LV= has been accused of “taking members for fools” after offering them £100 each if the business is sold to an American private equity fund.

The board of the member-owned Dorset insurer wants to sell it for £530million to Bain Capital, a US fund co-founded by former Republican presidential candidate Mitt Romney.

It has published a "member vote pack" in which it says £111m would be handed out in one-off payments, with every eligible member receiving £100.

The sale to Bain Capital would mean the end of LV= as a mutual body owned by its members. The business sold its general insurance arm to Alllianz for £1billion in a deal completed in 2019.

Labour MP Gareth Thomas, the chair of an all-party parliamentary group on mutuals which delivered a highly critical report of the proposed sale, said: “When we published our report we thought members didn’t have enough information to judge what’s in their interests. Now we can categorically say that this is a bad deal.

“A paltry £100 in return for membership rights to hand over a business focussed on its customers to a private equity shark intent on screwing the maximum profit for itself.

“LV leaders are taking members for fools, offering them £100 each to facilitate this plan to line their pockets from this deal. Another £250,000 for the chair and countless millions for the CEO.”

LV=’s information to members also said the business would allocate £101m to increasing future payouts to eligible holders of with-profit policies, a rise of 0.1 per cent for each year members have held their policies since 1996.

The pack is due to be sent to all members by November 18 ahead of a special general meeting and members’ meeting on December 10.

LV= said an independent expert had described its deal as fair and reasonable for members and policyholders.

Its chairman, Alan Cook, said: “We've built a strong brand, a rich heritage and have a real opportunity for future growth. However, in order to be successful in a highly competitive market, we need significant investment to compete and achieve our ambitions for growth.

“Bain Capital was the only option that offered both an excellent financial outcome for members and gave unrivalled support for the LV= brand, our people and locations. Whilst none of the bids would have allowed LV= to remain as a standalone mutual, this deal provides the highest distribution to with-profits policyholders compared to continuing with ‘business as usual’ or closing to new business.

“We urge members to carefully read the information in the member vote pack and join our upcoming webinars. The board and I truly believe that this is the right way forward, enabling us to embark on the next exciting chapter of the LV= story, and recommend that members vote in favour of our plans.”

In a statement responding to Mr Thomas’s criticisms, LV= said: “The proposal from Bain Capital was the only option that offered all of the following; an excellent financial outcome for all members, an independent future for the LV= brand and the protection of jobs for our people enabling us to maintain our position as a significant employer in Bournemouth, Hitchin and Exeter.

“In total £212m will be distributed in the form of payments to members and the board firmly believes this transaction is the right thing to do for our members, our business and our people.”