LV= kept members in the dark over financial woes for years, MPs told
Association of Financial Mutuals boss Martin Shaw slammed LV for a raft of ‘shortcomings’ in its approach to keeping members informed.
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Your support makes all the difference.Bosses of insurer LV= have wrongly kept members in the dark over the mutual’s balance sheet woes for years and made a series of communication “failures” over its proposed sale to private equity, MPs have been told.
In a hearing with the Treasury Select Committee on the future of mutuals, Association of Financial Mutuals chief executive Martin Shaw criticised LV for a raft of “shortcomings” in its approach to keeping members informed.
He said LV, which was formerly called Liverpool Victoria, has been left with no option but to put itself up for sale due to poor capital levels and after haemorrhaging members – a position it was in as far back as 2016 or 2017.
It's an unfortunate and sad position that they find themselves in
But he said members were not made aware of its precarious position until recently, as the December 10 vote nears for them to have their say on the agreed £530 million sale to US buyout giant Bain Capital.
He said: “Clearly that’s a failure in the basis of keeping customers informed.
“I’m sure if the directors had their time again they would improve the quality of their communications throughout.”
He added that poor management of LV in recent years has meant it is “nigh on impossible” for the group to have an independent future.
“It’s an unfortunate and sad position that they find themselves in,” he said.
He also pointed out that LV was the first and only UK friendly society to introduce the rule to prevent unwanted demutualisation by requiring that more than 50% of members turn out to vote.
“The only mutual insurer to have taken that protection out is now the only one planning to circumvent it,” said Mr Shaw.
The hearing comes ahead of a vote on December 10, when LV members will be asked to have their say on whether to back the Bain deal, with 75% of votes needed to back the takeover and a minimum turnout of 50%.
There are concerns over plans to push through a rule change that will mean it can override the minimum turnout threshold.
MPs on the select committee also raised questions over how the deal has been handled and scrutinised, in particular whether it is correct that LV chief executive Mark Hartigan should lead the negotiations when he stands to keep a role within the firm after the takeover.
Mr Shaw said there was a “potential conflict”, given Mr Hartigan’s plans to stay on at the group.
But he added: “The proposal is to sell a business to people that don’t know how to run a UK life insurance business – you need some kind of continuity in place to be able to have credibility when… if the business is sold.”
MP Siobhain McDonagh also queried the independence of the expert LV brought in to scrutinise the deal, given that she claimed the individual was chosen and paid for by LV.
Mr Shaw hit out at the City regulator’s reticence to step in and help prevent LV being demutualised.
He said the Financial Conduct Authority is wrong to say it does not have the power to intervene and has a duty under consumer protection to look at LV’s ownership.
The takeover tussle has received a widespread backlash from members and a number of MPs, given that the deal would see LV lose its 178-year-old mutual status if its 1.2 million customer-members hand over ownership of the group.