City comment: Royal London has flaws as counter bidder
The sale of what I still think of as Liverpool Victoria, but which some marketing people decided to call LV= back in 2007, isn’t much to enjoy.
A humanitarian business, either since 1843, is being sold against the best interests of policyholders, who are also owners (for now). Or an old-fashioned insurer has reached the end of the road and needs the hug of a wealthy fellow.
No truth is heart touching.
Bain Capital is playing the rogue private equity kings, against rival bidder Royal London, which is still a mutual.
As heroes go, it has flaws. Royal London has scale, which should be good, but it always seems to be a corporate, plc style business for the mutual. It invests in private equity funds, for one thing. Chief executive Barry O’Dwyer is in line for a very non-Mutual like £3.1 million salary deal this year, and even non-executive directors have an average salary of around £110,000, which is out of place. Won’t come out. A business owned by any shareholder.
Royal London sold one of its businesses, RL360, to a private equity firm, Vitruvian, so it’s all set to embrace that industry when practicality requires.
Critics say that private equity itself is changing too slowly. But Bain has committed to investing in the business and keeping the sites open. It doesn’t look like a pump and dump — if it were a game of bans, there are easier targets than complicated insurance businesses.
The board of LV= looked at 12 bidders and decided that Bain Capital offered the best results to the policyholders. Even those of us who aren’t wild about the idea might have to admit that the board is probably right.