Economical continues preparations as it awaits draft demutualization regulations

The hope was that draft federal regulations around demutualization would have been available by now, but the wait for this pivotal stage has not slowed Economical’s preparations for either an initial public offering (IPO) or a sponsored transaction with one or more strategic investors toward that end.

“We had hoped to be able to report by now that the Department of Finance had completed its draft regulations but, unfortunately, that is not the case,” notes an update for policyholders, released in late August. The department “has an important job to do in setting the framework for our precedent-setting demutualization, not just for Economical but for the Canadian p&c insurance industry as a whole.”

Economical reports the federal finance department recently confirmed in writing its commitment to demutualization, “noting its goal of making the regulations fair to everyone.”

Until draft regulations are released, the company is analyzing market conditions for a potential IPO while, concurrently, financial advisors “have been providing potential strategic investors with current information, to help them gauge the potential for a transaction through a sponsored demutualization,” the update notes.

“Your board continues to believe the most important thing it can do for you is to work with the management team to continue building the value of the company.”

Economical saw strong financial results in 2012 Q2, “not only compared with our past performance, but the recent performance of many of our competitors.” The view is that “the results demonstrate the potential of our company if it were on a level playing field with its non-mutual competitors.”