The mutual insurer LV= has claimed that a takeover by the private equity firm Bain Capital will result in £212m in extra distributions for members, as it tried to fight back against criticism of its decision to demutualise.

The 178-year-old life insurance and pensions provider, formerly known as Liverpool Victoria, has accepted an approach by the US private equity firm Bain Capital for £530m, in a controversial deal that would end its member-owned status. However, members must back the takeover in a vote on 10 December.

The majority would receive a payout of only £100 from the deal, a sum that has been criticised by some as a meagre return for the loss of mutual status and the prospect of ownership by a private equity firm, which often insist on job losses or cost cutting to achieve higher profits.

LV= said its “business as usual” no-deal scenario would result in only £404m being distributed to its 271,000 members whose policies mean they share in its profits, compared with £616m under the Bain deal.

LV= has been criticised by politicians and campaigners for failing to properly explain why members should sell out their rights.

The mutual said on Monday that it would fail in a business as usual situation because it was too small to compete against global insurers, and the £100m needed for new computer systems and product development would have to be funded by members, endangering their future distributions.

It said it had considered 12 offers, one of which was from the pensions provider Royal London, but that Bain’s was the best.

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LV= plans to pay out £533m over time to the 271,000 with-profits members, at an average of about £1,970, compared with an average of £1,490 without the takeover. 830,000 non-profit members will receive £100 each.

David Barral, the insurer’s senior independent director, said taking Bain’s offer was “a decision we didn’t take lightly given our mutual heritage” but it was the best outcome because it “saves the future of LV=”.

“We all came to the firm conclusion it would not be fair for us to ask our with-profit members to finance a future that requires significant investment, which many would not benefit from,” he added.



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