THE CHAIR of Economical Insurance and its special committee on demutualization says he believes the company has built a compelling case for the mutual insurer becoming a publicly traded entity.

“The move to demutualize is linked closely to our ability to create long-term, sustainable value for the company — for our brokers, for our customers and career opportunities for our people hinge on that access to capital,” John Bowey said earlier this month as the Waterloo, Ont.-based insurer unveiled the conversion proposal it submitted to the federal regulator last summer.

Under the terms of the proposal, 20% of the proceeds of an initial public offering would be allocated to Economical’s 878 shareholding ‘mutual’ policyholders, $100m would go toward establishing a charitable organization and the rest of the shares would be distributed among hundreds of thousands of regular policyholders who had policies in force on Nov. 3, 2015.

Depending on an IPO pricing for an estimated 100 million common shares valued at between $13 and $19 each, proceeds could yield more than $300,000 for mutual policyholders and $1,500 or more for eligible non-mutual policyholders.

But there are major steps remaining for the company to move forward with its plan.

One is a special meeting with mutual policyholders set for March 20, when they will vote on by-law changes to proceed with the demutualization.

“The meeting is only for eligible mutual policyholders who will vote on proceeding with the process outlined in the conversion proposal,” Mr. Bowey said.

“If they vote affirmatively we will then hold a final special meeting of 600,000 eligible non-mutual policyholders to vote on the conversion plan and authorize the final legal steps in the demutualization process and those steps will enable us to complete the process.”

Mr. Bowey said reaching the agreement outlined in the conversion proposal was a huge milestone for the company.

“The committees were tireless and spent many hours through a complex process and they took the time they needed to get to the result they got to,” he said, “and we are incredibly grateful for their efforts and dedication to get that agreement.”

If the next policyholder meeting votes against changes in by-laws to move ahead with the process, the demutualization will be dead in the water.

But Mr. Bowey said the company is encouraged by the agreement by committees representing the two groups of policyholders to take the process this far.

“It is the first time (p&c) demutualization has been attempted and Economical is approaching it with a long-term view to create a great Canadian business success story,” Mr. Bowey said.

The president of the Canadian Association of Mutual Insurance Companies said he is disappointed that Economical is moving ahead with demutualization.

“We believe that all insureds should be treated the same way and that mutuals don’t exist to make a profit but to deliver a service,” Normand Lafrenière said last week.

“The conversion proposal is not consistent with our values to promote mutuality and equality amongst all policyholders and members.”

He said the value of the company has been accumulated over generations of policyholders and members and the distribution of any proceeds should reflect that, but the plan unveiled this month does not.

Mr. Lafrenière said CAMIC believes that demutualization should be a last resort exercised only after all options to grow as a company — such as mergers and acquisitions — have been explored.

“Many amalgamations have happened between mutual insurance companies and we haven’t seen efforts made by Economical to remain in the mutual realm,” he said.

But he said Economical’s plan to use $100m to found the Economical Insurance Heritage Foundation is a positive development.

“The financial contribution to a charity is in line with CAMIC’s opinion on how the surplus should be distributed,” Mr. Lafrenière said.

“But in general the whole process does not reflect our values.”

The special meeting on March 20 will be the latest step in a process that began in 2010, when a group of mutual policyholders raised the prospect of demutualization.

(More details and background for Economical’s demutualization bid are presented in our Feb. 11 weekly edition. To order a sample copy or to subscribe, please choose the ‘Subscribe’ tab on our main page or email mpub@rogers.com).