Historic insurer LV is facing a furious backlash from loyal customers over a controversial takeover by a private equity firm.
Scores of Mail readers have vowed to vote against the deal, with some threatening to ditch LV in protest.
Many have been members of the mutual for decades, and chose the firm because they trusted it to look after their money.
Unimpressed: Retired lecturer Clarissa Johnson (pictured) says she was ‘horrified’ when she first heard that LV could fall into the hands of Bain Capital
They now say they feel bitterly let down amid concerns about what the sale would mean for their pensions and investments.
Formerly known as Liverpool Victoria, the investment and insurance giant was founded in 1843 to help impoverished Liverpudlians bury their dead.
Since then, it has been owned by its members as a mutual, run with their benefit in mind and not for profit.
But the firm is now considering accepting a £530 million bid from U.S. firm Bain Capital, which would see it stripped of its mutual status.
This has led to fears for members as private equity firms are notorious for slashing jobs, hiking prices and prioritising the pay packets of top bosses and shareholders.
The Mail has launched a campaign to save LV and today we are calling on members to ensure their voice is heard.
Around 1.2 million LV members with life insurance, pension policies and annuities are eligible to vote on whether the sale goes ahead next month.
And many have already pledged to cast their vote against it.
Retired lecturer Clarissa Johnson says she was ‘horrified’ when she first heard that LV could fall into the hands of Bain Capital.
The 74-year-old grandmother took out an enhanced annuity with the mutual over a decade ago, which pays out just under £500 a month.
However, she now says she has lost trust in LV’s board and plans to vote against the deal next month.
Bain Capital has pledged to pay each member up to £100 if the takeover goes ahead.
Retired couple Joseph and Jennifer Schneider, from Bushey, Hertfordshire, are horrified that LV chairman Alan Cook is backing a move that would demutualise the business
And around 297,000 customers who have with-profits policies — where payouts depend on how much profit companies make — will receive an extra 0.1 pc of the value of their policy for every year that they have held it. This is around £52 for most members.
LV bosses claim Bain’s bid is the only option that offers an ‘excellent financial outcome’ for members’ along with ‘unrivalled support’ for the brand, staff and UK-based offices.
But, given that Scottish Widows members received an average windfall of £6,000 when it was demutualised and bought by Lloyds in 2000, many feel the cash payment they have been offered is derisory.
Clarissa, who lives in Dorset, says: ‘The sum of money they offered us not only sounds like a bribe, it’s a paltry amount.
‘How does it amount to an “excellent financial outcome” for me, like LV says?’
If LV is no longer a mutual, its members will have no say on any decisions made by the company. Bain Capital has pledged to keep ‘mutual bonuses’ received by with-profit customers at a similar rate.
But experts fear the firm could hike exit fees and premiums for new customers in the future.
Takeover will end in tears, say experts
Tony Hazell, Money Mail letters editor
Why would a bunch of American investors want to buy a modest-sized insurance company owned by its members? Because they can sniff a fast buck.
Private equity is the antithesis of mutuality. It is about maximising profits for a few rather than fair shares for all.
Mutuality lay at the heart of family finances for more than two centuries. Then short-term greed undermined the sector. That ended in tears as nearly every former mutual was forcibly taken over to prevent savers losing everything.
Now LV investors are being encouraged to give up their mutuality for a handful of private equity cash, by directors who will stuff rather more into their own pockets.
Martin Shaw, chief executive, Association of Financial Mutuals
It’s sad to see a once great mutual in such a weak position that it has to sell its mutual soul to the wolves of Wall Street.
One advantage a mutual has is the flexibility to run the business without too strong a focus on profits, and in the interests of customers.
The money from Bain will yield a paltry £100 per member — next to nothing compared to everything members will lose.
Sylvia Morris, Money Mail’s savings guru
Savers pick mutuals because they like the idea of owning the organisation looking after their money.
All profits benefit them rather than going to outside owners.
Insurance companies owned by outsiders typically earmark 10 per cent of profits for themselves on a so-called with-profits investment fund.
With a smaller share of the profits, the final payouts of LV savings policies could fall.
Ros Altmann, former Pensions Minister
It is very difficult to see how customers can expect to benefit from this deal.
The financial ‘reward’ of a paltry £100 is unlikely to compensate for the increased future risks they face.
They are currently invested in a firm which is not seeking to make profit, but this will be replaced by an owner which aims to earn good returns.
James Daley, Fairer Finance
Almost all financial services scandals of the past few decades have — in my humble opinion — been caused by firms prioritising shareholder returns over good customer outcomes.
I’ve always been a fan of mutuals because that tension between customer and shareholder does not exist — they are one and the same.
I struggle to think of a single large financial services business that improved customer performance after moving into private equity ownership. I hope members will vote against and force the management to think again.
Helen Morrissey, senior pensions and retirement analyst, Hargreaves Lansdown
Some of the most highly respected brands in the UK are mutuals. Their roots are in helping support the poorer members of society, there are no shareholders to pay and they are owned by their customers so there is a laser focus on doing the right thing by them.
The tone has been set with reports that policyholders have been offered just £100 each to approve the takeover, a relatively small amount for signing over membership rights.
Malcolm Murray, 77, has been an LV customer for more than 50 years, just like his parents and grandparents before him.
And in 2000 the father of two set up a mutual investment bond with his wife Sheila, 73, to ensure she would be financially secure if he died unexpectedly.
The with-profits policy has delivered returns of around 5 pc each year — and is now worth a five‑figure sum.
But the retired chartered engineer says he will consider moving his bond to another firm if the Bain Capital bid is successful, and plans to vote against the deal.
Malcolm, who lives in Lincolnshire, says: ‘The cash which Bain is offering to members is derisory. LV needs to be kept as a mutual. If it ain’t broke, don’t fix it.’
Other customers are concerned about the perceived lack of transparency around the deal.
They are also worried that bosses want to change LV’s constitution to push the deal through.
Currently, 75 per cent of voting members or more need to back the deal, with a turnout of at least 50 per cent.
But LV is asking members to vote to ditch the 50 per centc requirement, which means it could go ahead with just a fraction of its members’ support.
And even if the bosses lose this vote, they could still go ahead with the sale but members will be paid just £60 rather than £100.
Derek Eade, 76, who has a five-figure sum invested in a with-profit growth bond, says all this uncertainty is unacceptable.
John James is concerned other members will be tempted by a short-term reward of £100
The retired accountant, who lives with wife Pam, 74, in Epsom, Surrey, says: ‘Policyholders need to know what they are voting for, especially the amount they will receive.’
Meanwhile, Joseph and Jennifer Schneider, from Bushey, Hertfordshire, are horrified that LV chairman Alan Cook is backing a move that would demutualise the business.
The retired couple signed up to an LV pension plan more than a decade ago because they believed the firm cared about its members.
But they have now lost trust in Mr Cook after discovering he was managing director of the Post Office between 2006 and 2010, when subpostmasters were falsely accused of theft.
Joseph, 78, who has already voted against the deal, says: ‘I just do not trust Bain Capital — goodness knows what will happen to our pensions. I’m ashamed and disgusted with the deal and Mr Cook should be ashamed of himself.’
John James, 72, is concerned that other members will be tempted by a short-term reward of £100 in cash. The retired construction project manager took out an annuity (which pays a regular income in retirement) with LV more than a quarter of a century ago.
John, who lives in Norfolk, says: ‘It is a terrifying thought that LV, a mutual, will be taken over by such a company. The £100 offer is a cheap joke, but other members could be easily influenced without looking at the long-term consequences.’
He is calling on City watchdog the Financial Conduct Authority to intervene to stop the deal going ahead.
An LV spokesman says it needs ‘significant investment’ to compete in a ‘highly competitive’ market, adding: ‘Whilst none of the bids would have allowed LV to remain as a stand-alone mutual, this deal provides the highest distribution to with-profits policyholders compared to continuing with “business as usual” or closing to new business.’
Matt Popoli, a managing director of Bain Capital, says its proposed investment ‘maintains an independent LV’, adding: ‘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.’
Make your voice heard on LV
Around 1.2 million LV members with life insurance, pension policies and annuities can vote on whether the mutual is sold to Bain Capital.
Those with other types of insurance policies, such as car and home cover, will not get a vote because their policies have already been sold to insurer Allianz. If you are eligible, you should receive a voting pack in the post by tomorrow. These have two unique security codes for each member that will be needed to cast a vote online.
There are two votes. The first is on whether members want the sale to proceed. To go ahead, LV needs at least 75 per cent of those who vote to approve it. If the motion fails, LV will have to consider other offers.
The second vote is on whether to scrap the mutual’s current constitution requirement that demands at least 50 per cent of all eligible members partake in the first vote.
If LV loses this vote but wins the first, it will push ahead with the deal and members will be paid just £60 rather than £100.
Members who have held an LV policy for less than 12 months will only be able to take part in the second vote.
Votes can be cast at two virtual meetings taking place online on December 10 (lv.com/members/ meetings).
If you cannot attend the meetings, you must vote online by 2pm on December 8.
Members also have until this date to vote by post using the form in their pack.
If you have not received a voting pack but you think you are eligible, call LV on 0800 066 5373.
The results will be published shortly after both meetings on LV’s website.
We are encouraging LV members, customers, or others, who would like to see it retain its mutual status, rather than be bought out by private equity, to write to it.
You could use the wording from the letter printed in the Daily Mail newspaper’s City pages (pictured here).
We have included the words for you to copy and paste into a letter below.
Send it to Alan Cook, Chairman of LV=, 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 maintain its mutual status.
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