GuideOne Mutual Insurance recently filed an application with the Iowa Insurance Division to reorganize from a domestic mutual insurance company to a stock insurance company. 

The application, if approved by Iowa’s insurance commissioner, would provide West Des Moines-based GuideOne with greater access to growth capital. It also opens up the option for the company to become a publicly traded stock company, according to an insurance industry expert. GuideOne officials declined to comment on the pending application, which is scheduled for a public hearing in mid-February. 

Founded in 1947, the property/casualty insurer’s mainstay for years has been coverage for faith- and community-based organizations. Over the past three years under a new chief executive, GuideOne has entered the small business insurance market, expanded its existing programs line of business, and last year added excess and surplus insurance lines. Those strategies have helped jump-start the company from a $123 million loss in 2017 to a $19 million profit in 2019. 

One of the biggest reasons that mutual insurance companies reorganize as stock companies is to gain greater access to capital, said Kevin Croft, distinguished EMC associate professor of practice and director of the Kelley Center for Insurance Innovation at Drake University. Croft, who has 30 years of experience in the insurance industry, most recently was senior vice president and head of structured products at American Equity Investment Life Holding Co. before joining the Drake faculty in June. 

“Mutuals can only get capital through the debt markets,” Croft said. “So becoming a stock company allows you to grow faster. It also provides an ownership stake for senior leadership through stock options.” 

Becoming a stock company also provides another currency option for an insurer to make acquisitions, as it can use either cash or stock, he said. “The challenge is — are you the Pac-Man or one of the dots? It makes you much easier to be acquired.”  

Under Section 521A of the Iowa Code, Insurance Commissioner Doug Ommen must determine whether the interests of the company’s policyholders “are properly protected and that the plan of reorganization is fair and equitable to the policyholders” — to include potentially modifying the plan of reorganization to protect policyholders’ interests. 

As the state regulator, the insurance commissioner retains jurisdiction over the mutual insurance holding company following such a reorganization. 

One of the largest Iowa-based insurers, Principal Financial Group demutualized to a stock company in July 2001, and on Oct. 23 of that year raised $1.85 million in its initial public offering.  

GuideOne could be on a similar path to becoming a publicly traded company, Croft said, “but they don’t have to go all the way there.” Some companies that reorganize as stock companies remain under a mutual insurance holding company structure, he said. 

The company’s mutual-based slogan was still front and center as of the first quarter of this year in the company’s 2019 annual report. GuideOne CEO Jessica Synder concluded her message to policyholders by stating: 

“As we become more complex, we have to consider what the future roadmap looks like for GuideOne and our ability to make change possible in the marketplace. As the world changes, exposure bases and opportunities change, and so must we. We must get things right in order to flourish and enable our newly-created 70-year start-up company to be That Mutual Company.”