Monday, June 22, 2015

(289) "Economical Mutual Insurance: still playing silly buggers?"

"Economical Mutual Insurance: still playing silly buggers?"

by Alastair Rickard

RickardsRead columns Nos. 284, 285 & 286 (""Economical Insurance Co. & the draft regime for P & C demutualization", parts 1-3) involved comments on and suggestions for amendments to the draft federal regulations that will govern the demutualization/conversion process of Canadian federally regulated mutual property and casualty (P & C) insurance companies like the Economical Mutual Insurance Co. of Waterloo, Ontario which have both 'mutual and non-mutual' policyholders. The draft regulations were published for public comment on Feb.28 this year.

I have received inquiries about whether I thought changes had been or were being made to the draft regulations as the result of comments submitted on the draft regulstions to the Dept. of Finance. I have received nothing directly from Finance in this connection except for acknowledgement of my submissions to Finance on the draft regulations. As for what has happened vis-a-vis the draft regulations I have heard nothing reliable enough to record here.

Questions abound. For example: when will the P & C regulations (with any amendments) be made effective?

If federal Finance Minister Joe Oliver who now faces a serious October election challenge in his downtown Toronto riding is even half as politically astute as his predecessor the late Jim Flaherty he will ensure that these regulations affecting potentially millions of P & C stakeholders (and which are certain to raise complaints and concerns from various quarters) do not become publicly official -- at the earliest -- until after the federal election.

Why? Because there is no net political upside for Oliver or the Conservative government from these regulations, only potential negatives given the approaching election.

On June 24 Economical Mutual will hold its annual meeting in Kitchener, Ontario. Those readers who have followed the Economical/demutualization issues through the more than a dozen RickardsRead columns I have devoted to the subject will recall that having to deal with this can of worms was forced upon the federal government by the Economical Mutual insider group deciding to request to demutualize the company, i.e., to convert it to a stock company.

In fact this process was at root prompted by the fantasy shared by the fewer than 1,000 of Economical's "voting" policyholders:   that they could force the demutualization of the company and share among themselves the $1+ billion in company equity and do so to the exclusion of the company's more than 1 million regular policyholders.

Economical annual meetings have not, since the announcement of the intent to demutualize in December 2010, provided much useful insight as senior management and board -- on behalf of the insider group to which they mostly belong -- played silly buggers with their demutualization fantasy.

As I have noted in more recent commentary this fantasy is now so sharply circumscribed, even by the P & C regulations in the draft form we have seen, that their appearance has doubtless diminished the insider group's enthusiasm for demutualization but also may perhaps shape or at least influence Economical's actual response to the regulations and the process once implemented in final form.

The company's annual meeting this week might even provide a reliable hint or two of senior management and board views about the future. Or maybe not.


In my two most recent RickardsRead columns (Nos. 287 & 288): Parts 1 & 2 of "McCarry, Kanon and other enjoyable reading" two among the novels I recommended were written by Joseph Kanon.

Since then I have read two more of Kanon's novels, all of which are historical thrillers set in various world cities at or just after the end of the Second World War: "The Good German" is set in the devastated Berlin of 1945-46 with an American war correspondent as th chief character; "Stardust" is a story that plays out in Los Angeles and its movie industry in the early post-war period and the nascent American anti-communist hysteria which later reached a zenith of sorts with Senator Joe McCarthy.

I recomment both these novels as good reading and I am part way through reading another Kanon novel set in Venice in the immediate post-war period. It is titled "The Alibi" and is truly absorbing.




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