Posted on March 3, 2020

Building Momentum — An Update from John Bowey, Chair of the Board of Directors

Ahead of our upcoming Annual Report, I want to share with you the latest progress on our journey to become a high-performing publicly-traded company.

That journey has been longer and more complex than anyone could have predicted, but we have made great progress, have broken new ground and are building momentum with the end in sight.

In this update, I share:

  1. News on the progress getting ready for our planned IPO.
  2. New updates on the timing of our final special meeting in the demutualization process.
  3. An upgrade to our website where you can view a personal estimate of demutualization benefits (based on certain assumptions).

Progress on track — performance building toward planned IPO

Our 2019 full-year financial results are encouraging and in line with our expectations. They show that our strategic investments and multi-year transformation programs have gained real traction and are generating value. These long-term initiatives will help differentiate Economical and support the strong, consistent, and sustainable performance that investors will expect of us as a public company.

Specific highlights from our recently released financial results include:

  • Gross written premiums exceeded $2.5 billion in 2019, increasing 3.4% in the fourth quarter and 2.2% for the full year versus the same periods in 2018
  • Sonnet continued to increase its scale, with premiums surpassing $206 million in 2019
  • Combined ratios of 103.6% for the fourth quarter and 105.0% for the full year represented significant year over year improvements of 5.3 points and 6.8 points, respectively
  • Underwriting income improved $147 million in 2019, leading to net income of $17 million for the year
  • Financial position remained solid at year end, as total equity increased $44 million in 2019

Taken together, these results demonstrate the positive impact from years of investment in our business fundamentals and innovation. They show we are building toward sustainable profitability, strengthening the track record we need to meet investor expectations, complete our IPO, and succeed as a public company for the long term.

Next steps on our demutualization journey

We know that the timing of our final special meeting on demutualization and our planned IPO is top of mind for many of you. My December update indicated that we would share more guidance on timing once our year-end financial results became available. I am now pleased to do just that.

Although there is still work remaining to further improve company performance, the emerging strength in our financial results gives us confidence that we will be able to hold our third and final special meeting in the second half of this year. That is exciting news for all eligible policyholders as our planned IPO is now coming into view.

As you know from our previous updates, the specific timing of our IPO ultimately depends on a number of factors:

  • Company Performance and Market Conditions. Our confidence is building, but we continue to work on producing results that will support an IPO reflecting Economical’s value and position the company for long-term success. Our board is also actively monitoring capital market conditions, a key factor in determining the exact time of the IPO.
  • Regulatory Requirements. Before we call the third special meeting, we need the approval of the Office of the Superintendent of Financial Institutions (OSFI). This review process is already underway. After a successful third special meeting, we will submit our application to demutualize to the Minister of Finance within three months, as required by regulations. These are in addition to the approvals we need from securities regulators and stock exchange(s) for the IPO itself.

An upgrade to our website

I am also pleased to announce we have upgraded our online account service for eligible policyholders so that it will make the demutualization process easier to understand. By registering online (at joininourfuture.com), eligible policyholders can now:

  • have instant access to important meeting notices, circulars, and voting information leading up to our third special meeting,
  • view policy information used for demutualization, and
  • access a personal estimate range of demutualization benefits (based on certain assumptions).

Register today to get the benefit of this free service.

We are excited at the prospect of being so close to unlocking the full potential of Economical to support our employees, brokers, communities, policyholders and, eventually, shareholders. Throughout this process, our board has been diligent, principled, and transparent with our progress. You can count on us to continue doing just that, so look for more updates throughout the year once our quarterly results have been publicly released.

As always, we welcome your feedback on the demutualization process. You can share that with us directly at joininourfuture.com/eng/contact/.

Thank you again for your continued support.


Sincerely,
John Bowey
Chair of the Board of Directors of Economical Mutual Insurance Company
March 3, 2020

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