The chief executive of LV= has come under renewed pressure to quit the mutual insurer after taking a £511,000 bonus despite his role in the botched sale of the 197-year-old company to a US private equity firm.
Mark Hartigan, who faced stiff personal criticism for his role in the aborted sale to Bain Capital, was awarded the annual bonus after the board decided he met most of his personal targets for last year.
The insurer founded as Liverpool Victoria in 1843 said on Tuesday that profits fell by £9m to £31m last year, despite an increase in the value of its new business sales from £1.3bn to £1.6bn.
Hartigan had argued LV= could not continue as an independent insurer after a strategic review and pushed for a sale to Bain Capital over a potential deal with fellow mutual insurer Royal London, prompting the ire of critics who said it was bad for the company’s members and diversity of business ownership in the UK economy.
Gareth Thomas, the Labour MP who chairs the all party parliamentary group for mutuals, said it was extraordinary the company could award Hartigan a big bonus after pursuing an unpopular, costly sale process.
“This shocking bonus payment begs the question as to who is really in charge at LV. What on earth were the board thinking?” Thomas said.
“After his plan to demutualise and sell up to the controversial American private equity giant Bain Capital wasn’t backed by almost 90% of LV’s owners, it is extraordinary that the board can think such a payout for poor performance is justified. Mr Hartigan needs to leave and be replaced by someone who is genuinely committed to running a mutual business properly.”
Only 69% of the 174,240 members who cast ballots on the deal in December approved of the £530m takeover offer, whereas 75% of voting members were required to approve the deal. The turnout represented 15% of LV=’s 1.16m members.
Company accounts show LV= spent at least £33m over the past two years on the strategic review and plan to sell to Bain Capital, before its members refused to back the deal in December.
The firm said Hartigan had not been incentivised to pursue the sale, meaning the outcome of the process would not influence his bonus. It said the chief executive had met sufficient financial targets to be awarded 69% of a potential maximum bonus for the year, while 60% of the award would be deferred over the next three years. His total salary and bonus for the year was worth a combined £1.1m.
Last month the company launched a boardroom clearout after the failed Bain Capital process, announcing that the chairman, Alan Cook, would step down from the start of April, while three other directors would also leave. However, it said Hartigan would remain with the firm and had been doing an excellent job.
A spokesperson for LV= said Hartigan’s bonus was subject to “stretching individual and business performance outcomes” and set by the company’s board.
“Mark has led the successful turnaround of the business over the last 18 months strengthening the commercial performance and improving the sustainability of the business. We have outperformed both our new business volumes and profitability targets with significant growth in sales and trading profit.”
