LV= has agreed to a £530m acquisition of its savings & retirement and protection businesses with Bain Capital Credit.

This represents a multiple of 0.9x for the Solvency II Own Funds of £606m as at September 2020 and a multiple of 1.05x for Economic Own Funds of £506m.

Under the proposals, LV=’s with-profits business would be ring-fenced in a separate fund and closed to new business.

This is expected to increase the capital available for distribution increase by up to 40 per cent, which will be used to increase payments to with-profits members as their policies mature, whilst long-term interests will continue to be protected by the with-profits committee.

Members are also expected to benefit from a cash payment to compensate for loss of mutual membership upon full completion of the transaction, and will also benefit from the increased investment that Bain Capital will provide, which is expected to strengthen LV’s offerings.

The transition is expected to complete by the end of 2021, and is subject to both regulatory approval and approval from LV= members, with all members invited to vote at a Special General Meeting, to be scheduled in the first half of 2021.

It will be carried out in two stages with Bain Capital initially acquiring LV='s subsidiary LVLC together with the administration and new business infrastructure.

Commenting on the transaction, LV= chairman, Alan Cook, explained that, as a newly standalone life and pensions business in an "increasingly competitive market", the board had recognised that LV= required "significant long-term investment" to be sustainable.

He continued: “This transaction is the culmination of an extremely thorough and robust strategic review – followed by a structured sale process to secure the best long-term future for our members, employees, other stakeholders and the business.

“The board is delighted to have secured an attractive price and unanimously agreed that the transaction with Bain Capital presents an excellent financial outcome for all our members, as well as offering an unrivalled commitment to LV=’s future prospects, business and people.

“We look forward to engaging fully with our members in advance of a member vote in the first half of 2021.”

LV= CEO, Mark Hartigan, added: “The partnership with Bain Capital recognises the opportunity to further invest to develop LV= at a time when it is well positioned, growing market share, expanding its products and trading resiliently, despite the pandemic.

"While our corporate structure will change, our culture and values remain the same."

Bain Capital Credit global head of insurance, Matt Popoli, added: “We are delighted by the opportunity to provide long-term support to LV=’s Board of directors and management team on this transaction, which delivers certainty and value to LV=’s members.

“We are investing in a unique company with an impressive management team and employee base, that is already well positioned in the market, with a clearly established product set, strong IFA relationships and a reputation for customer excellence.

“We have been impressed by LV=’s initiatives to further improve its market position, the benefits of which are already emerging.

“Our principles and values are in direct alignment with those of LV= and we firmly believe in a shared vision for the future of the business.

“We look forward to working collaboratively to achieve these shared goals, which include delivering profitable growth, while preserving LV=’s strong financial position, independence and rich heritage dating back to 1843.”

(This article first appeared on our sister title www.pensionsage.com.)

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