Posted on October 7, 2019

An Update from John Bowey, Chair of the Board of Directors

As we approach the end of the third quarter of 2019, I wanted to give an update on our company performance and provide further insight into our long-term plans, building off what we shared earlier this year at our special and annual meetings of mutual policyholders.

Unlocking our full potential

The driving force behind our plans to become public is our belief in Economical’s potential. For years we’ve been working tirelessly to realize that potential and position the company for long-term success as an independent publicly-traded company. We are well along in that journey and are confident we can accomplish our ambitious agenda knowing that Economical has the strategy, leadership, talent, and capabilities to execute industry-leading innovations, reimagine our core business operations, and grow our business profitably.

Those of you who attended our annual general meetings and read our public disclosures will know that Economical is in the midst of an extensive, multi-year business transformation and profit improvement program that impacts all aspects of our business, including:

  • Implementing a new organizational design and operating model with industry-leading talent and clear business line accountability
  • Integrating more sophisticated pricing and business segmentation models within our disciplined underwriting practices
  • Achieving rate adequacy and profitability across business lines, while exiting underperforming segments and increasing our share of target segments
  • Launching game changing innovations on time and on budget, with Canada’s first fully digital direct insurer in 2016 (Sonnet), and our best-in-class broker platform in 2018 (Vyne)
  • Optimizing our claims operations by implementing leading practices for fraud, subrogation, and salvage
  • Continually enhancing our digital platforms to drive exceptional broker and client experiences and position us for profitable growth
  • Transforming our operations to streamline processes, build new capabilities, increase productivity and capture expense savings

Sonnet and Vyne are significant investments that we need to compete effectively in a rapidly evolving industry. Insurance is increasingly complex and our industry moves much more quickly today than it did even a few years ago. Traditional risk factors that affect our industry, such as weather events and the number and severity of auto collisions, are being compounded by new trends such as vehicle automation, distracted driving, and the sharing economy. Our technology investments are critically important ingredients that help us meet consumer expectations, at the speed demanded by ever-changing market conditions.

While we have accomplished a great deal in the last two years, we still require focus to further strengthen our core business. Like all meaningful change in the insurance industry, the benefits of our efforts will take time to earn through our financial results, but we are confident they will not only strengthen our underlying business, but also improve how potential investors view us in the context of our planned IPO.

Investor expectations

As with any company planning to launch an IPO, we need strong, consistent and sustainable performance in order to be fully and fairly valued by the capital markets and to position us for a successful future. Our second quarter financials demonstrate the progress we are making to improve our performance and, while we are not yet where we need to be, they show we are moving in the right direction.

Specifically, we were encouraged by the indicators in our recently released quarterly results:

  • Our combined ratio showed an 11.5 percentage point improvement over the same period last year
  • Sonnet, our digital direct brand now in its third year, has more than 100,000 customers, and we are successfully reducing costs from our start-up phase, while strengthening our reputation with an industry-leading customer satisfaction score
  • Our new broker offering, Vyne, greatly reduces quote to bind turnaround times with guaranteed quotes, leading to stronger new business renewal rates and loss ratio improvements

By continuing our momentum toward sustainable profitability, we can establish the track record we need to have a successful IPO and meet market expectations as a public company. Ultimately, this would not only be in the best interests of Economical, but benefit eligible policyholders as well.

Next steps

As we shared at the special and annual meetings earlier this year, the timing of the next steps in our demutualization process depends primarily upon the Company’s readiness to become a public company, as well as on market conditions and the political environment. At the time, we said that we did not expect to complete our IPO in 2019 and that the third special meeting (the next step in the demutualization process) would not likely be called this year.

Those expectations remain the best guidance we can offer. Our recent results have increased our confidence that we are moving in the right direction to support our future as a successful public company, but we still have some distance to go. The Board and executive team remain committed to unlocking the full potential of Economical to support our employees, our brokers, our communities, our policyholders, and eventually our shareholders, as a dynamic Canadian public company.

I look forward to sharing future updates about the progress we are making in our business turnaround, and what that will mean for the next steps in our journey toward becoming a high-performing public company. If you have not done so already, I encourage you to subscribe for updates to stay informed of our progress, and if you are an eligible policyholder to log in and register your demutualization account to track your status as an eligible policyholder and to view specific information that relates to you.


John Bowey
Chair of the Board of Directors
October 7, 2019

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