- The acquisition of Bain Capital has been stymied by reaction from LV members
- The new scheme will allow LV members to retain their mutual status
- If there were two mutual alliances, Royal London could consider selling the LV brand
Royal London plans to propose a full merger with rival insurer LV, the Mail could reveal on Sunday.
Royal London chief executive Barry O’Dwyer is believed to be preparing to present a merger deal to LV’s board if its members vote against a £530 million sale to private equity giant Bain Capital on 10 December. Huh.
The takeover by the US firm has been hit by a backlash after LV members were offered £178 in exchange for losing their 100-year status as mutual.
A sure sign: Royal London boss Barry O’Dwyer is understood to be preparing to present a merger deal to LV’s board
Such a change would allow the company to be managed for profit rather than for the benefit of customers.
The Mail on Sunday understands that the new merger plan will allow LV members to retain their mutual status as part of Royal London.
If the two match, Royal London may look to sell the historic LV brand.
The brand is already licensed to German financial firm Allianz, which last year bought LV’s general insurance business for £1 billion.
One analyst said it would be an ‘obvious’ move to sell the entire brand to Allianz, which would then be able to market LV life insurance as well as general insurance policies to new customers.
LV was founded in 1843 to cover funeral expenses and was formerly known as the Liverpool Victoria Friendly Society.
It quietly changed its status in 2019 from a friendly society to a company limited by guarantee – albeit one mutually – so that it can be sold to a private firm.
The proposal to merge the businesses would require a vote of both the LV’s 1.2 million members and Royal London’s 1.85 million members.
The process of voting and amalgamation of the two may take at least 18 months. The merger option is said to have been discussed earlier when Royal London expressed interest in acquiring LV’s general insurance arm. But talks failed and the unit was sold to Germany’s Allianz in 2019.
Industry insiders warned that if the current deal with Bain ends, LV could soon run out of options. If Bain’s offer is rejected, LV’s other options are to continue in its current state or to wind up the business, although it has already said these are not attractive solutions.
An insurance expert said: ‘If [LV] Staying as a friendly society, I think they would have worried that there was only one sport in the city, that they could only merge with Royal London. So, they were probably thinking that in order to introduce some competitive tension and get the best price for the members, we would have to build some [a sale process] Where other people can also bid.
The latest development could give LV members a viable option to sell to a US private equity firm. Politicians slammed the sale, describing the £100 paid to members as ‘minor’. Policyholders will receive an average price increase of close to £400 with LV’s 297,000 benefits.
Former Tory deputy prime minister Lord Hesseltine has urged members to reject Ban’s proposal.
However, some attempts at mutual mergers in the past have faced a backlash. The merger of Royal Insurance and Sun Alliance in 1996 resulted in the loss of thousands of jobs. Royal London has acquired other friendly societies and mutual relations, including Scottish Life in 2001, Scottish Provident in 2008 and Royal Liver in 2011.
LV claims it needs to sell in order to have enough cash to remain competitive. Otherwise, it may need to use money that would normally go to policyholders along with its benefits.
The Mail on Sunday revealed last week that O’Dwyer had privately emailed LV chief executive Mark Hartigan, asking him to hold three-way talks with Bain if the vote goes against the deal. So discuss buying part of the business.
It is understood that Hartigan sent only a brief response acknowledging receipt of the email – and that there has been no three-way discussion due to an exclusivity agreement with Bain. Hartigan took the public under attack after emails last week accused Royal London of throwing a ‘grenade’ in the deal process.
If the ban deal fails, members may face additional costs involved in a new deal. Sunday’s Mail can reveal that the process has cost more than £30 million so far, including fees paid to lawyers, bankers and consultants.
Royal London made it to the final stages of the LV sale process with an offer of £540 million, but lost to Bain’s low £530 million bid. LV Said Bain’s offer was more attractive as it was set to take over the entire business, and Royal London had ‘higher and less fixed’ administration costs.
A spokesperson said: ‘The Board concluded that Bain Capital provided greater value to LV members when compared on an equal basis and would result in greater fixed payments to members, on a more accelerated basis.’ Royal London declined to comment.
LV. raise your voice
We are encouraging LV members, customers, or others who wish to retain their reciprocal position to write it, rather than having it purchased by private equity.
You can use the words from the letter printed in the City page of the Granthshala newspaper (pictured here).
We’ve included words for you to copy and paste in one letter below.
Send this to Alan Cook, LV= President, Liverpool Victoria, County Gates, Bournemouth, BH1 2NF
Dear Alan Cook,
I, the undersigned, urge you to reconsider your decision to sell LV= to Bain Capital and instead retain its reciprocal position.