Posted on December 18, 2019

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

As we approach the end of 2019, I want to continue sharing updates on our progress toward becoming a high-performing public company. Following my October update, I remain encouraged by our most recent quarterly results as they show our corrective underwriting actions are positively reshaping our book of business and that our strategic investments in Sonnet and Vyne are driving growth for the Company. These long-term initiatives will help differentiate Economical and support the strong, consistent, and sustainable performance investors will expect of us as a public company.

Results continue building toward our IPO

I am pleased to share that our Q3 2019 financial results demonstrate continued progress in our business transformation and profit improvement program:

  • Our combined operating ratio this quarter improved 7.9 points over the same period last year
  • Gross written premiums were relatively unchanged from prior year, as focus remained on returning to business profitability
  • The impact of our strategic investments on our combined ratio continued to abate as Sonnet, our digital direct channel, continues to grow
  • Our financial position remained solid, with a minimum capital test (MCT) of 236%

Our improved financial results demonstrate continued momentum toward sustainable profitability. These results also show the significant progress we are making to improve our performance and strengthen the track record we will need to meet investor expectations as a public company, both to successfully complete an IPO that appropriately reflects the value of the company, and to position Economical for long-term success going forward. That is our responsibility as directors of Economical.

I am also pleased to report that in November, independent rating agency A.M. Best affirmed our financial strength rating of A- (Excellent) for the seventh consecutive year. This globally recognized rating independently underscores our overall financial strength and stability. As we move closer to our IPO and our future as a public company, maintaining our strong financial position helps to reinforce investor confidence in Economical.

Adding to our leadership bench strength

As I mentioned at our most recent annual meeting, ensuring that we have the expertise and capability to deliver on our ambitious strategy is a critical factor to achieve our goal of becoming a top P&C insurer in Canada.

Over the last few years, we have built a board and executive team of proven leaders who are committed to our vision and dedicated to the future of our Company. The Board is committed to continuing that effort. At the beginning of October, I was pleased to announce that Robert (Bob) McFarlane would join the Board. Bob adds tremendous depth to Economical as we progress towards becoming a public company, given his experience in strategy, transformation, finance, mergers and acquisitions, and IPOs. Notably, Bob played a key role in the IPO and growth of national wireless operator Clearnet Communications Inc. as their EVP, CFO and Secretary-Treasurer. Subsequently as CFO of Telus, Bob was recognized by Canadian Business magazine in 2007 as Canada's top CFO. Bob also brings extensive prior board experience including seventeen combined years in chairing the audit and risk committees of two financial institutions. Bob's knowledge and expertise are valuable additions to those of our existing Board.

We also welcomed Liam McFarlane, who joined the company in October as Chief Risk and Actuarial Officer. Liam brings 30 years of experience to Economical as one of Canada's most respected actuarial experts, having spent the last 10 years as a partner with Ernst & Young LLP where he led the Canadian actuarial practice.

Earlier this year, Economical announced the planned retirement of our Chief Actuary, Linda Goss. Linda will remain with the Company through 2020 to support Liam, ensure a smooth transition, and complete her work as Economical's Appointed Actuary on our demutualization.

Timing of next steps

Thank you to those who took the time to ask questions following my October update. The most common questions we have received concern the timing of the third special meeting and our IPO.

As I shared at our most recent AGM, the timing of the next steps in our demutualization process depends primarily on the Company's readiness to become a public company as well as capital market conditions. Timing must be carefully considered to ensure we are fairly valued by the capital markets so that we unlock the full potential of Economical to support our employees, brokers, communities, policyholders and, eventually, shareholders. In the long-run, maintaining our course will not only serve the best interests of Economical, but will benefit eligible policyholders as well. While we are demonstrating very good progress in improving our performance, we are not yet where we need to be. The Board is committed to moving forward and is continually reviewing company performance and market conditions to determine the best time for the IPO.

With that said, we remain on track with our plans and are confident that our results are moving in the right direction. Before the Board can call the third special meeting and set the meeting date, the Company is required to obtain the Office of the Superintendent of Financial Institution's (OSFI) approval to send the meeting notice to eligible policyholders. Although the third special meeting will not be called this year, the approval process with OSFI is already underway.

We need to have a strong finish to our 2019 year. Once our 2019 full-year financial results are available and the Board has had the opportunity to consider them, I will be able to provide you with more updates about timing.

New year web upgrades

I am excited to share that in early 2020 we will be launching a number of new features on our demutualization website, Join In Our Future. This will allow all eligible policyholders to see their personalized estimates of the financial allocation they can expect to receive upon completion of our demutualization. This will be an important tool to help inform eligible policyholders as they prepare to vote at the Third Special Meeting. Please stay tuned for more information.

*   *   *   *   *

I would like to acknowledge those of you who requested more frequent updates. We will continue to update you regularly and as events warrant, such as the release of our 2019 year-end financial results. If you have not done so already, I encourage you to subscribe for email updates to stay informed of our progress. If you are an eligible policyholder, log in and register your demutualization account to track your status as an eligible policyholder.

Thank you for your continued interest in our transition to a public company. This is an important time of year when we reflect on the past and look to the future. On behalf of everyone at Economical Insurance, we wish you a healthy and happy holiday season, and best wishes for the new year.

John Bowey
Chair of the Board of Directors of Economical Mutual Insurance Company
December 18, 2019

Back to Top