![Role: David Hynam says mutuals have never been more relevant](https://i.dailymail.co.uk/1s/2023/01/14/16/66575373-11635099-image-m-106_1673714331773.jpg)
Role: David Hynam says mutuals have never been more relevant
David Hynam, who became chief executive of insurance company LV in September, is promising to lead the 180-year-old mutual into ‘a new era’ – as well he might, considering the shambles he inherited.
In his first interview since taking over, Hynam presents himself as a champion of mutuality. That is a marked contrast with his predecessor, an ex-Army colonel with an eye for the main chance called Mark Hartigan.
The latter tried to sacrifice LV’s mutual status on the altar of a £530million sale to US private equity barons at Bain Capital.
Following a campaign by the Daily Mail and Mail on Sunday, the deal failed to win sufficient support from LV’s 1.2million members and collapsed in late 2021.
Understandably, Hynam would prefer not to dwell on the disaster of the recent past, but there is no denying he has some major damage to repair. He and the chairman Simon Moore ‘are absolutely committed to being part of the mutual sector’.
Hynam is backing a bill going through Parliament to protect mutuals from asset strippers, carpet-baggers and predators. The Co-operatives, Mutuals and Friendly Societies Bill, tabled by Labour MP Sir Mark Hendrick, has the support of the Treasury and will offer safeguards to LV and other mutuals. The sector is bigger than many would think, with around 7,000 organisations serving roughly 30million people.
Currently, organisations can come under pressure to demutualise because it is difficult for them to raise capital from big investors. There will also be protection so that assets built up over generations are used for the long-term benefit of members.
‘We are a big supporter of the Bill,’ says Hynam.
His motto, according to his entry on LinkedIn, is always to leave things better than you found them which a cynic might say would not be hard at LV.
Having been brought in to clean up the mess left by previous bosses, he faces some tough questions.
As the Bain debacle unfolded, various confusing and contradictory claims were made. Members were first told that ‘business as usual does not work’ and that LV therefore needed to be taken over by a deep-pocketed new owner.
Then, when the Bain deal was voted down, Hartigan and co performed a U-turn and claimed it had a great future as a mutual after all. So which is it? Is LV sustainable as an independent mutual, or not?
‘All I can talk about is how I see it now, and I do think it is sustainable. We see ourselves in the mutual sector and have no intention of being anywhere else.’
In the immediate aftermath of the failed bid, LV entered merger talks with fellow mutual insurer Royal London. Hynam says these have not been resurrected and he has no plans to merge with anyone. As for the solidity of LV’s finances, he says: ‘Somebody once said to me many years ago, it is more important for mutuals to have good financial discipline than it is for listed companies. It is members’ money and you should look after it as if it were your own.
‘I don’t personally think the debt is the biggest story from the past, I think investment is the bigger challenge. There will be a big strategic investment spend over the next five years. We are putting a lot into data, service and IT,’ he says.
LV’s capital, as measured under the so-called Solvency II rules, has weakened a bit. Is he comfortable with it? ‘Yes, I am. The big question on capital is whether you can withstand shocks and have you got early warning indicators. They are not things I am sitting here worrying about.The volatility on markets has been an issue, not just for us, but for everyone. We are not exactly a high risk firm but we have had a bouncy year.’
LV has, he says, ‘no exposure’ to the pensions meltdown that followed the Kwarteng-Truss mini-Budget. ‘We shouldn’t beat about the bush. It has been a difficult time at LV over the past year or two, but we are now on a nice stable footing.’ If the deal had gone through, it would have meant an abrupt break with more than a century of tradition since the company was founded in 1843 to help the poor of Liverpool pay for funerals.
Saving LV from the clutches of private equity came at a heavy price. More than £30million of members’ money was squandered on the deal, with millions of it going on fees to advisers.
Mark Hartigan came out of it significantly the richer. He was awarded a £511,000 bonus on top of his £435,000 salary in 2021 and he may bag another fat payout for 2022. Does Hynam think it is right for the members of LV to have paid these sums – and should the board try to claw some back?
‘I have no views on those things because I don’t know Mark apart from the handover,’ he says. ‘I had a very good and constructive handover with Mark so that is all I can judge him on. I am very confident our remuneration committee is all over the pay and rewards and bonuses of executives. It is a matter of judgment for them.’
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Does he understand why people find the payouts jarring?
‘I have always had a strong opinion that I don’t want to comment on a predecessor because I wouldn’t want someone to do it to me.’
Is it more important for a mutual than a plc to show sensitivity around executive pay given it is members’ money? ‘Yes, it is members’ money,’ he agrees, adding any increases above ‘normal pay rations’ in future ‘would be aligned with members’ interests’. ‘I want the organisation to move forward. There is a risk that a transaction that never happened is stuck on a permanent cycle, and that is not good for members or the organisation,’ he adds.
Hynam, 51, dislikes being described as an industry veteran – ‘it makes me sound so old’. His previous roles include chairman of domestic insurance group Homeserve and chief executive of healthcare cover company Bupa, where he achieved record levels of growth and launched a range of digital services. He has won accolades for being one of the UK’s leading LGBT chief executives and is a champion of diversity.
Although the failed deal was expensive and traumatic, there were also positive aspects on which he can build. It has reminded people of the value of mutuality and it demonstrated to bosses that member power is a real force that they must respect. What does Hynam think mutuals can offer at this point, in the middle of a cost-of-living crisis? ‘We can genuinely take a longer-term view because we don’t have shareholders breathing down our neck.
‘The second thing is that most mutuals are very focused. We don’t try to do everything for everyone and we don’t have a lot of products out there. We are not trying to stretch the envelope all over the place. With so many distractions, that is actually really helpful.
‘Our members told us clearly in a vote they wanted to be a mutual. That is the mandate they have given me. I think there is an opportunity to revitalise. We want a modern mutual sector.’
He adds: ‘I would like a new age of mutuality. It has never been more relevant than it is today because if we are not reaching out to one another at the moment, then when will we?’