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Mahebub Rupani

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Did demutualization lead Canada Life to extinction?

Manulife's hostile and followed by Great-West Life's 'friendly' takeover bid for Canada Life reminds one of the 'flip flop' game that Canada Life (and indeed other Canadian insurance companies) have been playing with demutualization. Was Canada Life overly optimistic that, after the acquisition of Crown Life and demutualization, the company would better its competitive edge in the market against, perhaps, sharper competitors?

The bid by Manulife and Great-West should put in question the qualitative wisdom of Canada Life's demutualization, particularly considering that mutualization some 38 years earlier was a protective shield to avoid just the type of takeover bids Canada Life was facing.

And what happened with Canada Life's intended entry in Chinese and Indian markets?

Who benefited the most at Canada Life as the takeover by Great-West succeeded?

Pity the employees, particularly, ex-Crown Life employees who must have experienced stressful moments since the announcement that Canada Life would acquire the former. The stresses felt by the staff then must have recurred with the Great-West takeover bid, only this time ex-Crown Life employees would be accompanied by Canada Life staff, together some 1,200

Takeover bid story:
$6.4 billion hostile takeover bid of Canada Life by Manulife
Canada Life urges rejection of Manulife's hostile takeover bid

Dessertation, Demutualization and Acquisition
(appx. 5,000 words, submitted to The Chartered Insurance Institute, London, England, July 15, 1999)

Demutualization and Acquisition
Mutual insurance companies scramble to expand

- Topics:
Forms of demutualization
The process of demutualization
Government Regulations
Competition from non-traditional insurance providers
"... changes taking place in the insurance industry aroused a gut feeling that the intense competition of the nineties, from the banking industry and department stores, all wanting a share of the shrinking pie, drove the traditional insurers to consolidate their respective positions in the marketplace. For some, changing the corporate structure was a matter of survival, while for some others it was a question of gathering momentum for future growth."
Demutualization the best method
The Mutual - first to announce intention to demutualize
Sun Life
Canada Life
Flip flop
Strategy for growth
Fairness in demutualization
Staff concerns
..."Stress can arise from a shift in employee attitudes, as the organizational culture changes. Employees who have always served the needs of policyholders alone must, upon demutualization, address the requirements of other stakeholders - investors and the public financial marketplace. Running the company on behalf of the policyholders alone would no longer be sufficient and employees must, in addition, maximize profits and returns on investors’ equity." ...

"A dreaded phenomenon extensively characteristic of North American workplace and gathering momentum in other parts of the world is the unpredictable rearing of the monstrous head of ‘layoff’. That phenomenon, although an accepted way of North American lifestyle, has affected loyalties flowing in both directions, from the employee to the employer and vice versa. Each party looks out for its own interest first. The falling level of loyalty has caused the annual staff turnover in many companies to reach alarming levels, as much as 15% or more." ...
Burnout and stress levels
Bite too big
Insurers vs. banks