WATERLOO, ON, Dec. 14 /CNW/ - The Economical Mutual Insurance Company,
one of Canada's largest property and casualty insurance providers,
today announced that its Board of Directors intends to pursue a process
to convert the Company from its existing mutual ownership structure.
This would make Economical the first property and casualty insurance
company in Canada to demutualize. The conversion is targeted to be
completed in 2011, subject to approval by mutual policyholders and the
Minister of Finance.
"The Board of Directors has determined that demutualization is in the
best interests of the Company and all its stakeholders, including our
mutual policyholders," said Gerald Hooper, Chairman of the Board of
Economical Mutual. "As our stakeholders know, the decision to pursue
demutualization follows a review by a Special Committee of independent
directors. It was formed to examine strategic alternatives about a
potential transaction several months ago. The Board has agreed with
the recommendation of the Special Committee that demutualization holds
the greatest potential benefits for the Company."
The mutual insurance company structure, which Economical has had since
its founding in 1871, has distinct advantages, including stability and
the ability to maintain a long-term perspective, but it also restricts
the company's access to additional capital to continue to fund growth
in a highly competitive and consolidating industry. Demutualization
will help remove this restriction.
The Special Committee engaged independent financial advisors and legal
counsel as part of its strategic review and will continue consultations
with OSFI and will enter into consultation with the Department of
Finance to identify the most effective route to demutualization. It has
identified several alternatives and is currently focusing on two:
conversion, through an initial public offering, from a mutual company to
a public corporation with shares traded on a stock exchange;
a sponsored demutualization which would involve a transaction with
another strategically-aligned company that would invest in Economical
to acquire a significant ownership position, perhaps as much as 100%.
"This dual-track approach allows us to focus on maximizing long-term
value for mutual policyholders, while considering the interests of our
other policyholders, brokers, employees and community," said Karen
Gavan, Chair of the Special Committee. "We intend to expedite this
process but to some extent the timing will be dependent on the
regulatory approval process. New regulation and new legislation may be
required and that can be expected to take several months. "
She added: "In the end, we expect there will be significant direct
financial benefits for mutual policyholders but, at this point, no one
can predict the timing or the size of the benefit they may get."
Katherine Mabe, President and Chief Executive Officer said: "The Board
of Economical Mutual is setting the Company in a new corporate
direction. While that is under way, the executive team and all our
people will remain focused on ensuring we provide the highest quality
service to our valued clients and brokers."
A final recommendation on demutualization and a schedule for completion
is expected to be presented to mutual policyholders at the next annual
meeting which is scheduled for May 26, 2011. Meanwhile, the Board will
provide updates on progress to its stakeholders. In the interest of
fairness to existing mutual policyholders, the Board has previously
instituted a moratorium on the issuing of new mutual insurance
The Board of Directors believes its decision to demutualize means recent
efforts by VC & Co. to persuade mutual policyholders to sign
irrevocable six-year agreements to pay substantial fees are redundant,
serve no constructive purpose, and are not in the best interests of
Blair Franklin Capital Partners Inc. is the financial advisor and Miller
Thomson LLP is legal counsel to the Special Committee of the Board of
About The Economical Insurance Group
Founded in 1871, The Economical Insurance Group® (TEIG®) is one of Canada's leading property and casualty insurers, with $4.6
billion in assets and a surplus exceeding $1.1 billion. Canadian owned
and operated, TEIG provides a wide range of insurance products
throughout North America. TEIG Member Companies include Economical
Mutual Insurance Company® (including Western General® Farm Division), Waterloo Insurance Company®, Perth Insurance Company®, The Missisquoi Insurance Company®, Federation Insurance Company of Canada®, Family Insurance Solutions and The Mattei Companies.
SOURCE Economical Insurance
For further information: For further information:
Vice President, Marketing & Communications
The Economical Insurance Group
519-570-8500 ext 48589