Frequently Asked
Questions (FAQs)

1. What is demutualization?

   Economical is a mutual company. This means we do not have any shareholders. Instead, we have mutual policyholders. Demutualization is the process where a mutual company converts into a share company. After the demutualization, there will be shareholders and regular policyholders, but no mutual policyholders.

2. What are the advantages of demutualizing?

   Economical believes demutualization will help it compete with other insurance companies, many of which are share companies. Mutual companies have limited options to raise capital for their business and so Economical is limited in its ability to compete with other insurers.

   After demutualization, Economical would be a share company and have more access to the funds it needs to grow. Economical could use these funds to strengthen its finances, acquire other companies, or invest in its business.

3. Why is this process taking so long compared to other demutualizations / transactions?

   This process is complex and very different from a typical IPO. Significantly, our demutualization requires broad stakeholder participation and has a number of procedural checks and balances which make it much more complex than other typical corporate transactions. Because we are the first company to follow this complex process, we have no benchmarks to follow, making it difficult to provide accurate estimates of timing. To see a comparison of how our demutualization contrasts with the demutualization of Canadian life insurance companies, click here.

4. Why is Economical Demutualizing?

   After 145 years as a mutual company, Economical has decided to pursue demutualization — the process to become a public share company.

   Demutualization is an exciting opportunity for Economical to gain access to the capital that will allow us to invest in our business and innovation, acquire other companies, and strengthen our financial position for long-term success.

   If you would like lean more about Economical Insurance, we would encourage you to use the resources available on our corporate site including information about our management team, our heritage and future focus, our business performance, our products and services, and what we’ve been up to most recently.

5. What factors impact the timing of an IPO?

   As we work to complete the remaining steps of the regulatory requirements for demutualization, there are three key areas we are focusing on to ensure a successful IPO:

   1. Improving our financial performance through our business transformation initiatives
   2. Closely monitoring capital market performance and the political environment to help determine the optimal time for our transaction
   3. Satisfying a separate set of regulatory requirements with securities regulators and a stock exchange

   In October 2019, the Chair of the Economical Board of Directors provided an update on the factors that impact the timing of our IPO.

6. How will the outbreak of COVID-19 affect our demutualization?

   The outbreak of COVID-19 has adversely affected economic and capital market conditions in Canada and around the world.

   To manage and minimize the impact of these changes on our business, Economical has initiated a comprehensive and highly responsive business continuity plan to ensure we meet the needs of our policyholders, broker partners, and employees. We continue to be thoughtful, measured, and adaptable through these new realities.

   We are actively managing the potential impacts of the current situation on our demutualization process. We continue preparing for the next steps of the regulatory approval process and the third special meeting. At the same time, our Board and management is actively monitoring capital market dynamics to determine any impacts to our planned initial public offering. For more details, please review the update from March 3, 2020.

   As we manage through these circumstances, we will keep stakeholders apprised of any developments in our demutualization process on this website.

Third special meeting

1. When is the third special meeting?

   The specific date for the third and final special meeting on demutualization has not been announced yet.

   While we don’t yet know when the final special meeting will happen, we can confirm that it will not be held in 2020, as we expected before the pandemic.

2. Why doesn’t Economical hold the Third (final) Special Meeting now so we are ready to undertake an IPO when market conditions are favourable?

   A key consideration for a successful IPO for Economical is to have a track record of consistent financial results. This is in addition to completing the regulatory steps and having favorable capital markets conditions to launch an IPO.

   The Regulations governing our demutualization effectively prevent us from holding the third special meeting until we are ready to complete an IPO. Specifically, those rules require us to formally apply to the Minister of Finance for permission to demutualize within 3 months of holding the third special meeting. In effect our demutualization and proposed IPO will occur at the time the Minister approves the application, so the timing of this vote is driven by when we’d be in a position to achieve a successful IPO.

   Economical continues to be focused on building a track record of consistent financial results that will support a successful IPO and life as a public company. Economical’s 2019 financial results reflect positive momentum on building sustainable profitable performance. However, the onset of COVID-19 since that time has created uncertainty in the economy and capital markets, which impacts not only market conditions for our IPO, but also Economical’s financial results, for example, on the returns that can be earned on the investment portfolio.

   That leaves us where we are today, continuing to improve business performance and completing as much of the regulatory process as we can, while maintain the flexibility over timing to increase our chances for a successful IPO. On the regulatory process, this means we will complete as many of the steps as we can before holding the third special meeting.

3. Who will vote at the third special meeting?

   All eligible policyholders, both mutual and non-mutual, will participate in the third special meeting. With approximately 630,000 eligible policyholders, it is anticipated that this will be one of the largest stakeholder meetings in recent Canadian history.

4. What happens at the third special meeting?

   At the third special meeting, all eligible policyholders, both mutual and not mutual, will be asked to approve the Conversion Plan and authorize Economical to apply to the Minister of Finance for approval to demutualize.

5. What is the Conversion Plan?

   The conversion plan is the detailed document that outlines how Economical will transition from a mutual company to a widely-held company with common shares. Available as Appendix "A" of the 2019 Special Meeting of Eligible Mutual Policyholders Information Circular, the conversion plan details the creation of a new corporate structure for the company, outlines the immediate effects of our demutualization, and provides a valuation of the company that was done in the spring of 2018.

   The circular also provides detailed information on the allocation of financial benefits as negotiated by the policyholder committees, including the rationale used to guide the negotiations.

6. Is Economical a public company after the third special meeting?

   No. After an affirmative vote at the third special meeting, Economical will apply to Minister of Finance for approval to demutualize. Once approval is received, Economical can begin the process to hold an initial public offering (IPO) to list shares on a stock market exchange.

Second special meeting

1. When was the second special meeting?

   The second special meeting was held on March 20, 2019.

2. Who was involved in the second special meeting?

   Only eligible mutual policyholders could participate in the second special meeting. Eligible non-mutual policyholders will have the opportunity to participate in the third special meeting, which will be held at a future date.

3. What was voted on at the second special meeting?

   Economical’s previous by-laws stated that only a mutual policyholder (or their proxyholder) may vote at Economical’s annual and special meetings. Eligible mutual policyholders voted on the By-law Amendment Resolution, which was required to allow eligible non-mutual policyholders to vote at the third special meeting and continue the demutualization process.

   At the second special meeting, eligible mutual policyholders overwhelmingly supported changing the by-laws.

Demutualization process

1. What happens in the demutualization process?

   Demutualization is a four-phase process:

   Phase 1: Board decision to proceed with the demutualization process. The Economical Board of Directors initiated the process by passing a formal resolution recommending demutualization on November 3, 2015.

   Phase 2: First special meeting of eligible mutual policyholders. After the board resolution, there must be a meeting of eligible mutual policyholders to vote on whether to move to the next phase of the demutualization or terminate the process. On December 14, 2015, the eligible mutual policyholders of Economical voted to move to the next phase — negotiations over how to divide up (or “allocate”) the benefits from demutualization. As a result of this vote, a formal notice was mailed to eligible policyholders (both mutual and non-mutual). The notice describes the demutualization process and how eligible policyholders participate.

   Phase 3: Policyholder committee negotiation and conversion plan development. Two policyholder committees were formed: one representing eligible mutual policyholders and one representing eligible non-mutual policyholders. These two committees, with the assistance of court-appointed lawyers, negotiated the method of allocating the financial benefits from demutualization and whether any benefits will be provided to persons other than eligible policyholders. This allocation was incorporated into the conversion plan, which Economical prepared. The conversion plan contains all of the detailed terms of the company’s demutualization, including the non-allocation aspects of the demutualization. The conversion plan (including the committees’ determination of allocation) was submitted to the Office of the Superintendent of Financial Institutions (OSFI) for its review, along with required actuarial opinions.

   Phase 4: Second special meeting of eligible mutual policyholders and third special meeting of all eligible policyholders. After OSFI completed its review of the conversion plan, Economical called the second special meeting of eligible mutual policyholders. On March 20, 2019, eligible mutual policyholders continued the demutualization process by supporting changes to Economical by-laws to permit eligible non-mutual policyholders to vote at the third special meeting. These by-law changes were crucial because demutualization can only occur if there is a vote to approve the conversion plan that includes eligible non-mutual policyholders.

   There will be a third special meeting where all eligible policyholders vote to approve the conversion plan and to authorize Economical to seek final approval from the federal Minister of Finance.

   After the four phases, the Minister of Finance decides whether to approve the conversion plan, allowing Economical to demutualize and begin the process of listing our shares on a public stock exchange.

   Here is a more detailed description of the four phase process of demutualization.

2. What steps have been completed in Economical’s demutualization?

   Our demutualization journey is a long and complex one, and we are now in the fourth phase of the process. We are proud of the achievements we have made, and are excited to continue moving forward and unlocking our full potential as a leading Canadian property and casualty insurer. To learn more about our demutualization progress, please click here to explore our interactive timeline.

3. Are there any alternatives to demutualization?

   Alternatives to demutualization considered by the Board are listed in the policyholder information circular. The Board concluded that the alternatives do not give Economical the advantages of demutualization, and none of them result in benefits being distributed to eligible policyholders or the new charitable foundation.

Committee negotiation process

1. How are the courts involved in the demutualization process?

   The Ontario Superior Court of Justice supervised the policyholder committee process. The court was responsible for appointing the members of the policyholder committees who negotiated the allocation of benefits from demutualization, along with two law firms who assisted them in the negotiations. The court made these appointments on September 22, 2016 and February 22, 2017. McCarthy Tetrault LLP was appointed to represent the eligible mutual policyholders and Thornton Grout Finnigan LLP was appointed to represent eligible non-mutual policyholders. Our policyholder committee process page has more details on the committee process and negotiations.

2. What information is available about the negotiations?

   During the negotiations, Economical provided general progress updates. However, the negotiation process was governed by a confidentiality order that required information about the negotiations, including information about the work of the policyholder committees, be kept confidential. Under this court order, the members of the policyholder committees were not permitted to discuss or comment on the negotiations with anyone not directly involved, including with their friends and family.

   Details of the conversion plan, including an overview of the negotiations, are available in the policyholder information circular.

3. How were the policyholder committee members selected?

   The court appointed the policyholder committee members on the recommendation of policyholder counsel. There were nine members of the eligible mutual policyholder committee and six members of the eligible non-mutual policyholder committee. More details are available on the policyholder committee process page.

4. What was the company's role in the policyholder committee negotiations?

   The policyholder committees, with the assistance of policyholder counsel, negotiated and determined the allocation of benefits resulting from demutualization. Economical provided support and information to the policyholder committees, but did not take part directly in the negotiations.

   Economical wanted the negotiations to succeed and result in an allocation that met legal and actuarial requirements that will be approved by regulators and eligible policyholders in the policyholder votes. Economical assisted both committees equally and provided the same information to both.

5. Why was the OSFI extension necessary?

   The process laid out in the regulations was unprecedented and extremely complex. In addition to an agreement by the committees, the process requires input from actuarial, legal, financial, and market experts. Simply put, all the participants needed more time to finalize the agreement and to fully document both it and our detailed submission to OSFI.

6. Are the policyholder committee members still involved in the process?

   The policyholder committees have been disbanded pursuant to the regulations.

Eligibility to participate in demutualization

1. Who are eligible policyholders?

   Eligibility depends on holding policies of Economical Mutual Insurance Company (including those sold by Family Insurance Solutions and Western General). Policies issued by Perth Insurance, Waterloo Insurance (Economical Select), Federation Insurance, or Missisquoi Insurance (Economical in Quebec) are not taken into account.

   There are two types of eligible policyholders: eligible mutual policyholders and eligible non-mutual policyholders.

   • An eligible mutual policyholder is a person who holds an Economical mutual policy if he or she held it on November 3, 2015 (the date the Economical Board of Directors decided to proceed with demutualization).
   • An eligible non-mutual policyholder is a person who holds an Economical non-mutual policy and has done so for the 12-month period ending on November 3, 2015, or meets the special circumstances defined below.

   Economical mailed a letter to each eligible policyholder (both mutual and non-mutual). The letter describes the demutualization process and states if the person is an eligible mutual policyholder or an eligible non-mutual policyholder. If you have not received a letter from us and you believe you meet the criteria for being an eligible policyholder, contact us as at joininourfuture@economical.com or 1-866-302-6046.

   If you have received a letter from us, you can log in and set up your demutualization account.

   Read more information about eligibility.

2. What are the special circumstances for eligible non-mutual policyholders?

   There are special circumstances where a person who holds a non-mutual policy will be eligible even if they do not meet the eligibility requirements above. These circumstances are fixed and cannot be changed or expanded.

   1. A person added to a policy that was already in force for at least 12 months: a policyholder can be eligible even if they did not hold their policy for the entire 12-month period, so long as the policy they held on November 3, 2015 was at least 12-months old at the time.
   2. A person who changed Economical policies part way through the 12-month period, so long as they changed to a “similar” policy: a policyholder can be eligible even if they changed Economical policies during the 12-month period before November 3, 2015, so long as they held two or more “similar” Economical policies during that 12-month period which added up to 12 months of coverage. A policy is “similar” to another policy if both policies are personal property policies, both policies are auto policies or both policies are commercial property policies.
   3. A 12-month policyholder with small gaps in coverage: a policyholder can be eligible (including in the above circumstances) even if there are small gaps in coverage (to a maximum of 30 days). A gap in coverage occurs when none of the applicable policies are in force.

3. Do I have to continue to hold an in force policy to remain eligible?

   The negotiated allocation does not require an eligible policyholder to continue holding a policy to receive benefits. The allocation as drafted will treat the person as eligible, even if they now cancel or lapse their policy or otherwise are removed as a named insured from their policy.

   Nevertheless, Economical cannot guarantee receipt of benefits in this or any circumstances. The demutualization process is still not complete. Ultimately, receipt of benefits depends on final approvals of the demutualization and the conversion plan (without change) by eligible policyholders in a policyholder vote and the Minister of Finance.

   Accordingly, eligible policyholders should consider holding their policy or policies throughout the process as it will ensure eligibility under demutualization for any benefits distribution.

   Economical mailed a notice to eligible policyholders describing the demutualization process and informing them of their eligibility. If you have not received a letter from us and you believe you meet the criteria for being an eligible policyholder, contact us as soon as possible at joininourfuture@economical.com or 1-866-302-6046.

   If you have received a notice from us, you can log in and set up your demutualization account.

4. I have not received a letter yet. Does that mean I am not eligible?

   If you have not received a letter from us and you believe you meet the criteria for being an eligible policyholder, contact us as at joininourfuture@economical.com or 1-866-302-6046.

5. How do eligible policyholders participate?

   Eligible policyholders have a significant role in the demutualization process:

   1. They had the opportunity to apply to serve on the policyholder committees that represented eligible mutual and eligible non-mutual policyholders to negotiate and determine the allocation of demutualization benefits (i.e., how to divide the financial benefits).
   2. They have the right to vote for or against the conversion plan in the final policyholder vote.
   3. They will receive financial benefits (e.g., shares or cash) in accordance with the negotiated allocation and the conversion plan, if the demutualization is approved.

   You can subscribe for updates on demutualization to stay up to date on the latest developments.

6. What types of policies are relevant in determining whether a person is eligible?

   All types of policies that Economical Mutual Insurance Company issues are being taken into account in determining eligibility, including auto, property, or commercial policies and those sold under the Family Insurance Solutions and Western General brands. This does not include policies issued by our subsidiaries (Perth Insurance Company, Waterloo Insurance Company [also known as Economical Select], The Missisquoi Insurance Company, and Federation Insurance Company of Canada).

Benefits of demutualization

1. What are demutualization benefits?

   Demutualization benefits are the cash and shares that would be distributed to eligible policyholders if there is a demutualization of Economical. These cash and shares do not come from the assets of Economical. The shares are newly created during demutualization and the cash would be from selling shares in our new holding company to investors in an initial public offering (IPO).

2. What amount of demutualization benefits does each policyholder receive? Do all policyholders receive the same amount?

   The amount of benefits individuals receive will depend on various factors including the total amount of benefits to be distributed, the total number of eligible policyholders in each class of policyholder, and the length of time a policyholder held a policy with Economical.

   Details on the allocation of financial benefits, as negotiated by the policyholder committees, is available in the policyholder information circular. The exact value of the benefits will not be known until demutualization is essentially complete and will be distributed after our initial public offering.

3. How was the allocation of benefits decided?

   The allocation was negotiated by the two policyholder committees, one representing eligible mutual policyholders and one representing eligible non-mutual policyholders. Each committee was represented by their own counsel as well as their own legal, financial, and actuarial experts. After a complex and extensive negotiation, the outcome was reviewed by both the Appointed Actuary of Economical and an Independent Actuary, both who wrote opinions stating that the benefits and method of allocation are fair and equitable.

   You can read more about the allocation of financial benefits, including an overview of the negotiations, in the policyholder information circular.

4. Can the negotiated allocation be changed?

   No, the negotiated allocation cannot be changed. It has been approved by the policyholder committees, and also reviewed by our regulator. The policyholder committees have now been disbanded, and there is no opportunity to reopen negotiations.

5. When will I choose whether I want cash or shares?

   Later in the demutualization process (after all three special meetings), eligible policyholders will be sent an Election Form. This will allow certain eligible recipients to indicate their preferences to receive their demutualization benefits in the form of common shares or cash. This election does not guarantee that eligible recipients will receive their preferred form of demutualization benefits.

6. When will I receive my benefits?

   There are many events that still need to happen before Economical could have an IPO. After OSFI authorizes Economical to call the third, and final, special meeting and a successful vote is held, OSFI will review our application to the Minister of Finance for approval to demutualize.

   Only after the Minister of Finance approves can Economical begin the process to have an initial public offering. Due to the number of steps and variables, a timing estimate for the IPO cannot be given.

7. What will determine the actual value of my benefits?

   The value of benefits that have been allocated to you will be determined by the share price at the time of IPO. The actual value of our IPO won’t be known until the time of the transaction, and will depend on many factors.

8. What do you expect the actual IPO value to be?

   We expect investor demand will depend on numerous factors, including market conditions, company performance, and overall outlook at the time of IPO. The valuation report has no bearing on our future IPO value.

9. I think I'm a "Government" as defined in the policyholder information circular. What should I do?

   If you aren’t sure whether you are a “Government” you should consult your own legal advisors. It depends on the specific facts and circumstances. We are not able to give you that advice.

10. What is the share selling service?

    The share selling service provides eligible policyholders who receive shares with a convenient and low-cost way to sell their shares. We expect the service will be made available 180 days after the date of the IPO, and will remain available for two years after the IPO. You can read more about this service in the policyholder information circular.

Charitable Foundation

1. What led to a charitable foundation being created?

   Recognizing the contributions that Economical’s subsidiaries and ineligible and former policyholders have made to the value of Economical, the policyholder committees agreed to make a meaningful allocation to a new charitable foundation, to be known as the Economical Insurance Heritage Foundation.

   The creation of this foundation will create a positive, enduring legacy of this demutualization and the people who participated in it.

2. What is the mandate of the foundation?

   The mission of the Foundation is to honour the Economical policyholders and employees past and present by working to have the greatest impact on our communities.

3. How will the foundation be funded?

   The two policyholder committees negotiated a meaningful contribution from our demutualization to create this new charitable foundation, starting an important legacy for our policyholders and demutualization. The foundation will be allocated $100 million of demutualization proceeds upon successful completion of the process.

   We expect the charitable foundation will also be able to accept additional donations. More information will be available in the future.

Policy changes and impact on insurance coverage, insurance claims, or insurance benefits

1. Who do I contact to make a change to my policy?

   Changing your policy is the same as it was before demutualization. You should contact your broker to discuss any policy changes.

2. How will demutualization affect my insurance coverage, claims, or the payment of benefits?

   The demutualization process does not impact coverage, ongoing claims for insurance benefits, ongoing payments of accident or insurance benefits, or the other terms under your insurance policy.

3. What will happen if I cancel my policy or move to a different insurance company?

   The negotiated allocation does not require an eligible policyholder to continue holding a policy to receive benefits. The allocation as drafted will treat the person as eligible, even if they now cancel or lapse their policy or otherwise are removed as a named insured from their policy.

   Nevertheless, Economical cannot guarantee receipt of benefits in this or any circumstances. The demutualization process is still not complete. Ultimately, receipt of benefits depends on final approvals of the demutualization and the conversion plan (without change) by eligible policyholders in a policyholder vote and the Minister of Finance.

   Accordingly, eligible policyholders should consider holding their policy or policies throughout the process as it will ensure eligibility under demutualization for any benefits distribution..

General questions about the regulations governing demutualization

1. Where can I find the regulations?

   The regulations are available on the Government of Canada's website for federal laws.

   There are two sets of regulations, one for insurers with only mutual policyholders and one for insurers with both mutual and non-mutual policyholders. As Economical has both mutual and non-mutual policyholders, the Mutual Property and Casualty Insurance Company with Non-mutual Policyholders Conversion Regulations are relevant to Economical.

2. Why are regulations required in order to demutualize?

   Economical is governed by the Insurance Companies Act and it permits a mutual company like Economical to demutualize, but only if there are regulations that set out the specific requirements for such a demutualization. This means that without regulations, Economical couldn't demutualize.

Other questions

1. I have a question about a legal/tax/estate matter that relates to demutualization.

   Economical does not give advice on legal, tax, or estate issues. We recommend you contact your own advisors to discuss.