CUNA Mutual Seeks To Change 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 MHC, CMIS would become a stock subsidiary of MHC; policyholders would own the MHC.

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. "The current policyholders will simply move up in the structure," said Post.

One driver in the decision, said Post, is an accounting rule for mutual insurance companies related to goodwill. When CUNA Mutual acquired agricultural insurance provider ProAg, 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.

Post emphasized the change is not an indicator of any intentions to demutualize the company, noting there will be no stock issued and the narrower mutual holding company charter it is seeking will actually make demutualizing more difficult. "This makes us a stronger mutual," said Post.

Similarly, the company is also not currently seeking to raise capital, with Post noting CUNA Mutual currently has more capital than it did before the recession began. "Raising capital is really a timing specific issue," said Post. "But as we learned five years ago, you can never have too much capital."

CUNA Mutual has held a conference call with league presidents, met with CUNA, is sending a letter to CU CEOs, and a 90-page document to all policyholders explaining the move. The mutual holding company plan must be approved by regulators and a two-thirds majority of a policyholder vote.

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