Iowa’s insurance commissioner on Wednesday heard testimony from GuideOne Mutual Insurance executives to consider the company’s application to reorganize from a domestic mutual insurance company to a stock insurance company.

The reorganization, which would be conducted through two separate transactions, is expected to enable the West Des Moines-based insurer to increase its access to growth capital and to be better situated to acquire companies in the future as well as generate greater operating efficiencies, company executives said. The plan is the result of an evaluation of the company’s corporate structure that GuideOne’s board of directors initiated in 2018. As part of its exhibits, GuideOne filed a public copy of the reorganization plan with the insurance commission.   

GuideOne CEO Jessica Snyder said that one of the potential benefits would be the ability to raise equity capital in the future through a public stock offering, though there are no current plans to do so.

“The reorganization allows us to create financial flexibility for all the organizations under GuideOne,” Snyder said. Under its present ownership structure, the company’s only option for raising capital is to issue surplus notes, a type of debt that is expensive to use, she said.

Under Section 521A of the Iowa Code, the insurance commissioner 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.

Under the proposed plan, which received no opposition at the virtual public hearing, policyholders of what are currently GuideOne Mutual and GuideOne Specialty will become shareholders with ownership interests in the new holding company that will be formed, to be called GuideOne Holdco. The holding company will hold, either directly or indirectly, 100% of the stock of the reorganized insurance subsidiaries. After the reorganization, GuideOne Mutual would be renamed GuideOne Insurance Co.

Snyder and other GuideOne executives testified during the hearing that the reorganization is in the best interests of and protects all policyholders. The reorganization, which if approved is expected to be completed March 31, will not result in any changes in the company’s directors, officers or operations, said Andy Noga, GuideOne senior vice president and general counsel. Also, all policy terms and premiums would remain unaffected. The company further expects there will be no changes to its financial strength rating, which is currently A- (excellent) by AM Best.

Asked during the hearing whether the company intends to pay dividends to members once they are shareholders, Noga said that a dividend plan “has yet to be developed.”

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 Snyder’s leadership, GuideOne has entered the small business insurance market, expanded its existing programs line of business, and last year added excess and surplus insurance lines. The company reported a $19 million profit in 2019; 2020 financial results have not yet been released.

The insurance commissioner has 30 days to issue a decision on the two limited applications for reorganization. Under the terms of the plan, at least two-thirds of GuideOne members must approve the plan at a special meeting that would be convened by the company.