Mutually Beneficial: How One Midwest Mutual Insurer Recovered From Financial Storms

When Iowa mutual GuideOne Insurance began assessing ways to add an infusion of capital to strengthen its balance sheet, the company went to the usual places a mutual of its size might turn to for financial backing.

“We were working with the banker and looked at surplus notes and all those traditional things that mutual insurance companies do, and we just weren’t finding a great solution that we thought was the best fit for our business,” said Tim Fleming, former senior vice president of core commercial lines at GuideOne.

As conversations went on, it became clear that finding the significant capital to meet GuideOne’s needs would be difficult. Like many Midwest mutuals, GuideOne experienced a drop in surplus in the early 2020s driven by rising loss costs and an increase in claims severity.

By 2022, the company’s options were either taking on additional debt or securing more reinsurance, said Ken Cadematori, CEO of GuideOne.

That is until a GuideOne board member brought up a new idea. Bain Capital Insurance was closing in on an inaugural insurance fund of more than $1 billion. Chuck Chamness, a senior advisor for Bain’s insurance portfolio, was a former president of the National Association of Mutual Insurance Companies (NAMIC) who understood the struggles that companies like GuideOne go through to secure funding.

Why not see if Bain would be interested in investing some of its insurance capital into this 78-year-old Des Moines-based mutual?

Initial conversations between Bain and GuideOne left the mutual company’s leaders intrigued but also wary of what the undertaking would mean for their policyholders, according to Cadematori.

“It was probably bigger than we were anticipating and very much a transformational change that we didn’t think we necessarily needed to undergo at that point in time,” said Cadematori “But it did get us thinking.”

As GuideOne leaders pondered their next steps, time was running short for the company to secure funding.

AM Best placed GuideOne’s credit ratings under review with negative implications in July 2023, pointing to a significant decline in surplus and risk-adjusted capital ratios. AM Best noted that a “successfully executed transaction” could prevent a material decline in GuideOne’s capitalization.

GuideOne kept up conversations with Bain over the course of 2023 before landing on a creative solution in late December. Bain would form The Mutual Group, a new insurance platform serving the mutual industry, of which GuideOne would join as the inaugural member.

The deal brought Fleming over to The Mutual Group as its newly appointed CEO, while Chamness joined as chairman.

As part of the transaction, The Mutual Group acquired the operational assets of GuideOne and over 400 of its employees. In return, GuideOne received a $200 million investment used toward strengthening its balance sheet and surplus position.

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Topics Carriers Windstorm