LV= undertook the sale of its General Insurance business in 2018 and 2019 in response to the need to improve its capital position. Following the sale, LV= was left with a sub-scale life insurance business that required investment in IT modernisation, business operational improvements, product development and customer service.
As part of our proposal to convert to a company limited by guarantee, we explained to our members that we were considering options to create two separate funds in order to give our business more flexibility to grow and prosper, without our With-Profits members having to bear the burden of future investment.
Against this backdrop, the Board of LV= initiated a strategic review in early 2020. The strategic review considered:
The strategic review concluded that an external transaction offered members the best possible outcome. Throughout this strategic review and the subsequent process, LV= kept both the FCA and PRA fully updated on its progress including full details of the proposals received from third parties.
As part of exploring an external transaction, the Board led a structured, competitive auction process with a timetable applying to all parties invited to participate in the process. This resulted in the receipt of 12 indicative, non-binding proposals. Of these, four parties were invited to participate in more detailed discussions with LV= about a possible transaction and were provided with access to confidential information to carry out due diligence and substantially reduce conditionality in their proposals. This resulted in LV= receiving three offers of which one was materially lower from a value perspective. The two remaining parties were Bain Capital and Royal London and both were asked to clarify certain aspects of their proposals, advance their outstanding due diligence and submit a best and final binding offer.
In comparing the final proposals from Bain Capital and Royal London, the Board of LV=, taking advice from the With-Profits Committee, the With-Profits Actuary and its advisers, unanimously concluded that Bain Capital offered the best outcome for LV= members. The Board continues to recommend members vote in favour of the transaction for the following reasons:
The Board confirms that an e-mail was received from Royal London last week, being almost a full year after our transaction with Bain Capital was announced. It proposed the dismantling of LV=. The Board of LV= continues to unanimously recommend the transaction with Bain Capital to its members ahead of the Special General Meeting on 10 December. We invite our members to attend the two webinars organised for Monday 29 November in order to learn more about our proposals as well as the three Q&A sessions that we have planned for Monday 22 November, Friday 3 December and Monday 6 December which are an opportunity to ask questions to our Chair, CEO, Bain Capital and the Independent Expert. Full details and sign-up are available at www.lv.com/future.
“Despite having every opportunity, Royal London failed to submit a superior best and final offer, and therefore the Board unanimously concluded that the better value, certainty, investment and structure of Bain Capital’s proposal would be in the best interests of our members.
“The Board of LV= is clear that at no point have any of Royal London’s proposals included an offer for membership rights or continuation of mutuality for LV= members, contrary to media speculation. Given this context, the Board of LV= believes it is unfair and misleading to characterise any proposal from Royal London as preserving mutuality or offering a real mutual alternative.
“We are also surprised and disappointed by the timing of Royal London’s intervention, which comes more than a year after we terminated our confidential discussions and is seeking to destabilise the conclusions of our comprehensive strategic review, in close proximity to what is a very important vote for our members.
“Given our Special General Meeting on 10 December, we are seeking to clear up the fog for our members and remove all the uncertainty and confusion that has been created for our members ahead of what is a very important vote. The Board of LV= continues to unanimously recommend the transaction with Bain Capital to its members ahead of the Special General Meeting on 10 December.”
“The proposed transaction with Bain Capital continues to represent the best outcome for members given its attractive valuation and the enhanced and accelerated pay-outs to LV= members, the certainty offered by removing any business risk from the With-Profit Fund, the release of capital to support LV=’s defined benefit pension scheme liabilities and repay LV=’s debt whilst also distributing value to members and the on-going investment by Bain Capital in LV=’s franchise and brand. These attributes are far superior to any proposal received from other third parties, including Royal London.
“The Board therefore continue to unanimously recommend to LV= members to vote in favour of the proposed transaction with Bain Capital.”
 Following the acquisition of Royal Liver, Royal London recognised a one-off gain on acquisition of £97 million in its financial results the following year. Following the acquisition of the Co-operative, Royal London recognised a one-off gain on acquisition of £150 million in its financial results the following year.
 As part of Royal London’s acquisition of Royal Liver, Co-operative and Police Mutual, no membership rights were offered to the members of the acquired mutual organisation.