Mutually owned life insurer LV will on Monday confirm that it is in talks over a takeover. Any deal could lead to a windfall payout for its 1.1m members.

LV, which is the third-largest insurance mutual in the UK, launched a strategic review in June after selling its general insurance business to Germany’s Allianz. It said at the time that a deal with a third party was one of the options on the table.

The company is expected to confirm on Monday that it is in talks with “a number of parties”, according to people familiar with the negotiations, although there is no certainty that the negotiations will lead to a deal.

Sky News reported that potential buyers of LV, which could be worth more than £500m, include Royal London, the UK’s largest mutually owned insurer, and private equity firm Bain Capital.

Royal London and Bain declined to comment.

LV, which was founded in Liverpool in 1843, was until last year one of the UK’s last remaining composite insurers, selling both life insurance and general insurance. However, it sold its general insurance business, which provides cover for cars and homes, to Allianz in two stages in 2017 and 2019 for a total of £1.3bn.

That left the rest of LV as a much smaller business and prompted the strategic review from Mark Hartigan, who became chief executive at the start of this year.

In 2019, LV made a pre-tax profit of £15m on total income of £1.8bn. Almost all of the company’s 1.3m customers are members, meaning that they have the right to vote on what happens to the company and could be in line for a payout in the event of a sale.

Last year, LV changed its legal status from being a friendly society to a mutual in a move that lawyers said would make it easier to sell the company or combine it with another insurer.

Royal London, meanwhile, has been bulking up under Barry O’Dwyer, a former Prudential and Standard Life executive who became chief executive last year. Earlier this year it agreed a deal to buy Police Mutual, which specialises in insurance for the police and armed forces.

Private equity funds have taken a growing interest in life insurance companies over the past few years. Although the sector is heavily regulated and capital intensive, private equity houses see scope to cut costs and to invest more aggressively in an effort to bump up returns.

Source: Financial Times

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