The Empire Life Insurance Company

Decision

Headnote

NP 11-203 -- Application for relief from the requirement that the Filer shall not file a prospectus in the form of a short form prospectus unless the issuer is qualified under specified sections of National Instrument 44-101 Short Form Prospectus Distributions -- Filer seeking qualification to file a prospectus in the form of a short form prospectus for convertible 5 year rate reset preferred shares -- Relief granted subject to conditions.

Applicable Legislative Provisions

National Instrument 44-101 Short Form Prospectus Distributions, ss. 2.1, 8.1.

June 19, 2015

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (THE "JURISDICTION") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF THE EMPIRE LIFE INSURANCE COMPANY (the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator ("Legislation") exempting the Filer, from the requirement under subsection 2.1(1) of National Instrument 44-101 -- Short Form Prospectus Distributions ("NI 44-101") that the Filer shall not file a short form prospectus in the form of Form 44-101F1 of NI 44-101 unless the Filer is qualified under any of section 2.2 through 2.6 of NI 44-101 to file a prospectus in the form of a short form prospectus and subsection 2.1(2) that the Filer be qualified under any of sections 2.2 through 2.6 of NI 44-101 to file a prospectus in the form of a short form prospectus, in both cases, in connection with the distribution of Series 1 Shares (as defined below) (the "Requested Relief").

Furthermore, the principal regulator in the Jurisdiction has received a request from the Filer for a decision ("Confidentiality Relief") that the application, any supporting materials and this decision document in connection with the subject matter herein ("Confidential Material") be kept confidential and not be made public until the earlier of the date: (i) on which the Filer advise the Decision Maker that there is no need for the Confidential Material to remain confidential; (ii) on which the Filer receives a receipt in respect of the preliminary Non-Offering Prospectus (as defined below); and (iii) that is 90 days from the date of this decision.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(i) the Ontario Securities Commission is the principal regulator for this application; and

(ii) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of Alberta, British Columbia, Manitoba, Saskatchewan, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 -- Definitions, MI 11-102 and NI 44-101 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

(a) The Filer is a stock life insurance company incorporated by Letters Patent on January 11, 1923. The head office of the Filer is 259 King Street East, Kingston, Ontario.

(b) The Filer is governed by the Insurance Companies Act (Canada) (the "ICA") and regulated by the Office of the Superintendent of Financial Institutions (Canada) ("OSFI").

(c) The Filer is not a reporting issuer (or the equivalent thereof) in any province of Canada and, to its knowledge, is not in default of any applicable requirements under the securities legislation thereunder.

(d) The Filer has one wholly owned subsidiary, Empire Life Investments Inc., which carries on business as an investment management firm and is registered as a portfolio manager, exempt market dealer and commodity trading manager in Ontario and as an investment fund manager in each of Ontario, Newfoundland and Labrador and Quebec.

(e) The authorized capital of the Filer consists of (i) an unlimited number of preferred shares without nominal or par value, issuable in series ("Preferred Shares"); and (ii) 2,000,000 common shares without nominal or par value ("Common Shares"). As of the date hereof, the Filer has 985,076 Common Shares issued and outstanding. No Preferred Shares have been issued.

(f) The Common Shares are the only "equity securities" (as defined under National Instrument 41-101 -- General Prospectus Requirements) of the Filer and are not listed or traded on a "short form eligible exchange" as defined in NI 44-101.

(g) The Filer is a direct subsidiary of E-L Financial Services Limited ("ELFS") and an indirect subsidiary of E-L Financial Corporation Limited ("E-L"), an insurance and investment holding company listed on the Toronto Stock Exchange ("TSX") with a market capitalization as at May 13, 2015 of over $2.5 billion.

(h) E-L is the owner of 81% of the equity of ELFS. The remaining 19% of ELFS' equity is owned by Guardian Assurance Ltd.

(i) ELFS is the owner of 98.3% of the Filer's outstanding Common Shares. The remaining 1.7% of the outstanding Common Shares are held by various shareholders, including 0.9% owned directly by E-L, but, as noted above, the Filer is not a reporting issuer (or the equivalent thereof) in any province of Canada.

(j) E-L is a reporting issuer in each of the provinces of Canada. The Filer is the major operating subsidiary of E-L. Although the Filer is not a reporting issuer (or equivalent thereof) in any province of Canada, there is significant disclosure regarding the Filer contained in E-L's public disclosure which is filed on SEDAR. This disclosure has historically included detailed financial disclosure of the Filer in E-L's annual and interim financial statements, a detailed section on the Filer contained in E-L's MD&A, a description of the Filer's business and risk factors in E-L's annual information form and some description of the Filer's executive compensation in E-L's management information circular. Such disclosure is included in the annual information form, annual financial statements and accompanying MD&A filed by E-L on March 6, 2015 and the management information circular filed by E-L on April 1, 2015. E-L has also issued and filed press releases in respect of certain matters in respect of the Filer, including the appointment of a new President and Chief Executive Officer of the Filer in May 2014.

(k) The Preferred Shares may at any time or from time to time be issued in one or more series having such designation, rights, privileges, restrictions and conditions as determined by the board of directors of the Filer. Subject to any rights which may be attached to a series of Preferred Shares or as a result of applicable law, the holders of Preferred Shares are not entitled to receive notice of, attend or vote at any meetings of shareholders of the Filer. For greater certainty, the only voting securities of the Filer are the Common Shares.

(l) Prior to the issuance of any series of Preferred Shares, the particulars of the series, including the rights, privileges, restrictions and conditions of such series must be sent to OSFI.

(m) The Filer proposes to (i) become a reporting issuer pursuant to the filing of and issuance by the Ontario Securities Commission of a final receipt in respect of a non-offering prospectus ("Non-Offering Prospectus"); (ii) file pursuant to section 2.8 of NI 44-101 with the Ontario Securities Commission a notice of intention on the date that the Filer files the preliminary Non-Offering Prospectus declaring its intention to be qualified to file a short form prospectus; (iii) subsequently thereafter create two new series of Preferred Shares, being Non-Cumulative Redeemable 5-Year Rate Reset Preferred Shares, Series 1 ("Series 1 Shares") and Non-Cumulative Redeemable Floating Rate Reset Preferred Shares, Series 2 ("Series 2 Shares"); and (iv) distribute the Series 1 Shares to the public ("Offering") pursuant to a short form prospectus ("Short Form Prospectus"). The Short Form Prospectus will be prepared pursuant to the short form prospectus requirements of NI 44-101 and comply with the requirements set out in Form 44-101F1. The Filer intends to file the Short Form Prospectus in each of the provinces and territories of Canada.

(n) The purpose of the Offering is to increase the Filer's regulatory capital. The Filer intends to confirm with OSFI that the Series 1 Shares and Series 2 Shares will be treated as Tier 1 capital of the Filer for the purposes of the ICA.

(o) The Series 1 Shares and the Series 2 Shares will be substantially identical in all respects except that (i) the dividends payable on the Series 1 Shares will be based on a fixed rate and the dividends payable on the Series 2 will be based on a floating rate; and (ii) the Filer is able to redeem the Series 2 Shares on any date after the fifth anniversary of the closing of the Offering, whereas the Series 1 Shares can only be redeemed by the Filer on the fifth anniversary of the closing of the Offering and every fifth year thereafter.

(p) The Series 1 Shares will be convertible, in certain circumstances, at the option of the holder or the Filer, into an equal number of Series 2 Shares of the Filer. In particular, holders of Series 1 Shares will have the right, at their option, no earlier than five years after the issue date of the Series 1 Share (i.e., at the end of the fixed rate period) and every five years thereafter, to convert their Series 1 Shares into Series 2 Shares on the basis of one Series 2 Share for each Series 1 Share.

(q) The Series 2 Shares will be convertible, in certain circumstances, at the option of the holder or the Filer, into an equal number of Series 1 Shares of the Filer. In particular, holders of Series 2 Shares will have the right, at their option, five years following the end of the floating rate period (usually after 10 years after the issue date of the Series 1 Shares) and every five years thereafter, to convert their Series 2 Shares into Series 1 Shares on the basis of one Series 1 Share for each Series 2 Share.

(r) Holders of Series 1 Shares and Series 2 Shares will not be entitled to convert their shares in certain circumstances if the Filer determines that there would remain outstanding on a conversion date less than 1,000,000 or 500,000 of such shares depending on the initial number of Series 1 Shares that are issued.

(s) The Series 1 Shares and the Series 2 Shares will have a designated rating on a provisional basis and the Filer will satisfy the other ratings requirement as set out in Section 2.3(e) of NI 44-101.

(t) The Filer does not satisfy the qualification criteria in Section 2.3 of NI 44-101 in order to be able to file a prospectus in the form of a short form prospectus for the distribution of the Series 1 Shares because the Series 1 Shares are convertible securities.

(u) The Series 2 Shares will be distributed pursuant to Section 2.42 of National Instrument 45-106 -- Prospectus and Registration Exemptions.

(v) An application will be made to list the Series 1 Shares and the Series 2 Shares on the TSX.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:

1. the Filer is an electronic filer under National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR);

2. the Filer is a reporting issuer in at least one jurisdiction of Canada;

3. the Filer has filed with the securities regulatory authority in each jurisdiction in which it is a reporting issuer all periodic and timely disclosure documents that it is required to have filed in that jurisdiction

(a) under applicable securities legislation,

(b) pursuant to an order issued by the securities regulatory authority, or

(c) pursuant to an undertaking to the securities regulatory authority;

4. the Filer has, in at least one jurisdiction in which it is a reporting issuer,

(a) current annual financial statements, and

(b) a current AIF, or provided the Filer has not yet been required under the applicable CD rule to file any annual financial statements, the Filer has filed and obtained a receipt for a final prospectus that included the Filer's or each predecessor entity's comparative annual financial statements for its most recently completed financial year or the financial year immediately preceding its most recently completed financial year, together with the auditor's report accompanying those financial statements and, if there has been a change of auditors since the comparative period, an auditor's report on the financial statements for the comparative period;

5. the securities to be distributed

(a) have received a designated rating on a provisional basis,

(b) are not the subject of an announcement by a designated rating organization or its DRO affiliate, of which the issuer is or ought reasonably to be aware, that the designated rating given by the organization may be down-graded to a rating category that would not be a designated rating, and

(c) have not received a provisional or final rating lower than a designated rating from any designated rating organization or its DRO affiliate; and

6. the Filer files the Short Form Prospectus pursuant to the short form prospectus requirements of NI 44-101 and complies with the requirements set out in Form 44-101F1.

The further decision of the principal regulator under the Legislation is that the application of the Filer, any supporting materials and this decision document in connection with the subject matter herein be kept confidential and not be made public until the earlier of the date: (i) on which the Filer advise the Decision Maker that there is no need for the Confidential Material to remain confidential; (ii) on which the Filer receives a receipt in respect of the preliminary Non-Offering Prospectus; and (iii) that is 90 days from the date of this decision.

"Kathryn Daniels"
Deputy Director, Corporate Finance Branch
Ontario Securities Commission