Policyholder committees agree in principle on allocation of financial benefits
WATERLOO, ON, February 8, 2018 — After months of complex negotiations, the committees representing eligible mutual policyholders and eligible non-mutual policyholders have reached an agreement in principle on the allocation of financial benefits that would result from the planned demutualization of Economical.
“The level of complexity in the demutualization process is equaled only by its importance. Policyholder committees reviewed significant volumes of information and considered unique issues during negotiations,” stated John Bowey, Chair of the Economical Board of Directors and its Special Committee on demutualization. “The company greatly appreciates the commitment and dedication that committee members and their advisers brought to the process.”
The agreement reached by the policyholder committees remains subject to finalizing a formal resolution documenting the details of the agreement. Economical has been informed by the policyholder committees that they expect to pass the resolution soon.
Confidentiality of allocation details will be strictly maintained
Details of the conversion proposal, including the allocation of financial benefits, remain confidential. They will be made public at a later date in policyholder information circulars that will be sent to eligible policyholders and made available on the demutualization website hosted at joininourfuture.com.
In addition, there is a court order in place that prohibits the committees, the company or any advisor that participated in the process from disclosing information about the negotiations or the agreed-upon allocation. This confidentiality was critical to the success of the negotiations and will continue to be critical to the integrity of the regulatory review process.
Next steps in the process
Conversion proposal submission
Economical is working on a formal conversion proposal that will detail how Economical will convert from its current mutual form to a public company with share capital. Among other things, it will include the negotiated method of allocation, the manner of distributing benefits, and opinions from financial and actuarial experts.
Due to the complexity of the process, more time is required to complete the conversion proposal and the professional opinions that are required to be submitted to the Office of the Superintendent of Financial Institutions (OSFI), the principal regulator for Economical. OSFI has extended the deadline for submitting those documents from February 22, 2018 to June 30, 2018.
OSFI will conduct a review of Economical’s submission, as well as all of the other information required by the demutualization regulations, before granting its authorization for Economical to call the next special policyholder meeting on demutualization.
Eligible policyholder votes
If authorized, Economical will call the next special meeting at which eligible mutual policyholders will have an opportunity to vote on whether demutualization may proceed to the next step. If that vote is successful, all eligible policyholders will then vote together on whether to accept the conversion proposal and proceed with demutualization as described in the conversion proposal.
The materials for the meetings will include a description of the negotiation process and details regarding the methodology that would be used to allocate financial benefits.
Government approval and IPO
A successful outcome from both policyholder votes would put Economical in a position to apply to the federal Minister of Finance for approval to demutualize. It is only after approval is received from the Minister that Economical can demutualize and proceed with any proposed initial public offering. Economical will continually evaluate market conditions, company performance and other factors to determine the right time to complete the process.
Keeping updated on Demutualization
To stay up to date on the status of the demutualization of Economical, eligible policyholders are encouraged to log in to joininourfuture.com where they can view their policy details to ensure Economical has the right information, update their contact information, allow for real-time electronic communication rather than mail and see other information about the process. Other interested parties are invited to subscribe to our mailing list.
About Economical Insurance
Founded in 1871, Economical is one of Canada’s leading property and casualty insurers, with more than $2.2 billion in annualized premiums and more than $5.6 billion in assets as at September 30, 2017. Headquartered in Waterloo, ON, this Canadian-owned and operated company services the insurance needs of more than one million customers across the country. Economical conducts business under the following brands: Economical Insurance, Economical, Western General, Economical Select, Perth Insurance, Sonnet, Petsecure, Economical Financial, and Family Insurance Solutions.
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