Mark Hartigan had his bonus for 2021, members of LV= may feel, when he got to keep his job as chief executive despite overseeing the shambles of the failed £530m sale of the mutual insurer to US private equity firm Bain Capital. That misadventure, remember, ended last December in humiliating fashion: the board, despite throwing the kitchen sink at its proposal, couldn’t get enough members to vote for it.
A rapid clear-out of directors followed, with chairman Alan Cook heading for the exit, but Hartigan somehow escaped the cull. Now he’s popped up with a £511,000 bonus for his efforts in 2021. The award wasn’t a maximum jackpot (he slipped up on employee engagement, for example) but two-thirds ain’t bad after a year like the one LV+ had.
Yes, as the remuneration report makes clear, the organisation hit its trading targets in areas such as capital generation and volume of new business, but the critical number was surely the £33m that was blown on the fruitless “strategic review” that backed the Bain sale. Members have got precisely nothing for their outlay on consultants and advisers.
Instead, under Hartigan, LV= has moved full circle. The business was supposedly strong after selling its general insurance operations, meaning car and home policies, to Allianz for £1.1bn. Then, after the strategic review, the conclusion was that “business as usual does not work” and surrender to Bain was the best bet. Now, with a straight face after a year spent promoting demutualisation, Hartigan says LV= looks forward to being part of “a vibrant mutual sector”.
A humbler chief executive would have let the dust settle and accepted that this was not a year to take a bonus. A wiser board of newcomers would have given him no choice.
The lion’s share
Round numbers in share prices shouldn’t matter, but let’s hear it anyway for AstraZeneca as the pharmaceuticals company on Tuesday closed above £100 for the first time. The FTSE 100 index’s second-largest company (a whisker behind Shell) has given its owners a rewarding ride since it was demerged as the unloved offspring of ICI (remember them?) in 1993.
The share price at separation for the original Zeneca was 626p, so the capital appreciation over 29 years is 16 times – call it a doubling in value every seven-and-a-bit years. Very slick, but it also understates matters. Include the reinvestment of dividends and the pace was faster in reality.
The merger with Swedish group Astra happened in 1999 at a share price of £29.46 but the more memorable figure is £55 in 2014. That was the level of the takeover offer from US group Pfizer. An AstraZeneca board, led then and now by chief executive Pascal Soriot and chairman Leif Johansson, mounted a high-risk defence that was long on hope for recent and yet-to-be-launched oncology treatments.
Life might have worked out differently if Pfizer had bumped its bid by a couple of quid, but shareholders stayed loyal and Soriot has delivered on his revenue promises: $45bn by 2023 is virtually nailed-on to arrive a year early.
As an example of the investment virtue of backing long-term winners, AstraZeneca is hard to beat. Johansson retires next year; there’s a nice gig for someone.
Well-placed to weather the storm
Cue, too, a warning that “the impact of a prolonged or escalated conflict on SSE’s businesses is difficult to predict”. Fair point. High and volatile electricity prices also bring stiffer credit and collateral terms and, while SSE reckons it has been well served by its “breadth of businesses across the energy value chain”, clearly nothing is guaranteed.
One can say this, though: the idea that SSE should do the splits and separate its renewables assets from its fuddy-duddy networks business looks even more of a non-starter. Activist investor Elliott Advisors pushed the argument last year and thankfully got nowhere. The case for SSE remaining as a single entity is stronger than ever: balance in earnings is plainly an advantage in the energy game these days.
• This article’s photo was changed on 30 March 2022. An earlier picture showed services offered by LV= General Insurance, a separate company to LV= which is the subject of this column.
