RUTH SUNDERLAND: What LV needs is credible people at the top who can command respect and trust – not the Laurel and Hardy of mutual insurance
- Members will soon have to decide whether or not to back the sale to Bain
- A veto will be a vote of no confidence in bosses Mark Hartigan and Alan Cook
- The values of mutuality are a long way removed from those of private equity
Members of mutual insurer LV will soon have to decide whether or not to back the proposed sale to US private equity group Bain.
If they exercise their democratic right to veto the deal it will be a ringing vote of no confidence in LV’s chief executive, Mark Hartigan, and chairman Alan Cook.
The culture and values of mutuality, founded on self-help for ordinary people, are a long way removed from those of private equity, spawned on Wall Street and exported to the UK.
Another fine mess: LV members deserve better than the Laurel and Hardy of mutual insurance
It should therefore go without saying that anyone attempting to sell a mutual to a buyout firm needs to mount an utterly compelling case, particularly if there is a potential conflict of interest involved.
There certainly is here, since Cook was in line to keep his £205,000-a-year job under Bain, and Hartigan has been hoping to remain in charge with a lucrative pay packet and an equity stake. Whether or not Bain still wants to hand the reins to hapless Hartigan after the dismal showing he has made over the sale is an interesting question.
He and Cook have utterly failed to convince. Critics have lined up to attack the deal, including MPs, pensions and finance experts, and many of LV’s own members.
Some commentators have damned the Bain deal with faint praise, by speculating that it may be the least worst option. Even if true, and that is far from clear, the idea loyal LV policyholders have to settle for ‘least worst’ is in itself appalling.
Hartigan and his opposite number at Bain, Matt Popoli, have made assertions that the Bain deal is the best that is, or will be, on offer. In effect, members are being asked to take an awful lot on trust from people who have done very little to earn their faith.
If members vote against, Hartigan and Cook have only themselves to blame. The cash payment of £100 looks derisory. The establishment of a company to own LV in the tax haven of Jersey is at odds with mutual values, even if the business pays taxes in the UK.
But the most worrying aspect is the complexity and confusion surrounding the deal and the reluctance to divulge information.
The LV board refused to disclose costs to members of £43million, which only emerged through ferreting in the dense documents on their website.
Information has been released grudgingly, with a sense that it would have been kept secret had it not been for the clamour from the media and MPs. Again, this lack of transparency is diametrically opposed to the spirit of mutuality. Is it too cynical of me to wonder whether the feeling was that the transaction would escape detailed scrutiny from the media and politicians, that members would be apathetic or bamboozled, and that it would go through on the nod?
Members of LV are the owners of the business. They pay the salaries of Hartigan and Cook. They pay the fees to the army of advisers who have put together such a flawed proposition. They have been let down by City regulators, who have stood by as this debacle has unfolded. In short, they are being treated with contempt.
Policyholders are being told Bain is the only viable option. There are legitimate concerns about LV’s fate if the deal is rejected, but other options do exist and members may prefer to take that chance.
Royal London, a fellow mutual, tabled a bid and has signalled it could come back with an offer that preserves mutual membership rights for LV, if Bain is rejected.
What LV needs above anything else is credible people at the top: a heavyweight chairman and chief executive who can command respect and trust.
Members deserve better than the Laurel and Hardy of mutual insurance.
Make your voice heard on LV
We are encouraging LV members, customers, or others, who would like to see it retain its mutual status, rather than be bought out by private equity, to write to it.
You could use the wording from the letter printed in the Daily Mail newspaper’s City pages (pictured here).
We have included the words for you to copy and paste into a letter below.
Send it to Alan Cook, Chairman of LV=, Liverpool Victoria, County Gates, Bournemouth, BH1 2NF
Dear Alan Cook,
I, the undersigned, urge you to reconsider your decision to sell LV= to Bain Capital and instead maintain its mutual status.