The Benefits of Reorganization
The proposed reorganization offers many benefits to policyholders. The new structure will provide greater access to increased capital and surplus. Improved operating efficiency enhances the company’s ability to offer even more competitive pricing. Additional benefits are listed below.
Greater Financial Strength
The reorganization will create a very large and financially strong regional property insurance company. As a subsidiary under the new structure, South Carolina Farm Bureau Insurance Company will have a much broader spread of risk and greater access to capital. With a bolstered balance sheet and greater geographic diversification, South Carolina Farm Bureau Insurance Company will be less susceptible to catastrophic loss events and policyholders ultimately benefit from the enhanced financial security.
Improved Spread of Risk
Moving from separate single state mutual companies to a regional insurance company writing in four states will provide a much broader spread of risk. A single state mutual company is vulnerable to localized storms due to its geographic concentration. By joining together and merging into a regional property insurance company with operations in four states, this allows for a good spread of risk which is a crucial factor for stability and success.
With the completion of the merger and reorganization, the entire property operation will have common management and a common board of directors. Common board direction and management will ensure that goals and objectives to protect capital and promote growth will be uniformly pursued and applied in all states for the benefit of the Farm Bureau members. Our merger and reorganization provides centralized management of the capital at risk in the property operation, including the use of a combined sophisticated catastrophe reinsurance program.
Improved Economies of Scale
The merger and reorganization will result in increased opportunities to achieve cost savings across the four states. The reorganized company will possess greater purchasing power than each single state mutual company. The reduction of expenses will allow the company to offer more competitive rates, which in turn will provide the opportunity to grow its insurance book of business and Farm Bureau membership.
Higher Investment Yields
A consolidated investment portfolio should result in higher yields due to the ability of the group to purchase larger blocks of issues, which generally would be priced more favorably than the smaller ones. This could also result in savings on transactional costs.
Due to the merger and reorganization, the company stands to benefit by the offsetting of tax gains and losses generated from different geographic regions in which the group operates. The company may also receive favorable premium tax treatment by writing through domestic subsidiaries.
Easier to Attract Farm Bureau Companies
The creation of a mutual holding company (MHC) structure provides a much better mechanism for new Farm Bureau states to join the regional property operation. Attracting new state partners to our growing company is an exciting possibility that comes as a result of restructuring.
Contact Us for More Information
If you have additional questions about the proposed reorganization that have not been answered on this website, you may email us at Growing@scfbins.com and someone will be in contact with you soon.