Last week, UK regulators approved the sale of the asset management and life insurance businesses of The Co-operative Group to Royal London for £219 million.
The Financial Conduct Authority and Prudential Regulation Authority approved the Royal London plan to fill a large gap in its finances and allow it to enter the Stock Exchange.
The sale should go through at the end of July and CIS will then become a limited company with the name of Royal London (CIS).
History of the Co-operative Insurance Society
In March 2013, The Co-operative Group announced the intention to also sell its general insurance operations. If this transpires, it will mark the end of nearly 150 years of co-operative insurance within Britain.
The Co-operative Insurance Society (CIS) was established in 1867, providing fire insurance for retail societies that were a part of the co-operative movement.
When it was taken over by the co-operative wholesale societies in 1912, CIS became part of The Co-operative Group.
After a £138million profit the year before, the company suffered a £662million loss in 2012. A poor economy was blamed for this disappointing performance and the company made some moves to counteract the effects.
Its insurance arm was put up for sale so the company could strengthen its capital position and begin focusing on its banking activities.
Between the end of 2012 and first quarter 2013, the core tier-one capital ratio of the bank, used to measure financial strength, increased from 8.8 to 9.2 percent, exceeding the regulatory minimum.
Co-operatives Flourish Elsewhere
Britain may seem to be shunning co-operative insurance but this cover is flourishing in other parts of the world. Co-operatives who want to insure with their own rather than using a commercial insurer have led to the establishment of several successful co-operative insurers.
Established in 1951, Zenkyoren is currently the largest co-operative in the world, servicing the life, liability, and property insurance needs of the Japanese agricultural industry. In Canada, it was predated by six years by the Co-operators insurance company.
Zenkyoren, the Co-operators insurance company, and most other co-operative insurers are secondary co-ops that are not owned directly by individual members but by a consortium of credit unions, co-ops, and other organizations.
The co-operative movement has extended to all corners of the world, with co-ops and credit unions working to create national co-operative insurance companies in Malawi and other countries.
The International Co-operative and Mutual Insurance Federation (ICMIF) reports that since the global financial crisis that began in 2007, the insurance industry market share held by mutual and co-op insurers has increased from 23.7 to almost 27 percent.
Shaun Tarbuck, CEO of ICMIF, noted that mutual insurers and co-ops are more actively marketing their unique attributes including a different structure of governance, member-ownership, business sustainability, and profit-sharing.
This is a drastic change from what occurred in Britain during demutualization, when major insurers converted from member-owned establishments into plcs.
Demutualization caused Britain to have the smallest mutual and co-op insurance market share of all major economies.
Royal London is the largest pensions and life mutual in the nation so the life business of the Co-operative Group will be in good hands. There is still potential for cancellation of the general insurance sale.
However, if this goes through, the company will still sell its rebranded insurance products under the name of Co-operative Insurance with underwriting provided by another organization.