RUTH SUNDERLAND: LV Doesn’t Need Laurel And Hardy To Take The Lead
RUTH SUNDERLAND: What LV needs are 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 to sell to Bain . whether or not to support
- A veto will be a vote of no confidence in bosses Mark Hartigan and Alan Cook
- The values of mutuality are far removed from those of private equity
Members of mutual insurer LV will soon have to decide whether or not to support the proposed sale to US private equity group Bain.
If they exercise their democratic right to veto the deal, it will be a resounding vote of no confidence in LV’s chief executive, Mark Hartigan, and chairman Alan Cook.
The culture and values of reciprocity, based on self-help for ordinary people, are far removed from those of private equity, originated on Wall Street and exported to the UK.
Another Nice Mess: LV Members Earn Better Than the Laurel and Hardy of Mutual Insurance
It should therefore go without saying that anyone attempting to sell a mutual venture to a buyout company must present a very compelling case, especially if there is a potential conflict of interest involved.
There certainly is, as Cook lined up to keep his £205,000-a-year job under Bain, and Hartigan hoped to stay in control with a lucrative pay package and an equity stake. Whether Bain still wants to hand over the reins to the hapless Hartigan after the dismal show he’s made about sales is an interesting question.
He and Cook have not been able to convince at all. Critics have lined up to attack the deal, including MPs, pension and financial experts, and many of LV’s own members.
Some commentators have doomed the Bain deal with vague praise, speculating that it may just be the least-worst option. Even if that’s true, and it’s far from clear, the idea that loyal LV policyholders have to settle for “least worst” is in itself abhorrent.
Hartigan and his counterpart at Bain, Matt Popoli, have claimed that the Bain deal is the best that is or will be offered. In fact, members are asked to take a great deal of 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 £100 cash payment looks ridiculous. The creation of a company to own LV in the tax haven of Jersey is at odds with mutual values, even if the company pays tax in the UK.
But the most disturbing aspect is the complexity and confusion surrounding the deal and the reluctance to release any information.
The LV board declined to disclose the £43 million cost to members, which were revealed only by searching the closed-door documents on their website.
Information has been released reluctantly, with the feeling that it would have been kept secret had it not been for the media and MPs. Again, this lack of transparency is diametrically opposed to the spirit of reciprocity. Is it too cynical of me to wonder if the feeling was that the transaction would escape detailed scrutiny from the media and politicians, that members would be apathetic or cheated, and that it would go through with a nod?
Members of LV are the owners of the company. They pay Hartigan and Cook’s salaries. They pay the fees to the army of advisers who drafted such a flawed proposal. They have been abandoned by the city’s regulators, who have watched as this debacle unfolded. In short, they are treated with contempt.
Policyholders are told that Bain is the only viable option. There are legitimate concerns about LV’s fate if the deal is rejected, but there are other options and members may prefer to take that chance.
Royal London, a fellow counterparty, has made an offer and has indicated that it could come back with an offer that retains LV’s reciprocal membership rights, if Bain is rejected.
Above all, what LV needs are credible people at the top: a heavyweight chairman and chief executive who can command respect and trust.
Members earn better than the Laurel and Hardy from mutual insurance.
Make your voice heard on LV
We encourage LV members, clients, or others who would like it to maintain its mutual status, rather than being bought out by private equity, to write it.
You can use the wording from the letter printed on the City pages of the Daily Mail (shown here).
We have included the words that you can copy and paste below into a letter.
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 the mutual status.