FIRST Mutual Life says $10 billion worth of free assets will be distributed to shareholders in the society’s transformation into a quoted company with two billion shares issu
ed to qualifying policyholders in an exercise expected to boost consumer-spending power.
“We believe the number of shares to be issued is sizeable to give capacity for growth although we are yet to determine the average share price to be used,” Douglas Hoto business unit executive and chief actuary said in an interview.
Hoto said as at December 31 2002 from the total insurance company funds of $34,8 billion, free assets to be distributed were valued at $10 billion while $24,8 billion would go towards supporting benefits into the future.
More than 200 000 policies would participate in the de-mutualisation process. The first shareholders of the group would be the qualifying policyholders who will receive free shares with an option to sell.
About a third of individual shareholders are expected to sell shares at outset while the remaining shareholders are expected to hold on to their shares. Pension schemes are however, not expected to sell at outset, the chief actuary said.
The amount of shares that are likely to be sold at the outset was likely to be dependent on the market valuation of the share at the time of listing but Hoto says the amount was likely to be significant owing to the economic difficulties prevailing, “although in-vestor sentiment towards insurance companies might affect the share price.”
Policyholders are due to approve the demutualisation proposal at an EGM to be held tentatively on June 26 this year.
The business unit executive said the society has completed the first three stages of the process which included the processing of cutting off eligibility with the cut off date being March 31, the confirmation of policyholders’ details and policy details confirmation of which as at April 30, 70% of responses had been received.
The three-stage process that has been completed precedes the allocation of free shares, which is expected to be completed by the end of this month, resulting in the indication of shares allocated to each member and inviting members to vote on the proposal.
Hoto said the scheme document that describes benefits derived from demutualisation, provides an explanation on how shares were allocated and the post-demutualisation arrangement, among other things, would be sent together with abridged reports from the reporting actuary and an independent actuary appointed by the Commissioner of Insurance.
The report confirms that the scheme protects members’ interests and that it complies with the Insurance Companies Act.
First Mutual will be the second mutual society after Old Mutual, which demutualised and listed on the ZSE in 1999.