The Wawanesa Mutual Insurance Company

900-191 Broadway
Winnipeg, Manitoba R3C 3P1
Canada
Telephone: (204) 985-3923
Fax: (204) 942-7724
Web site: http://www.wawanesa.com

Private Company
Founded: 1896
Employees: 1,747
Total Assets: $1.39 billion (2003)
NAIC: 524126 Property and Casualty Insurance Carriers

The Wawanesa Mutual Insurance Company, based in Winnipeg, is Canada's largest mutual insurer. It also offers automobile insurance in California and Oregon through San Diego-based subsidiary Wawanesa General Insurance Company. Wawanesa Mutual offers personal, homeowners, business, farm, and automobile coverage through 1,300 independent insurance brokers spread across Canada, with the exception of Quebec, where it relies on company agents. A subsidiary, The Wawanesa Life Insurance Company, offers individual products, life insurance and investment products, as well as group products, including group life, disability, and health and dental products. Unlike its parent corporation, which is owned by policyholders, Wawanesa Life is a stock company.

19th Century Roots

Wawanesa Mutual takes its name from the small Canadian town of Wawanesa, located in southern Manitoba just north of where Minnesota and North Dakota meet. The insurer was founded in 1896 by friends Alonzo Kempton and Charles Kerr, but it was Kempton who was the driving force behind the venture. As a young man he moved from Nova Scotia with his parents to Manitoba in 1891. He wanted no part of the farm his father bought, preferring to find other work. A jovial, although sometimes gruff, man, he proved to be a natural salesman. He also developed a drinking problem that would plague him during his adult life. Selling out of a horse and buggy, Kempton peddled pots and pans and washing machines before turning to fire insurance, which he sold for an eastern stock insurance company. Farmers desperately needed fire insurance, due in large part to the wooden threshing machines in use during this period. They burned straw and threw off dangerous sparks. In addition, coal-oil lamps were a major fire hazard. But Kempton grew frustrated with the product, which was not tailored to the needs of western farmers. The insurance was expensive and required that the customer pay the premiums upfront, at the beginning of the year, several months before farmers were paid for their crops.

According to company lore, Kempton hatched the idea for organizing a mutual insurance company to serve farmers while sharing a jug of whiskey on a sales trip in 1895 with Kerr, another Manitoba transplant who became an accountant. The concept of a mutual company was not foreign to the men or their potential customers; it was the spirit behind the cooperative movement among farmers. By pooling their resources, Kempton reasoned, farmers would be able to obtain reasonably priced fire insurance. He and Kerr supposedly pitched their idea to an influential wheat farmer named Alexander Naismith, who agreed to participate but only if the two men took the "Keeley" cure for their drinking—referring to the Keeley Institute. The men agreed and took the cure, but according to a Keeley director quoted in MacLean's Magazine in a 1954 company profile, "Kerr stayed with it for the rest of his life. Kempton stayed with it until he got home."

Kempton planned to establish the new insurance company in the village of Glenboro, but cure or no cure, Kempton was not welcome, banned by the town's fervent temperance league. Instead, he traveled 19 miles to the west to the more accommodating town of Wawanesa, thus depriving Glenboro the honor of having a major insurance company named after it. Kempton spent the summer of 1896 visiting farmers, trying to convince them to contribute $20 a piece to start a mutual insurance company. Twenty signed on, and on September 25, 1896, a provincial charter was granted to establish The Wawanesa Mutual Insurance Company. Drawing on its modest funds, the company rented a room above a drugstore, which, ironically, was owned by a future managing director, Dr. C.M. Vanstone. Kempton was named the first managing director, with Kerr serving as accountant, and seven of the 20 original investors acting as directors. Just two weeks later Wawanesa wrote its first policy, covering a thresher for $600 for three years at a premium of $24.

Unlike the stock insurance companies, Kempton did not demand payment up front. Rather, farmers signed an assessment note, which was to be paid after they sold their crops in the fall. The note plan was a major factor in Wawanesa's early success and would be used by the insurer in one form or another for the next 75 years. Despite this innovation, however, Wawanesa struggled in the early years, forcing the directors to sometimes guarantee personal notes at the bank to meet claims. Changes were needed and in 1898 the company split the business into two branches: Thresher and Farm, the latter offering fire insurance for farm buildings. Wawanesa soon phased out coverage for threshers, which proved to be too risky a business, and started covering schools, churches, and other buildings. Wawanesa also looked westward to what would become the provinces of Saskatchewan and Alberta. By the start of the 1900s Wawanesa covered more than $1 million in property, and confidence in the future of the enterprise was strong enough that in 1901 the company bought a lot and erected a brick building for its new headquarters.

Steady Growth in the Early 1900s

Wawanesa grew at a rapid clip, so that by 1907 it was covering $20 million in property, and by 1910 it was claiming to be the largest mutual fire insurance company in Canada. An important step was taken in 1913 when the finance committee moved beyond bank deposits to begin investing in farm mortgages. Prudent investments would become an important component in the insurers' future growth. Wawanesa prospered during World War I, adding Victory Loan Bonds to is investment portfolio, and by the end of the war in 1918 the amount of insured property reached 75 million. To maintain the company's momentum, Kempton took Wawanesa into British Columbia in 1920. He also retained the company's independence. While a number of western mutual companies in 1918 formed an alliance, the Western Canada Mutual Fire Insurance Association, to reinsure one another's business, Wawanesa elected to go it alone. In the 1920s Wawanesa also displayed an innovative spirit in the area of fire prevention. It manufactured dry powder fire extinguishers and made them available to policyholders who lived far from a fire department, and later made a smaller version suitable for tractors. In addition, during these pre-electricity days, Wawanesa offered Little Wonder Lantern Snufflers and fireproof matchboxes.

Although Kempton had well served Wawanesa policyholders in many respects, he also ran the company with an autocratic hand, often fought with his directors, and insisted that his secretary type up his profanity-laced dictations verbatim. He also never lost sight of his own personal interests. In 1901 he launched the stock-owned Occidental Fire Insurance Company to reinsure Wawanesa policies. Occidental shared Wawanesa office space and personnel. Kempton was also involved in a number of outside business ventures, including a mortgage company (Occidental Trust), a land development company, The Wawanesa Wagon Seat Company, and the Canada Hone company, which made leather razor straps and a "magnetized" honing paste that was supposed to be just as useful in curing hemorrhoids as it was in sharpening razors. Kempton also lived large, building a massive house in town powered by an electric generator and staffed by a Chinese cook, who often served him raw oysters that he had shipped in from Nova Scotia by the barrel. He showed off his wealth by driving around in the town's largest car. His saving grace appeared to be a genuine fondness for children. He was quick to dispense nickels to them and often piled as many as would fit in his car for an excursion.

On occasion Kempton threatened to quit if the Wawanesa board did not accede to his plans, and although the board backed down, his manner created simmering animosity. After Kerr died in 1920, Kempton's drinking problem worsened, as he would be out of the office for days at a time engaged in one of his periodic drinking binges. Business began to suffer, so that when he threatened to quit in January 1922, the Wawanesa board promptly accepted his resignation, and when he tried to rescind his resignation at a subsequent meeting the directors reaffirmed their acceptance of it and asked him to immediately turn over the keys to the building and clear out. Enraged, Kempton moved to British Columbia where he would ultimately die a pauper in 1939, remembered by locals for his wild claims about having founded the great Wawanesa Mutual Insurance Company.

Taking over as managing director at Wawanesa was Dr. Charles Morley Vanstone, a man with a personality that was the mirror opposite of Kempton. He was disciplined and methodical, traits that would prove useful as Wawanesa dealt with a downturn in the Canadian economy in the early 1920s. He cut costs and diversified the company's business even further. Wawanesa began covering private buildings in towns and cities and in 1928 added automobile insurance. Other mutual insurers did not fare as well, however, and Wawanesa would absorb 11 struggling mutuals over the next decade. In 1930 Wawanesa received a Dominion of Canada charter, allowing it to operate in every province, leading to the opening of offices in Vancouver and Toronto in 1930. By 1935 additional offices would open in Montreal, Winnipeg, and Moncton. As a result of this expansion, Wawanesa was able to operate during the Depression years of the 1930s with little ill effect. All told, Vanstone's 21-year tenure as the head of Wawanesa was very successful, and left the organization financially sound and highly regarded in its field.

Company Perspectives:

Since 1896, Wawanesa has insured people from all walks of life, in their work and in their play.

Adding Life Insurance in the 1950s

Due to poor health, Vanstone stepped down in 1943, replaced as managing director by H.E. Hemmons. During his five years at the top, Wawanesa decentralized its operations, granting branch managers a great deal of latitude to take advantage of local market conditions. This change would help spur even further growth. By the mid-1950s Wawanesa was Canada's fourth largest fire insurance company and the fourth largest automobile insurance company. Serving as general manager at this stage was Milton C. Holden, a former school teacher and part-time Wawanesa salesman, who ascended to the top post in 1948. Under Holden, Wawanesa began charging drivers under the age of 25 a 30 percent premium while lowering the general rate. This change, Holden once told a reporter, "sweetened up our business." In the late 1950s Holden petitioned the government to engage in the life insurance business. The request was eventually granted and in 1961 The Wawanesa Mutual Life Insurance Company was launched. Because of the need for additional executive and technical staff, the move into the life insurance business also led the company to move its corporate offices from Wawanesa to Winnipeg.

But after granting the company a new business, a few years later the government took some away. A new government came into power in Manitoba in a 1969 election and created a public insurance corporation. As a result, Wawanesa lost two-thirds of its automobile business in the province. British Columbia followed suit in 1974. Holden stepped down as Wawanesa's president in 1971, stayed on as chairman, then passed away in 1975. His handpicked successor, Claude Trites, a 34-year veteran of the firm, had to deal with the loss of the automobile business. Wawanesa looked to the U.S. market. An initial impulse to move into nearby North Dakota was rejected in favor of the more lucrative California and New York markets. The company settled on California, and in 1975 Wawanesa was granted a license to sell insurance in the state and opened an office in San Diego. It proved to be a wise choice in location, as the population in the region grew 500 percent within 20 years. In Canada, Wawanesa made up for the loss in auto insurance premiums by expanding into other areas of property and casualty insurance. With this growth came the need for a new office building in Winnipeg, opening in 1976. By the end of the decade, Wawanesa also would launch a new branch office in Calgary and a second location in Alberta. Trites retired as president at the close of 1981, having played a crucial role during a transitional period in the company's history.

Selected as just the sixth person to head Wawanesa was Ivan Montgomery, who had been with the insurer for 23 years. During the 1980s he had to deal with unpredictable interest rates as well as intense competition, which forced Wawanesa to underprice its policies. Significant underwriting losses occurred throughout the industry. But because of the investment strategy instituted decades earlier, Wawanesa continued to grow its business and increase profits. Even while many firms struggled during the difficult economic conditions that prevailed in the late 1980s and early 1990s, Wawanesa was able to hold steady.

Montgomery stepped down as Wawanesa's president in 1992, replaced by Gregg J. Hanson, the company's current president. At age 41 he was the youngest person since Kempton to lead the company. An accountant by training, he joined Wawanesa in 1979, just four years after graduating from college, and quickly rose through the ranks. He tackled the problem of underwriting losses by raising deductibles, a change that cut down on the number of frivolous claims and resulted in a return to underwriting profits. He also oversaw the conversion of the life insurance company from mutual to stock ownership, making it a fully owned subsidiary. In addition, Hanson was responsible for converting Wawanesa from a mainframe computer environment to a personal computer-based network, a move that resulted in a significant increase in productivity. By the middle of the decade, Wawanesa had more than 1.2 million policies in force and its assets topped $1.5 billion.

Wawanesa celebrated its 100th anniversary in 1996. The company now faced new challenges, from Canadian banks, which were now allowed to sell insurance products, and from consolidation within the insurance industry. Nevertheless, Wawanesa was able to continue expanding its business into the new century and looked forward to ongoing growth. Wawanesa enjoyed the further advantage of having a seasoned, yet relatively young chief executive in Hanson, who recognized how to keep the company competitive. As he told Manitoba Business in 1999, "The status quo is never an option, you're either moving forward or you're being left behind."