State of Oregon Approves Standard's Demutualization Plan.

PORTLAND, Ore.--(BUSINESS WIRE)--Feb. 16, 1999--Standard Insurance Company's plan to become a public company took a major step forward Friday, Feb. 12 when Oregon's Department of Consumer and Business Services (DCBS) issued an order conditionally approving the company's demutualization plan.

The company now will submit its plan to a vote of its policyholder members.

The state's approval followed a Jan. 27 public hearing on the demutualization plan, held in Portland by Michael Greenfield, Director of Oregon's Department of Consumer and Business Services and the state's chief insurance regulator. Among other things, Greenfield found that Standard's plan to demutualize "protects the rights of the policyholders" and "will be fair and equitable to the members."

"The applicable provisions of (Oregon state law) have been fully met," Greenfield wrote in his order. The order is conditional upon Standard making a limited number of modifications to the plan, which Standard has agreed to make.

Under the terms approved by the state, the plan will not become effective until policyholder approval and completion of an initial public offering (IPO). The company will mail the plan, a ballot and financial and other information to its eligible policyholder members this week. If the plan is approved by a majority of policyholders who vote, Standard can proceed with an IPO of stock in its newly formed holding company, StanCorp Financial Group, Inc. A special members' meeting to vote on the plan has been set for March 19, 1999.

Standard is currently a mutual life insurance company, owned by its policyholder members. That ownership, however, cannot be transferred and has limited economic value. Greenfield concluded that Standard's demutualization provides a fair allocation of consideration to policyholders, who will receive shares of stock, cash or policy credits in exchange for their illiquid membership interests.

Standard also demonstrated that demutualization would not increase premiums or reduce policy benefits, guarantees or other policy obligations of the company. "When our board of directors first authorized management to develop a plan of demutualization, it emphasized that policyholder interest should at all times be the primary consideration. We have adhered strictly to this instruction," Ron Timpe, Standard's Chairman, President and CEO, told Greenfield and other DCBS officials at the public hearing.

Timpe also noted that, in addition to serving the best interest policyholders, demutualization will allow Standard to enhance its financial strength and increase its growth potential. "Enhanced access to capital markets will permit the company to grow its existing business and develop new business opportunities," Timpe said. Greenfield's order notes the effect of Standard's plan on future insurance buyers in Oregon: "To the extent the plan will further position Standard to continue its operations and implement future growth, implementation of the plan will protect the insurance buying public."

Timpe said that Standard' s current strong financial position provides a good foundation for the decision to become a public company. "Our Board of Directors and management team believe that the time to strategically reposition Standard is at a time of relative strength and when the path to future success is clear. We believe that time is now."

Founded in 1906 in Portland, Oregon, Standard offers life and disability insurance and retirement plans for individuals and groups plus group dental insurance. The company insures more than four million people nationwide.