First friendly society set to demutualise
Members of theOver 50s Mutual Friendly Society are expected to approve the demutualisation of the group at a meeting in Melbourne next Tuesday which could lead to further societies heading in the same direction.
It is expected that the members of Over 50s will approve the demutualisation at the meeting after the society's directors and the expert report have recommended members vote yes to the proposal.
Other friendly societies, such as IOOF, have talked about demutualisation in the past and a positive outcome to Over 50s moves could speed up their plans.
At the last IOOF AGM, managing director Rob Turner said the subject was under review, but didn't put any timescale on a decision to demutualise.
The Over 50s proposal will see members given shares in a new company ? OFM Investment Group.
If the demutualisation goes ahead, the society's management fund, which is about $50 million, will be transferred to the new company. This company will then managed Over 50s $1.4 billion of member's funds.
A total of 40 million shares are to be issued in the new company and all members of Over 50s will receive 180 shares as their minium allocation.
Further shares will be issued on the basis of the value of the policies they have with the society and the length of time they have been with the society.
The Over 50s board plans to list the shares in the new company on an exempt market first and then on the ASX by June, 2003.
According to the expert report, by PricewaterhouseCoopers Securities, the shares would trade in a price range of between $1.10 and $1.35 a share.
In its report PwC believes the advantages of demutualisation would enable Over 50s to use its funds better for future expansion. The move would also make the board more accountable and the members could gain benefits from the increased value of their shares on an open market.
The disadvantages of the demutualisation are the members would be in conflict with subsequent policyholders who might not own shares. The cost of running the company will also increase which may be seen as a disadvantage by some members, the report says.
If the demutualisation proposal is rejected, the society will continue to wind down due to the falling membership and a steady reduction in funds under management, the directors say.
In 1992, the combined funds under management of Over 50s and Mutual Friendly Society, (the two merged this year) was about $2.3 billion. This has fallen to $1.4 billion this year.
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