Echelon Financial : EFH Reports Settlement of Litigation and Special Distribution

ECHELON FINANCIAL HOLDINGS INC. - Reports

Settlement of Litigation and Special Distribution to Shareholders

Toronto, August 26, 2020- Echelon Financial Holdings Inc. ("EFH" or the "Company") (TSX:EFH) is announcing the settlement of outstanding litigation and the declaration of a special dividend.

In May 2019, EFH sold Echelon Insurance, its major asset, to CAA Club Group for net proceeds (after adjustments and expenses) of approximately C$170 million.

In June 2019, the EFH Board of Directors declared and paid a special distribution to shareholders of $8.80 per share, or approximately $106 million in the aggregate.

As previously disclosed, in March 2017 EFH sold its European operations, QIC Holdings A/S and Qudos Insurance A/S. Subsequently, the purchaser commenced litigation in Denmark alleging that the Company had misrepresented the condition of the European operations and claiming significant damages of about C$70 million. The Company has denied this claim and has been defending the litigation.

The Board has concluded that it is in the best interests of EFH and the shareholders to settle the litigation for a reasonable amount. The parties have now agreed to a settlement upon payment by EFH of C$7 million.

Accordingly, the Directors have declared a special cash dividend in the amount of C$5.60 per share, for an aggregate of approximately C$67 million. The record date for shareholders entitled to receive the dividend will be September 4, 2020, and the payment date will be September 15, 2020.

The Toronto Stock Exchange (the "TSX") has advised EFH that "Due Bills" are to be used in connection with the trading of the common shares through the facilities of the TSX for the period from and including September 3, until the close of trading on September 15, 2020 (the "Due Bill Period"). A Due Bill is defined in the TSX Company Manual as an instrument used to evidence the transfer of title to any dividend, distribution, interest, security or right to a listed security contracted for, or evidencing, the obligation of a seller to deliver such dividend, distribution, interest, security or right to a subsequent purchaser.

As a result, buyers of common shares during the Due Bill Period will receive the special Dividend, provided they continue to be holders of the applicable common share on the payment date.

The common shares will commence trading on an ex-dividend basis (i.e. without an attached Due Bill entitlement to the dividend) commencing at the opening of trading on September 16, 2020. The Due Bill redemption date will be September 17, 2020 ("Due Bill Redemption Date").

As a result of the common shares trading on a Due Bill basis during the Due Bill Period, those shareholders entitled to be paid the special dividend owing on the Due Bills should expect to receive that payment by the Due Bill Redemption Date. Shareholders prior to the Due Bill Period who do not purchase or sell common shares during the Due Bill Period will not have their applicable special dividend impacted by the Due Bill process.

Following the payment of this special dividend, EFH will continue to focus on its 75% ownership of the Insurance Company of Prince Edward Island which has recently been licensed in Quebec for all lines of business. EFH will have sufficient resources to meet its liquidity needs with roughly $2 million in cash, an additional $1 million in working capital, no meaningful long-term debt, and its sole investment in ICPEI which had a proportionate book value of roughly $13 million at the end of Q2, 2020. The pro forma book value of EFH following payment of the special dividend will be approximately $1.39 per share, or an aggregate of $16.6 million. EFH intends to seek a listing on the Toronto Venture Exchange and to seek to delist from the Toronto Stock Exchange.

The annual general meeting of the shareholders of EFH had previously been scheduled for October 5, 2020. The Company has now rescheduled the AGM for October 27, 2020.

About Echelon Financial Holdings Inc.

Founded in 1998, Echelon Financial Holdings Inc. operates in the property and casualty insurance industry in Canada, providing personal and commercial lines insurance exclusively through the broker channel. The Company distributes insurance products through The Insurance Company of Prince Edward Island. It trades on the Toronto Stock Exchange under the symbol EFH. For more information, please visit efh.ca

Forward-looking Information

This news release contains forward-looking information based on current expectations. This information includes, but is not limited to, statements about the operations, business, financial condition, priorities, targets, ongoing objectives, strategies, litigation outcomes and outlook of EFH. These statements, which appear in this press release generally can be identified by the use of forward-looking words such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "plan", "would", "should", "could", "trend", "predict", "likely", "potential" or "continue" or the negative thereof and similar variations.

This information is based upon certain material factors or assumptions that were applied in drawing a conclusion or making a projection as reflected in the forward-looking information. By its nature, this information is subject to inherent risks and uncertainties that may be general or specific. A variety of material factors, many of which are beyond EFH's control, affect the operations, performance and results of its business and could cause actual results to differ materially from the expectations expressed in any of this forward-looking information.