CUNA Mutual Seeks Change in Structure

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MADISON, Wis. — CUNA Mutual Group plans to ask its policyholders to approve a plan to convert CUNA Mutual Insurance Society to a mutual holding company structure from its current mutual insurance company structure. Under a mutual holding company, CUNA Mutual Insurance would become a subsidiary of holding company; policyholders would own the holding company.

In an interview with Credit Union Journal, President/CEO Jeff Post said the move is being pursued to enhance capital flexibility and in response to narrow accounting rules that apply to mutual insurance companies.

Post stressed the move will not affect in any way the ownership rights or shares of current policyholders, and is not an indication of any intention to demutualize. "The current policyholders will simply move up in the structure," said Post.

One driver in the decision to pursue the new structure, said Post, is an accounting rule for mutual insurance companies related to goodwill. When CUNA Mutual acquired agricultural insurance provider ProAg several years ago, it began carrying $50 million in related goodwill on its balance sheet.

"Today's accounting rules do you allow you to write down that goodwill," said Post. "We are capped due to this accounting provision to putting no more than $30 million in more goodwill on our books."

Post said that factor, along with the capacity to raise capital more inexpensively under the new structure, do not mean an acquisition is in the offing, adding the company has nothing in its sights. "We are doing this simply to get more flexibility in accounting rules; that's it," said Post.

The mutual holding company plan must be approved by a two-thirds majority of a policyholder vote. The plan also requires regulatory approval.

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