Wednesday, December 18, 2013

(No.253) the Economical Insurance Co. & demutualization: what might we watch for?

"The Economical Insurance Compamy and its proposed 
demutualization: what might we watch for? 
Plus some other views including the previous demutualization of
The Mutual Life Assurance Co. of Canada "

by Alastair Rickard

Each of my three most recent columns (Nos. 241, 245 & 251)) concerning the property and casualty insurance (P & C) company Economical Mutual and its proposed demutualization prompted a number of emails from readers.

As advanced by the company's board and supported by its fewer than 1,000 "voting shareholders" what is being sought is to divide among themselves the company's equity ( which could be equal to $1 million plus per voting policyholder).

Having previously presented comments critical of my negative views on the subject, this column will present some other views. Consistent with my usual practice I have withheld the names of the correspondents but have identified them generally in terms of their connection to or basis of interest in the subject.

An insurance expert on demutualization emailed to say that "I always read you with great interest, even when you push your natural kindness to take the time to answer stupid letters!

"I read recently in that Economical is in its 4th wave of closing offices and reducing expenses. This may be in connection with the larger than expected amount of claims but there could be another explanation, suspicious me would suspect: not only the reduction of expenses for a better [share] price but also the smoothing out of the approval process on a transfer of a block of business. The note said that this trend started soon after they announced their intention to demutualize.

"Establishing a demutualization regime [by the federal government] for P & Cs is a complex job (many companies and politicians have been educated with the life [insurance mutual company demutualization] regime), one with great visibility -- and compliance is tedious.

"Selling all the non-voting policies [of Economical Insurance] to, say, Intact Insurance, and distributing the proceeds to the voting policyholders [of Economical] who would have remained in the skeletal Economical is a single deed, a simple transaction and a less visible one. But it still needs the approval of the minister ... and of the Competition Bureau. However it's nothing like the long process of demutualization.

"The [regional Economical] offices being closed now are in Moncton and Hamilton. Should we know the intended purchaser it would be interesting to see if it has offices in these relatively small cities, especially Moncton. Well all this is worth watching for now."

A former manager with the Mutual Life of Canada, now an insurance industry consultant, responded to my views with "Amen Al, Amen. Thanks for the great read on Economical's demutualization attempt. I appreciate it as a longtime non-voting policyholder and interested insurance industry observer.

" And I daresay this piece included something I have thought for a long time but don't recall seeing -- that the demutualization of MLC [Mutual Life of Canada] was unnecessary. It was a shame.

"To me it was worse than unnecessary. It changed the nature of the industry and not for the better. That same greed at work at Economical is the code of the day in all life [insurance] companies today. It hasn't helped."

A longtime consulting actuary involved in the Canadian life insurance business wrote to declare that "I can proudly say I had absolutely no role in any [Canadian life insurance company] demutualization,

"There was no big money in demutualization for actuaries or anybody else for that matter, as we saw it, until the big brain actuaries made it so.

"As it was a windfall for [participating] policyholders, 1 vote = 1 share was the logical way to go. The market will value the shares. Have a nice day.

"Anything else was entirely arbitrary. It wasn't their money. Policy size and location did not and should not matter until the actuaries made it so, and crunched local and foreign asset shares going back 100 years and blasted out embedded values going forward another 100 years, and made out like bandits. ....

"In my view demutualization was an actuarial scam up there with the good old days of hawking defined benefit pension plans by overvaluing the assets, as only they can. Nobody else has that insidious power but pretty much everybody else has to pay for it, including transforming the nature of the entity ....

"But with Economical as you describe, there's years of scheming and manoeuvring setting it up with few votes for lucky insiders .... "

A very successful agent of many years experience with the Mutual Life of Canada wrote to agree with my unfavourable view of the demutualization of the Mutual Life of Canada more than a decade ago.

"The only point I would make [ref. RickardsRead column No. 245] is that you have been through a demutualization. You understand the process and repercussions.

"In the life insurance industry we lost one of the best run, productive and philosophically innovative insurance companies in Canada and North America. In retrospect I feel the process was motivated by greed. The policyholders were essentially forgotten. In the long run the industry and policyholders were the losers."

An American insurance educator wrote to thank me for "a nice Thanksgiving present. Nothing like a series of good belly laughs. And it is possible to laugh even at situations as absurd and deplorable as this one [i.e., the Economical Insurance Company demutualization]. I only hope the federal regulators do the right thing -- when they get around to it."

From a fomer life insurance company executive who lives in the Waterloo region in which Economical has its head office came this: "I guess if I were anticipating a payout of approximately 1 million dollars for simply owning an insurance policy I would have some strong concerns about someone with a national audience who is effectively pointing out the inequity of such a payout, particularly if I thought the Minister of Finance might be inclined to both read and agree with the [criticism about the] inequity."

While from one side of the 'discussion' I published the view of an Economical voting policyholder who thought I was a blatant liar and crackpot who crawled out from under a rock,  another correpondent from the life insurance side of the business viewed my status as being somewhat above that: "You have a unique ability to go to the heart of the matter. Apparently this has an effect of pissing some people off. My sense is that you don't give a fig about that. You are a modern day Diogenes."

Another resident of the Waterloo Ontario area, but one who is not involved with the insurance business, thought the most recent column on Economical was an "excellent, balanced article; the profits of the company should benefit all the shareholders, not just a select few. You can only hope that what you've written here reaches the right people in Ottawa ...."

Finally my friend Joe Belth, editor and publisher for 40 years of the Insurance Forum based in Indiana, wrote (to comfort me?):

"Dear Blatant Liar and Crackpot -- I cannot tell you how big a charge I got out of the comment you received after your latest blog about Economical Insurance. I am jealous, because I have not received anything like that in at least 20 years from any of my 40 or so subscribers. My subscribers are much better behaved and much smarter, because they know from past experience that I publish such comments complete with the name of the writer.

"All the best to you,

"Your Ellettsville Stringer."


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Tuesday, December 10, 2013

(No.252) Recently published novels: some good reading, some great

"Recently published novels: some good reading, some great"

by Alastair Rickard

The English critic Cyril Connolly once observed that literary critics had the thankless task of drowning other people's kittens. For this self-imposed critical role writers of fiction are mostly and understandably unsympathetic. As the screenwriter Chrisopher Hampton declared: "asking a working writer what he thinks about critics is like asking a lamp post how it feels about dogs."

In my RickardsRead columns on novels I escape the frequent  role of the critic to which Connolly and Hampton refer by reviewing books I have enjoyed at least to some degree.

Some book reviewers feel the urge to draw blood in order to show off their sharp edge. Others revel in taking the role of the termagant when writing abut novels. While I can and do indulge in what some regard as shrewish comment, when it comes to fiction I usually don't.

I do refrain from issuing praise comprehensively, like rain falling on the just and the unjust. I see no point in wasting the time of the readers of (or mine, for that matter) recommending  books that make for inferior reading even when they are superior examples of how not to write.

In the column that follows I present my views of six recently published novels, three by British novelists and three by Americans. All of these new works by long-established novelists provide enjoyable reading although not of equal accomplishment.

Michael Connelly is a former California reporter who wrote a series of very good 'police procedural' novels featuring LAPD detective Harry Bosch. The author is now well along with another series in which the central character is Bosch's half-brother, an LA criminal defence lawyer named Mickey Haller who operates out of his limousine, hence the title of the first book in the series "The Lincoln Lawyer".

The latest book in this series is "The Gods of Guilt", a story that is absorbing and set principally in and around an LA courtroom as Haller and his small team defend a client who, unusually for them, is actually innocent in this case of the murder of a prostitute with which Haller's pimp/client has been charged. Neither the police in LA nor the California judicial system come off looking well. It is a great story well written by a novelist who knows his way around the courts, the police and the bestseller list.

John Lawton is an accomplished English novelist who has, among other books, written seven novels featuring a Scotland Yard detective Inspector Troy, from a wealthy upper class family but very far from being a Lord Peter Wimsey-style twit. The series follows him from being a beat constable in the 1930s through post-war England.

Lawton's latest novel, "Then We Take Berlin" is not one of the Troy series. It follows the central character, Joe Holderness, from his lower class London adolescence during the years of W.W.II as an apprentice burglar through being drafted just after the war into the Royal Air Force and then, because of a superior IQ test, taken into British intelligence and sent to post-war Berlin, ending up by the 1960s as an undistinguished London private detective. From that role he is drawn back into a Berlin scheme by a former associate.

The plot is absorbing and the writing is up to Lawton's usual high standard. It is the sort of novel that, once begun, one hates to put down.

Robert Harris is an English novelist and former journalist whose books have covered an impressively wide range of subjects and periods, from ancient Rome to a Germany in the 1950s that had not lost the war. In fact this latter novel, "Fatherland", is one of my favourites.

Harris' novels are impressively researched and then presented as highly credible and informative historical fiction. With his latest novel, "An Officer And A Spy", he takes the famous 19th century French political scandal known ever after as the Dreyfus Affair and makes of it a truly riveting story.

Alfred Dreyfus was a captain in the French army and a Jew from a wealthy family at a time of blatant anti-Semitism in French society. He was falsely convicted by the military of spying for France's arch enemy Germany and transported to complete isolation on Devil's Island. His story and its outcome is told through the eyes and words of a French intelligence officer who, becoming convinced that Dreyfus had been railroaded, is instrumental in his eventual release.

This novel, based on an historical case for which much documentation is available, has been turned by Harris into a fascinating novel. It is also further evidence of Harris' superior skills as a novelist.

For me among many other readers the Scottish novelist Ian Rankin is one of the very best crime genre novelists writing in the English language. He is a real favourite of mine as is the character he created and followed in a long standing series of novels -- Edinburgh Detective Inspector John Rebus. He is a joy to read about (although not to know).

A few years ago Rankin retired Rebus from the force and created a new continuing character in the police, Malcolm Fox, an investigator in the Edinburgh police unit called "The Complaints", the title of the first Fox novel, the sort of police unit which in the U.S. is customarily called 'Internal Affairs'. In terms of the rules, their styles and their respective approach to their work Rebus and Fox are opposites.

In his latest novel "Saints Of The Shadow Bible" Rebus is back in the force although on a short term basis, now in reduced rank as a sergeant, and working on an old case which involves a former group of detectives with whom he was a colleague. Also involved with the case from a different direction is Malcolm Fox.

This novel is everything one expects from Ian Rankin: superior writing and a finely  plotted story.

Archer Mayor is a Vermont novelist who, many novels ago, began the story of a Vermont policeman and Vietnam veteran named Joe Gunther. Joe's cases have been varied as have the cases with which he and his small band of detectives have become involved.

The latest in the Gunther series, "Three Can Keep A Secret", has Joe and his bunch involved in a series of cases arising because or in the wake of Hurricane Irene hitting the state hard. The novel is the sort of enjoyable reading one has come to expect from Mayor but it is not a book that offers either writing or plot on a par with the foregoing novels.

Nor does the latest novel (the 7th) by the bestselling American novelist John Sandford featuring the Minnesota state police detective Virgil Flowers who works rural and small town parts of the state. "Storm Front" is an interesting enough tale in which the pursuit of a holy relic to Minnesota by an assortment of middle eastern characters provides levers for Flowers to pull when not polishing his bass boat.

Sandford knows how to keep an interesting story moving along briskly as he has done in his other multi-volume series also set in Minnesota featuring a tough urban cop named Lucas Davenport. Flowers reports to Davenport but doesn't replicate his traits.


When next I devote a column on RickardsRead to books I may focus on several worthwhile
non-bestsellers, unusual in authors and subjects, out of the mainstream but still in print.


About this column:



to set a 'Google alert' in order to receive automatic notice of new
columns as they are posted to, go to

previous columns/blog archive: to access columns go to the blog archive
the links to which are located chronologically in the margin beside each
column as it appears on the website  -- and use the links.