital.
The firm said it also committed to maintain a presence at LV=’s three existing sites, invest in the communities LV= supports and preserve its 178-year-old mission, vision and values to serve policyholders and provide them with affordable and valuable insurance products.
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