Source: Doug Maybee – Economical Insurance Press Release:
Economical Insurance announced on November 3, 2015 that its board of directors has formally decided to proceed with demutualization, launching the process to convert the company from a mutual to a stock company with shareholders.
“Today marks a pivotal milestone for Economical. Our board and its special committee on demutualization have carefully reviewed the regulations and the impact this process will have on the organization and its stakeholders. With the recommendation of our special committee on demutualization, we have unanimously determined that demutualization is in the best interests of the company,” said Gerald Hooper, chairman of Economical’s board of directors. “Demutualization will allow Economical to unlock its full potential and compete with the top players in the P&C insurance industry. Economical is ready and excited for this next phase of the process to begin.”
Eligibility to participate in demutualization
Economical’s policyholders will play an important role throughout the demutualization process, including serving on committees to negotiate the method of allocation among eligible policyholders and any other persons they determine.
The demutualization framework, including eligibility, is set out in regulations enacted by the federal government. Under the regulations, an eligible policyholder must, at a minimum, have held a policy on November 3, 2015, the date of the board decision (non-mutual policyholders would also had to have done so for the 12-month period ending on that date). However, an eligible policyholder might lose their eligibility if their policy is cancelled or lapses after the board decision date.
Economical has requested guidance from the Office of the Superintendent of Financial Institutions (OSFI), on whether policies must be held past the board decision date in order for policyholders to remain eligible. Once Economical receives this guidance, more information will be made available. In the meantime, if it appears a policyholder may be eligible and they do not want to affect that potential eligibility, Economical recommends they maintain their policy beyond November 3, 2015.
More information on eligibility can be found on Economical’s demutualization website (www.joininourfuture.com).
Next step — mutual policyholders decision
Under the regulatory framework, the next step is the special meeting of policyholders where eligible mutual policyholders will decide whether to continue with the demutualization process. Details of the meeting will be announced once the meeting has been called by the board.
At this meeting, eligible mutual policyholders will decide whether to continue with the process by authorizing the commencement of negotiations with eligible non-mutual policyholders on the allocation of demutualization benefits. As outlined in the regulations set forth by the Department of Finance, if the vote is passed, Economical will send a notice to all eligible mutual and non-mutual policyholders to inform them of the decision and explain the demutualization process.
The demutualization process is complex and requires many steps to complete. Economical estimates that, from today’s date to the date the Minister of Finance approves the conversion, the process will take at least 24 months, assuming all steps are successful.
The board can terminate the demutualization process at any time before completion if the board determines that demutualization is no longer in the best interests of the company.
Demutualization website — www.joininourfuture.com
Economical remains committed to keeping our stakeholders informed throughout the demutualization process. To achieve this, a fresh new website designed specifically with policyholders in mind — www.joininourfuture.com is available. This website provides information about the latest news and access to demutualization-related resources. The website will continue to provide regular updates and stakeholders are encouraged to visit the website.