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Catch up with the latest press releases from LV=

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LV= welcomes Royal Assent of Mutuals' Deferred Shares Bill

Press release: 27/03/2015

  • UK's largest friendly society welcomes Royal Assent of the Mutuals' Deferred Shares Bill
  • New Act will enable mutual businesses to raise tier one capital in the form of deferred shares
  • New deferred shares will allow LV= to create a new class of members

Mutual insurance, retirement and investment group LV=, the UK's largest friendly society, today welcomed Royal Assent of the Mutuals' Deferred Shares Bill.

The new Mutuals' Deferred Shares Act will enable mutual insurance companies to raise new tier one capital in the form of deferred shares. The new deferred shares will confer membership and allow LV= to create a new class of members who wish to invest in the business. In keeping with our mutual ethos these members would only have one vote per member regardless of the size of their investment.

Under current friendly society legislation (the Friendly Societies' Act), capital is primarily raised through retained profits which emerge gradually, impacting the speed with which LV= can act to grow and develop its businesses and respond to market.

In 2013 LV= raised funds through a very successful subordinated debt offering which was five times oversubscribed, which was testament to keen institutional interest in investing in LV=. However, this type of instrument is classified as restricted tier two capital which limits the amount that could be used for solvency.

The FCA is introducing permanent rules in October 2015 on the retail distribution of regulatory capital instruments such as deferred shares which could potentially allow proposed deferred shares to be marketed to retail investors.

Commenting on the new Act, Mark Austen, Chairman of LV=, said:

"We very much welcome the passing of this Act and the now widespread support that this demonstrates for mutuals and friendly societies. We hope this marks a turning point in the legislative and regulatory attitude towards these ownership models to ensure their further development as an important and diverse part of the financial services industry.

"We serve over 5.7 million customers and members with a range of insurance, investment and retirement products and the ability to raise capital in the form of mutual shares would potentially enable LV= to fund further growth and increase member value.

"Additionally, as deferred shares will confer membership, it will allow us to develop a new class of members who actively wish to invest in LV='s strategy.

"We hope the new permanent FCA rules on retail distribution of regulatory capital instruments, which will come into effect in October 2015, will follow a sensible and pragmatic approach to allow us to offer shares to retail investors who want to invest in successful financial mutuals like LV=."


Notes

The Mutual Deferred Shares Bill was a Private Members' Bill introduced into the Lord by Lord Naseby but received government support and assistance.

The FCA intends to introduce permanent rules in October 2015 on the retail distribution of regulatory capital instruments and published consultation paper CP14/23 in October 2014 on the new rules.


For further information please contact:

Emma Banks, emma.banks@lv.com, 0208 256 6714 / 07894 158 605


LV=

LV= employs 6,000 people and serves over 5.5 million customers with a range of financial products. We are the UK's largest friendly society and a leading financial mutual.

When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

We offer our services direct to consumers, as well as through IFAs and brokers, and through strategic partnerships with organisations such as ASDA, Nationwide Building Society and a range of trade unions.

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. LVFS is a member of the ABI, the AFM and ILAG. Registered address: County Gates, Bournemouth BH1 2NF.