Proposed Merger Information
Below are brief answers to frequently asked questions about the proposed Plan of Merger of Gem State Insurance Company (“Gem State”) with Ohio Mutual Insurance Group, Inc. (“Ohio Mutual”). Policyholders should carefully review the more detailed discussion about the proposed Plan of Merger that will be included in the forthcoming Member Information Statement, which qualifies all the information presented in these answers and should be considered authoritative if there is any apparent contradiction between content in this document and the Information Statement.
What is the transaction that is being proposed?
Gem State and Ohio Mutual have agreed to a merger of Gem State into the Ohio Mutual mutual holding company system. To facilitate the merger, Gem State will (1) re-domesticate from Idaho to Ohio and (2) reorganize into a stock insurance company with the existing Gem State policyholder membership interests in Gem State transferred to Ohio Mutual, a mutual holding company (MHC). This reorganization and merger is subject to member approval and regulatory approvals, including approval from the Idaho and Ohio Departments of Insurance as described below.
What do I need to know about Ohio Mutual?
Ohio Mutual is a nearly $500M mutual property & casualty insurance company founded in 1901 and headquartered in Bucyrus, OH. Its products are sold exclusively through a network of 500+ independent agents throughout eight states: CT, IN, ME, NH, OH, RI, VT, and WI. Ohio Mutual currently employs about 260 associates. Ohio Mutual has maintained a rating of “A / Stable” from A.M. Best Co. for 33 consecutive years, and has been honored as one of the top 50 insurance companies in the nation (Ward’s 50) nine times since 2009. Additional company information is available at omig.com.
What is a mutual insurance holding company?
A mutual insurance holding company is a legal entity organized under state law to serve as the corporate parent (i.e., the controlling shareholder) of an insurance company that has been converted from a mutual company to a stock company.
By reorganizing and merging into a mutual holding company, Gem State policyholders’ contractual rights and insurance policies will remain with Gem State, but their mutual ownership interests in Gem State will become membership interests in Ohio Mutual. After the Reorganization and Merger, Gem State will be a stock subsidiary of Ohio Mutual. As a mutual holding company, Ohio Mutual is a mutual organization, operated for the benefit of its members. Numerous other property and casualty mutual insurance companies across the country have converted and are operating under the mutual holding company structure – some for decades.
Does Gem State’s Board of Directors have a recommendation for policyholders on voting?
After careful consideration and thorough deliberation, the Gem State Board of Directors has unanimously approved the Reorganization and Plan of Merger and the transactions contemplated thereby. Accordingly, the Gem State Board of Directors unanimously recommends that policyholders vote FOR the Plan of Merger at the Special Meeting.
Did Gem State’s Board consider any alternatives to this Merger?
The Gem State Board of Directors considered other alternatives, including remaining independent. Gem State’s Board determined that the opportunities provided by partnering with Ohio Mutual were the best option to achieve its strategic goals and to benefit its policyholders. The Gem State Board of Directors strongly believes in the benefits of mutuality and in enhancing the overall strength and stability of Gem State by ensuring its long-term financial success and stability through its Merger with Ohio Mutual.
Why did Gem State agree to the reorganization and merger with Ohio Mutual?
Gem State’s interest in merging with Ohio Mutual was based on several factors, including:
- Gem State will be able to significantly lower the risks associated with the spread of risk by executing territorial and line of business expansion.
- Gem State will be able to substantially expand its Idaho footprint and product offerings, serving as Ohio Mutual’s Idaho operational branch.
- Gem State will be able to dramatically increase the speed to market for product enhancements and technology implementation by leveraging the capabilities of Ohio Mutual while achieving economies of scale.
- Gem State will be able to access a stable and cost-effective reinsurance program.
- Over time, there will be opportunities to lower expense ratios through thoughtful and judicious strategic and operational planning, as well as efficiencies gained through the combined entity.
- Gem State’s Policyholder Surplus will be combined with Ohio Mutual’s Policyholder Surplus.
Why does Ohio Mutual want to bring Gem State into its organization?
Ohio Mutual’s interest in merging with Gem State was based on several factors including, but not limited to:
- Ohio Mutual will gain access to the Idaho market through Gem State.
- Over time, Ohio Mutual will gain geographic and weather pattern exposure diversification with the addition of Gem State’s policy and premium growth.
- Gem State’s Policyholder Surplus will be combined with Ohio Mutual’s Policyholder Surplus.
- Ohio Mutual will benefit from the talent of the Gem State associates and knowledge of the Idaho market.
- Over time, Ohio Mutual may be able to reduce the expense ratio of the combined enterprise through combined business functions and other economies of scale.
Are there any regulatory approvals that must be obtained?
Yes. To complete the Merger, Gem State will need to engage in the transactional steps noted below. Each of these transactions requires regulatory approval in whole or in part by the Idaho and Ohio Departments of Insurance. While each of these steps require separate regulatory approval, we expect each step and related approval to occur substantially simultaneously.
- Step 1 – Redomestication – Gem State will qualify to engage in the business of insurance in Ohio and will then re-domesticate its state of domicile to Ohio from Idaho and become an Ohio mutual insurance company.
- Step 2 – Merger – The Reorganization will be accomplished through a merger of Gem State into Star Garnett, Inc. (a wholly owned subsidiary of Ohio Mutual), with Gem State continuing as the surviving organization.
- Step 3 – Reorganization – Gem State will reorganize from a mutual insurance company to a stock mutual insurance company, with policyholders’ membership interests transferring to Ohio Mutual and contractual rights under their policies remaining with Gem State.
When is the Merger expected to be completed?
The Merger is expected to close in the third quarter of 2026.
Are there any potential disadvantages or risks associated with the Merger?
There are potential disadvantages and risks associated with the Merger, including, without limitation, the challenges of combining two companies, the uncertainty of maintaining key business relationships in Idaho, the costs and distractions of completing the Merger, and the possibility that the anticipated benefits of the Merger may not materialize.
How will the Merger affect the financial strength of the companies?
Gem State is currently rated “A – Unsurpassed” by Demotech, Inc. The company’s AM Best rating is currently “NR – Not Rated.” With the Merger, it will benefit from Ohio Mutual’s AM Best financial strength rating of “A” Excellent with a Stable Outlook.
Will the Merger result in the relocation of any company headquarters?
No. Gem State’s headquarters are not expected to be closed or relocated as a result of the Merger. Ohio Mutual intends to utilize the current headquarters as the Group’s Idaho Branch. Ohio Mutual’s headquarters will remain in Bucyrus, OH.
What will happen to the Gem State brand?
Reorganized Gem State will continue offering products and services under its existing brand after the Merger.
How will the Merger affect policyholders’ surplus?
The policyholders’ surplus of the Reorganized Gem State will become surplus of Ohio Mutual. Post-merger, Gem State will be protected by the surplus of the entire Group.
Will there be any changes to the rights and benefits of policyholders under insurance policies previously issued by Gem State or Ohio Mutual?
No. The merger will not result in any changes to current insurance policies.
Will there be any significant management changes as a result of the Merger?
Upon consummation of the Reorganization and Merger, the directors and officers of Ohio Mutual will become the directors and officers of Gem State. The current management of Gem State will be offered employment with Ohio Mutual, focused on the Idaho market.
Do any of Gem State’s directors or officers have interests in the Merger that may differ from or be in addition to the interests of the members?
No.
What are my current rights as a policyholder of Gem State and how would the proposed MHC Conversion and Plan of Merger affect those rights?
As a policyholder of Gem State, you have two types of interests in Gem State: (1) contract rights arising from your insurance policy with Gem State; and (2) membership rights arising from your status as a member of Gem State.
Contract Rights: Your contractual rights will not be affected in any way by the proposed Reorganization and Merger. Your insurance policy with Gem State will remain a contractual obligation of Reorganized and Merged Gem State and there will be no changes to your insurance coverage, claims payments, premiums, or benefits as a result of the Reorganization and Merger.
Membership Rights: On the effective date of the Reorganization and Merger, you will cease being a member of Gem State and you will instead become a member of Ohio Mutual, the mutual insurance holding company. On the effective date of the Merger, Gem State will become a subsidiary of Ohio Mutual.
Is there an intention to issue stock following the Plan of Merger?
No. The Board of Ohio Mutual does not have any plans to issue stock in any entity after the proposed Plan of Merger is completed. All of the stock of Converted Gem State will be held by Ohio Mutual within its mutual holding company structure.
Do I have to attend the Special Meeting to vote?
No, Policyholders may vote in person at the Special Meeting or by proxy as described in the forthcoming Member Information Statement and accompanying proxy form. Results of the policyholder vote will be announced at the Special Meeting and online at gemstateinsurance.com.
How can I vote on the Plan of Merger?
Policyholders will receive a membership communication that includes a “Member Information Statement,” which contains instructions on how to vote and how to reach us regarding the election, should you have any questions. Gem State policyholders are being asked to vote on the Plan of Merger in person at the Special Meeting or by proxy. Properly completed proxy forms must be received by Gem State not less than five (5) days prior to the date of the Special Meeting in order to be counted.
What should I do if I have other questions about the proposed Plan of Merger?
If your question is not answered in these Frequently Asked Questions, we invite you to contact us at 208-934-0960 or online at: https://secureformsolutions.com/form/gemstateinsurance.com/contact