Our proposed transaction with Bain Capital
Last year we announced proposals for Bain Capital to acquire the LV= life and pensions business. Since then we’ve been working with a number of stakeholders to develop a comprehensive Member Vote Pack outlining all of the details our members need about the proposals so they can make an informed vote.
If LV= was to use internal capital to fund this, the majority of members holding eligible With-profits policies would be unlikely to benefit due to their policies maturing before LV= sees the returns on that investment. The Board did not believe that would be fair for members. Under our proposals, it is Bain Capital that will fund this investment and they are expected to pay £530m plus interest in order to acquire the LV= business. The transaction presents an excellent financial outcome for all of our members and an unrivalled commitment to LV=’s prospects, business and people.
The Member Vote Pack contains
The life and pensions market is becoming increasingly competitive, driven by large insurers with access to capital. We would need significant investment to be able to compete effectively, especially with the rapid change in technology and digital services that our customers now expect. Ultimately, structured as a mutual, this investment would have to come from internal capital. Due to the scale of the investment and time taken to deliver growth, this could impact the funds in the LV= Inherited Estate and therefore the level of any distributions paid to members holding eligible LV= With-profits policies before their policies end. The majority of policies end within the next eight or nine years. Accordingly, in order to protect the financial interests of members and continue to provide a high quality service, we needed to find another way to source the capital required for investment. As a mutual, we have limited access to the financial markets so we cannot raise equity investment and we are limited in how much debt we can raise.
The Chair and non-executive directors receive a flat fee for their work on the board. They do not receive bonuses and never will. The CEO will receive no bonus directly related to the transaction and we have a very explicit remuneration policy for his ’business as usual’ roles and responsibilities.
The business will be overseen by a new Board of directors. The Board will remain independent with two thirds being independent non-executive directors. The Chair and non-executive directors will receive a flat fee for their work on the board and won’t receive bonuses.
In terms of the CEO position going forward , there have been no firm decisions regarding this role or the terms of any contract and there won’t be until the outcome of the transaction. Future CEO remuneration will be a matter for the remuneration committee of the new Board. It would be usual for a CEO’s remuneration arrangements to include some form of Long Term Incentive Plan.
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