THE government has been urged to probe the planned sale of LV= after a report accused its bosses of failing to be “open and transparent” with its members.

A group of MPs has written to the governor of the Bank of England and one has called on ministers to investigate.

LV= announced last December that it was to be sold for £530million to Bain Capital, a US investment firm co-founded by former presidential hopeful Mitt Romney.

The sale would spell the end of its existence as a mutual body owned by its members. LV= had already sold its general insurance business to Allianz for £1billion.

LV= to be sold to Bain Capital, co-founded by Mitt Romney

A report by the All-Party Parliamentary Group (APPG) for Mutuals found: “On the basis of the evidence available to us, we have concluded that the leadership at LV= has not been open and transparent with the members about its intentions for the company.”

It added: “Despite repeated assurances that there was no intention to alter the mutual status of the company, it is clear that plans were well advanced to seek alternative arrangements which could include a change of corporate status, if not a full demutualisation.

LV= completes £1billion sale of its general insurance business to Allianz

“Not only will the business ultimately be sold to Bain Capital, a private equity investor in a full demutualisation, but LV= had been exploring potential sales to other non-mutuals at the same time as the company provided public reassurance to its members.”

It added: “The public pronouncements from the chairman and chief executive could arguably be seen as misleading by members.”

The proposal to sell the business came the year after it had been converted from a friendly society to a company limited by guarantee.

“Throughout this process, members were reassured that there were no plans to alter the mutual status of the business, yet just a few months later, it put in train the process which led to the demutualisation we are examining now,” the report said.

The report criticised the decision to hold LV=’s 2020 annual general meeting “behind closed doors”.

“We might have expected the UK’s second largest mutual insurer, in the throes of negotiating the sale of its business … to take this obvious opportunity to explain what was going on to its owner members. Instead, the AGM was held with 12 people in attendance, approved 14 resolutions, considered 31 questions, and lasted a total of 10 minutes,” it said.

The report said: "Demutualisation is bad for members, for consumer competition and choice and for financial market stability."

The group’s chair, Labour MP Gareth Thomas, has since spoken in Parliament to urge ministers to investigate the deal. He criticised LV=’s chairman, Alan Cook, a former managing director of the Post Office.

“Presumably Mr Cook expects to make millions from the deal,” he said.

“Mr Cook cleverly proposed the conversion of LV= to a company limited by guarantee and got the Financial Conduct Authority to agree, all the while telling his owners – his customers – that he was not going to demutualise Liverpool Victoria. Remarkably, that is exactly what he is now proposing to do,” he added.

LV= said in a statement: “We have always been clear to our members that the strategic review and subsequent proposed transaction with Bain Capital has been solely driven by their long-term interests. At all times this has been the absolute driving force and guiding principle behind any decision made or action taken at LV=.

“We therefore welcomed the opportunity to provide written and oral evidence to the APPG hearing to explain why Bain Capital was singular in offering an excellent financial outcome for members as well as an unrivalled and long-term commitment to LV=’s future prospects, business and people.

“We are disappointed by the report and we have always recognised the importance of equipping our 1.25m members with all of the information they need to help them make an informed decision in advance of the vote and this continues to remain our absolute priority.

“As part of this, we are finalising the comprehensive member pack with the regulator – which will include reports from an independent expert and with-profits actuary – and look forward to sharing it with our membership in due course. We will also provide all members with another opportunity to pose any further questions through a webinar.

“We have been clear that the business, while well capitalised, requires significant further investment to compete in an increasingly competitive market. This investment would need to come from our existing capital, and this creates an inherent tension between balancing the requirement to invest for the future success of the business while providing meaningful returns to with-profits policyholders.

“We continue to passionately believe that we have secured the best possible outcome for members and our confidence in the future of LV= under Bain Capital’s ownership remains unswerving.”

It said of Mr Thomas’s remarks about Alan Cook: “Discussions regarding the position of chairperson are at a very early stage. No agreement on the appointment or the terms has been reached.”