Final steps in Economical Insurance’s plan to go public won’t happen this year
Pandemic has introduced too many ‘unknown factors,’ board chair says
WATERLOO — A final vote to determine whether policyholders want Economical Insurance to become a publicly traded company won’t happen this year as originally anticipated.
In an update issued Tuesday, board chair John Bowey said the COVID-19 pandemic has introduced too many “unknown factors.”
A two-thirds majority in a final vote from more than 630,000 eligible policyholders for the demutualization process to continue, and approval from the federal finance minister, would set the stage for issuing an initial public offering (IPO).
That would see the 148-yearold Waterloo-based firm transition from being owned by its nearly 900 mutual policyholders, to being a publicly traded company owned by shareholders. It would be the first Canadian property and casualty insurer to demutualize; going public would give it improved access to capital that could be used to invest in the business or to acquire other companies, Economical maintains.
A successful IPO would establish a “strong footing” for the newly public company, Bowey said.
The performance of the IPO would also determine how much policyholders receive as a result as benefits are distributed in the form of cash or common shares. It’s been estimated that regular (non-mutual) policyholders could each receive benefits worth $1,500 to $2,300; the mutual policyholders could each receive benefits valued between $300,000 and $430,000.
Those estimates are based on a 2018 IPO valuation of between $1.3 billion to $1.9 billion. Economical’s financial performance leading up to an IPO will influence investor response.
Prior to the pandemic, Bowey predicted things were on track for that final vote to be held this year.
“Unfortunately, since then, it has become clear that the onset of COVID-19 could slow our performance improvement, particularly in relation to the returns we can earn on our investment portfolio and the impact the pandemic is having on capital markets and public offerings,” he said in this week’s update.
“In this environment, it is impossible to deliver a responsible prediction about the timing of our future IPO, and therefore our third vote,” Bowey said. “While we don’t yet know when the final special meeting will happen, we can confirm that it will not be held in 2020.”
First announced about a decade ago, the demutualization process has been formally underway since November 2015. Mutual policyholders gave the green light to proceed in a vote held in March 2019.
As part of the process, Economical also plans to create a charitable foundation funded by $100 million from the IPO.
The company has launched a campaign encouraging past and present policyholders to determine their eligibility to participate in demutualization and to register online if they haven’t yet. Visit joininourfuture.com for more information.
“Despite the current uncertainty, I am confident in our business and in our readiness for the ‘new normal,’ ” Bowey said. “While we don’t yet know exactly when that will take hold … we will continue to work with dedication toward building a high-performing publicly traded company.”