How a Midwest mutual insurer recovered from financial storms

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

“We were working with the banker and we 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,” he said Tim Fleming, former senior vice president of core business lines at GuideOne.

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

By 2022, the company’s options were to either take on additional debt or secure more reinsurance, said GuideOne CEO Ken Cadematori.

That is until a GuideOne board member came up with 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 companies like GuideOne go through to secure funding.

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

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

“It was probably bigger than we anticipated and very much a transformational change that we didn’t think we necessarily had to go through at the time,” Cadematori said “But it got us thinking.”

As GuideOne’s leaders pondered next steps, time was running out for the company to secure funding.

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

GuideOne continued conversations with Bain throughout 2023 before reaching a creative solution in late December. Bain would form The Mutual Group, a new insurance platform serving the mutual industry, which GuideOne would join as an inaugural member.

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

In the transaction, The Mutual Group acquired GuideOne’s operating assets and more than 400 of its employees. In return, GuideOne received a $200 million investment used to strengthen its balance sheet and surplus position.

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