Economical Insurance cheers Canada rules paving way for listing, sale
TORONTO Feb 27 (Reuters) - Economical Insurance on Friday welcomed rules released by the government of Canada that pave a path for the Canadian property and casualty insurance firm to potentially seek a public listing or a sale.
The government posted the new draft regulations on Friday that potentially allow the company to explore demutualization. The process would allow the company to sell an ownership stake, with eligible mutual policyholders exchanging their current ownership and voting rights for shares in the company.
It is a process that many of Canada's largest life insurance firms went through in the 1990s, but until now regulations did not exist for property and casualty insurers to follow that path. In 2011, the Canadian government began a process to create a regulatory framework to allow property and casualty insurers to demutualize.
The framework released on Friday is now open to a 30-day public comment period. Economical said its board will make a final decision on whether it will proceed with demutualization only once the regulatory framework is finalized.
"With the greater access to capital that demutualization can bring, Economical could make the significant investments it needs to compete on an equal footing with other P&C companies," said Economical's Chair Gerald Hooper, in a statement.
The company, which traces its roots back to the 1800s, said that while the mutual structure has served it well for decades, it restricts its ability to access capital and participate in the ongoing industry consolidation.
A number of major P&C players have announced deals since the time Economical outlined its intention to demutualize more than four years ago, including Intact Financial that bought AXA Group's Canadian operations for C$2.6 billion ($2.1 billion) in 2011; and Dejardins Group that bought State Farm Canada's property and casualty and life insurance assets in 2014.
($1 = 1.2500 Canadian dollars) (Reporting by Euan Rocha; Editing by David Gregorio)
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