Rationale for the transaction
To be able to compete effectively in the future, LV= requires significant investment. 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.
Should the proposals go ahead in full, the £530m paid by Bain Capital replaces the value of the non-profit business. The transaction enables the surplus assets, after allowing for other commitments, to be distributed to members. As a result, members will receive the following financial benefits:
- £212m4 will be distributed in the form of payments to members, totalling:
‑ £111m in one-off member payments, with every eligible member receiving a payment of £100.
‑ £101m increase in future With-profit policy payout enhancements for all eligible With-profits members. This represents a percentage uplift of 0.1% for each year members have held their policy from 1996 until the policy pays out5.
- In addition, as part of the transaction significant assets will be set aside to support the two existing staff defined benefit pension schemes which are the responsibility of the With-Profit Fund to support.
For all members:
- Continuation of existing customer policy benefits, including discounts on LV= General Insurance products
- Investment by Bain Capital to deliver technology improvements, development of existing and launch of new products and service enhancements for customers
- LV= to remain a UK regulated entity, providing ongoing protection from the Financial Services Compensation Scheme
- Continuation of the LV= brand, with Bain Capital taking ownership of the operational infrastructure and as the employer of staff
For members holding eligible LV= With-profits policies:
- Bain Capital taking responsibility for support of the ongoing business and exposure to future new business risks, currently assumed by With-profits policyholders
- The With-profits business will be ring-fenced in a separate dedicated fund which Bain Capital will be unable to access3
- Current bonus arrangements – mutual bonus and exit bonus – continuing for eligible policies, consistent with current practice
- Greater clarity around costs with defined cost schedules for the administration services and investment management provided by Bain Capital
- Continued oversight from the With-Profits Committee at the same level of governance as received today
LV= is pleased to be able to share the comprehensive Member Vote Pack with all members. Members are encouraged to read the pack and engage with LV= in order to support them to make an informed vote:
- A series of five webinars for members in the build-up to the SGM and Members’ Meeting will be held - full details and sign-up are available at lv.com/future
- Extended opening hours (8am – 7pm Monday to Friday and 9am – 1pm on Saturday) offer members the opportunity to discuss the transaction and ask questions at a time to suit them.
- Email the dedicated email boxes for non-profit members [email protected] and for With-profits members [email protected]
- We are providing financial adviser briefings and a separate webinar to support them in answering queries from our members, their clients.