Warning over Bain threat to LV’s ring-fenced member funds if private equity buyout is successful

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The reportedly ‘ring-fence’ member on LV may tap into the fund following the successful purchase of private equity baron mutual insurer at Bain Capital.

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The owners of both companies have repeatedly stated that LV members’ cash is safe and cannot be used by Bain except in ‘extreme circumstances’.

But a former Bank of England regulator has raised concerns that the money pot could actually be tapped in circumstances far from extreme.

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Decision time: LV’s 1.2 million members vote on sale of mutual insurer to private equity baron Bain Capital

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The warning comes as the future of LV hangs in the balance 178 years after it was set in Liverpool to help the city’s poor bury their families in a well.

Its 1.2 million members are voting on the deal with Bain, with a deadline of 2 p.m. tomorrow to do so by post or online portal.

Those who are yet to vote can express their views in the online meetings tomorrow at 2 pm and 4 pm. The proposed deal has sparked outrage among LV customers, lawmakers and experts, who are angry that it is being sold by its owners to US private equity.

Now new apprehensions have come to the fore regarding the ban deal. About 297,000 LV members have ‘with-profits’ policies, meaning they share in the fortunes of the company.

Bain plans to decouple these policyholders from the rest of the ongoing business. This would ‘ring-fence’ a pot of money to cover their payments, replacing them with cash from future profits of the continuing business.

In a communication sent to LV members, Bain has stated that he will not touch the vessel except in ‘extreme circumstances’, as if the entire business is at a standstill.

But former Bank of England regulator Dean Buckner warned that LV is exposed to risky equity release mortgages of £630 million, which could result in significant losses if the housing market does not grow at the rate LV forecasts.

If the housing market stalls, it could tap the corpus with benefits for additional cash.

Buckner, who is on the board of the UK Shareholders Association, said: ‘£630 million … constitutes a substantial portion of their annuity liabilities.

‘It would not take an “extreme scenario” to exhaust their liquidity, for example stagnation in house prices, unexpected changes in mortality rates and model error.’

LV insists it has enough capital to cover the severe setbacks. It states that all equity release mortgages since 2016 have been underwritten by a third party. A spokesperson said: ‘We have a very prudent level of reserves to support the historic equity release business we have built on the LV balance sheet.

‘We do not believe there is any reasonable basis on which LV members should be aware of the scenarios described.’

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 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.

,

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