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P&C mutuals line up against demutualization


December 15, 2017   by Canadian Underwriter


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Two years after Economical left the gate on the track to demutualization, the Waterloo, Ont.-based mutual insurer appears to be the lone horse among its industry peers.

Four Canadian life insurers demutualized in 1999-2000 but regulations allowing mutual property and casualty insurers to demutualize have only been law for two years.

Manitoba-based Wawanesa Mutual Insurance Company has “no plans to demutualize,” Wawanesa chief executive officer Jeff Goy said Thursday in a statement to Canadian Underwriter.

Ditto for Lindsay, Ont.-based Commonwell Mutual Insurance Group – which, unlike Economical and Wawanesa, could not legally demutualize in any case because it is not regulated by the federal government but by the Ontario government.

Related: ‘Clock is running’ as Economical Insurance prepares for public offering: Saunders

Commonwell was formed in 2013 after the merger of Farmers’ Mutual (also based in Lindsay), Perth-based Lanark Mutual, and Alexandria-based Glengarry Mutual.

Ontario would have to have “regulations developed and enacted and put in place before we could even consider” demutualizing, Commonwell CEO Tim Shauf said Thursday in an interview. “We don’t have any intentions of demutualizing ourselves,” he added.

In addition to Wawanesa and Economical, other federally-regulated P&C mutuals include Portage, The Kings, Saskatchewan, Heartland Farm and Gore, the latter of which announced earlier that its board of directors voted not to demutualize. Canadian Underwriter contacted The Kings and Portage, but did not receive responses before press deadline.

RelatedWho’d want to buy Economical? 

Economical’s board and mutual policyholders voted two years ago in favour of demutualization. Two court-appointed committees – one representing eligible mutual policyholders of Economcial and the other representing non-mutual policyholders – are in negotiations. Economical plans to submit a conversion proposal to the federal Office of the Superintendent of Financial Institutions (OSFI) before Feb. 22, 2018. Several more steps are needed before it can demutualize.

Economical plans an initial public offering of stock if it completes its demutualization, the company’s president and CEO Rowan Saunders said in October during the CEO panel at the Insurance Brokers Association of Ontario annual convention. Economical officials have said in the past that the company wants to raise cash through an IPO so it can buy other companies.

“Demutualization is a challenge,” Shauf said Thursday. “There is the access to capital that some companies desire but there is also the historical buildup of that capital.”

Once Economical starts trading on the stock exchange, it would have to be widely held for two years. After that time, “it is possible and likely they would get interest from a larger entity like an Intact,” Paul Holden, a CIBC Capital Markets analyst, told Canadian Underwriter earlier.

For its part, Commonwell is more than a century old, “so that is a big ball of twine to unwind” with demutualization, Shauf added. “It’s not a simple or straightforward process.”