Posted on December 10, 2020

Moving Ahead with Confidence – A Special Update from John Bowey, Chairman of the Board, December 2020

As we approach a holiday season like no other, I want to take a moment to reflect on an unprecedented year and share some exciting news about the road ahead for our demutualization process and planned IPO. We at Economical sincerely hope that you and your families are keeping safe and secure during these difficult times.

In my September update I promised to share a more concrete perspective on our timing for demutualization and planned IPO before the end of the year, and I am pleased to now be able to do just that.

Facing Challenge and Building the Foundation for a Bright Future

2020 has been particularly challenging for our customers and our broker partners. COVID-19 has slowed the Canadian and global economies this year and created a measure of uncertainty for the timing of our demutualization process and planned IPO. Despite this, we have been transparent about our progress and remain committed to sharing information about our outlook as it becomes available.

In regard to that outlook, you’ve heard me say for some time now that there are three key areas that need to come together before we can finalize the timing of our IPO.

  1. We need to improve our performance
  2. We need to complete the necessary regulatory and governmental approval steps
  3. We need to ensure our transaction is completed when capital market conditions are favourable

We have consistently focused on these key areas to increase the likelihood of a successful IPO and Economical emerging from that IPO strongly positioned to support our long-term future as a public company.

Our Board is pleased with how Economical’s fundamentals are improving, and under the supervision of a strong and skilled leadership team, Economical closed 2019 in a position of emerging strength and sustained momentum. We expanded and transformed our business to become more innovative, efficient, scalable, and profitable.

Our 2019 annual results demonstrated the positive impact from years of investment in our business fundamentals and innovation, and during this past year those trends have continued. As our latest quarterly earnings demonstrated, the strength of Economical’s underwriting results show that the investments we have made in our business fundamentals are taking hold on a sustainable basis, marking the ninth consecutive quarter of year-over-year improvement, and the third profitable quarter in the past twelve months.

That track record of improved results proves that the time we’ve taken in building real and sustainable value for Economical has been worthwhile.

Moving Forward with the Third and Final Special Meeting

The next major milestone in our demutualization process is the third and final special meeting, when all 630,000 eligible policyholders can vote to initiate the final phase of the process.

I am very pleased to report that our Board has determined to target the second quarter of 2021 to hold our third and final special meeting, after appropriate regulatory approvals have been received. The exact date of the special meeting will be set by the Board once approvals are obtained and is expected to be announced in the first quarter of 2021. This determination is based on the momentum demonstrated in our recent financial performance and in our most current business planning and projections for the year ahead. Assuming the vote at that meeting passes and our demutualization is thereby approved by eligible policyholders, we will work to complete the remaining steps of the process in a timely manner. This will include:

  • Sending a notice to all our current policyholders
  • Completing a process for eligible policyholders to elect cash or shares
  • Submitting a formal application to demutualize to the federal Minister of Finance, a step that is required within three months of the third special meeting

If we receive required approvals from the Minister of Finance on a timely basis and capital market conditions are favourable, we would look to complete our demutualization and planned IPO in the fall of 2021.

To those ends, Economical has already begun working toward finalizing the necessary meeting materials so that they can be mailed to eligible policyholders once the Board formally sets the meeting date, something it will do once the regulatory review process is complete.

In light of the ongoing pandemic, we have taken concrete steps to ensure we provide eligible policyholders with safe access to the third special meeting, while complying with expected public health restrictions on large gatherings. As we did with our AGM earlier this year, we recently secured permission from the court to use a virtual meeting format for our upcoming third special meeting.

An Exciting Future is Within Reach

Demutualization will help us build a new and dynamic Canadian P&C insurance market leader - one that can meaningfully participate in the trend toward industry consolidation, access the capital needed to develop and grow our business, and have the resources to attract and retain the best talent needed to realize plans for future growth. The net result will be a new Economical with enhanced prospects for growth that can add more choice, stability and assurance to the Canadian marketplace.

Transitioning to a public ownership structure, Economical will create real financial benefits for our eligible policyholders in the form of cash and shares in our newly-launched public company. Our demutualization will also benefit many communities through the creation of the Economical Insurance Heritage Foundation. Recognizing the contributions of all Economical’s policyholders and employees past and present, the two policyholder committees agreed to allocate $100 million resulting from our planned IPO to support charitable initiatives and strengthen our proud history of community involvement.

Now is the Time to Register Online

If you are an eligible policyholder and have not already done so, I strongly encourage you to register online at joininourfuture.com/eng/register/ and allow us to share updates with you via email. If you have not already done so, please check that the email registered with us is current and active so that we can avoid losing contact with you in the months ahead. Doing so will allow you to take advantage of receiving and submitting documentation online and reducing the environmental footprint of the large pre-meeting document distribution required for voting. Given that we plan to conduct our meeting online, getting connected now will help you expedite pre-meeting registration and information needs and ensure you are ready to participate and vote online at our third special meeting.

Finally, I want to thank our eligible policyholders for their ongoing patience and support. These are uniquely challenging times, as we become the first Canadian P&C company to demutualize while contending with an unprecedented global public health and economic crisis. All things considered, I am increasingly confident that Economical will emerge from our demutualization stronger than ever.

On behalf of our Board, I wish you the very best of the holiday season with hope for a happy and healthy new year.


Sincerely,
John Bowey
Chair of the Board of Directors
Economical Mutual Insurance Company
December 10, 2020

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