Mutual policyholders of The Economical reject dissidents’ motion to replace the company’s current board of directors

Mutual policyholders of The Economical Mutual Insurance Company voted 649-192 on May 26 against a motion that would have removed its current board of directors and replaced it with directors named by VC & Company Advisory Ltd.VC & Company, a Toronto firm, represented dissident mutual policyholders that questioned the current board’s commitment to demutualize. VC & Company called for mutual policyholders to support a motion at the company’s annual general meeting in Kitchener on May 26 that called for “the removal from office, effective immediately, of all directors of Economical whose term in office would otherwise continue following completion of the meeting.”The company noted 930 mutual policyholders were eligible to vote at the company’s annual general meeting. One hundred and thirty-six showed up to vote in person, and 580 voted by proxy, representing 77% of the eligible voters.After three hours of speeches and questions, mutual policyholders voted against the VC & Company motion. Subsequently, they voted for a slate of three board members recommended by the current board of The Economical, rejecting VC& Company’s three candidates for the board. The three board positions were open for election based on the company’s normal staggered election of directors. The current board of The Economical announced on Dec. 10, 2010 that it would be pursuing a strategy to demutualize. If successfully carried out, the company would be the first property and casualty insurance company in Canada to demutualize under the federal Insurance Companies Act.Karen Gavan, a board member of The Economical and head of a special committee working on the demutualization, gave a speech at the meeting outlining the progress the company has already made towards demutualization. She expressed concern that replacing the current board would simply delay the work that has already been done. She said The Economical could be ready to demutualize within six months of the federal government approving new regulations for a P&C demutualization. The federal government must create new rules for a P&C insurance company demutualization. This is expected to be a priority in the government’s upcoming budget.Finance Minister Jim Flaherty has already said publicly no company would be allowed to demutualize until regulations are in place.