미국 보험상호회사의 비상호화 = A Demutualization of American Mutual Insurance Company

다국어 초록 (Multilingual Abstract)

The insurance industry is, regardless of its product, is organized under two
basic corporate structures. One is a stock company, the other is a mutual
company. A stock insurance company is owned by its shareholders. A mutual
insurance company has no shareholders and is instead owned by its
policyholders.
At the end of 1999, 1470 life insurance companies were in the United
States. Although mutual companies account for only 106 of the 1470 life insurance
companies(7% of the total), they accounted for 21% of the total insurance assets,
17% of premium income, and 36% of life insurance in force.
Since 1996, some mutual life insurance companies have either completed
or announced plans to reorganize into a different corporate structure.
One might wonder why changing the corporate structure has become
attractive to mutually owned companies in recent years. The answer to this
question lies in the dynamics of the financial services industry in which the life
insurance is a part. Demutualization and smaller firms’ competitive shortcomings
ensure that the trend towards consolidation and convergence will continue in the
coming years.
Many mutual life insurance companies see themselves as significantly
182 金融法硏究제2권 제2호(2005)
The Korean Journal of Financial Law, Vol. 2, No. 2 (2005)
A Demutualization of American Mutual Insurance Company
Noh Il Seok
handicapped in competition against their larger and more diverse publicly-held
stock competitors.
Mutual life insurers have no authority to issue shares of capital stock and
consequently have limited access to market sources of permanent equity capital. A
mutual company can raise capital, primarily, only through generating and retaining
earnings. There are sizeable risk-based capital requirements and other significant
regulatory controls and restrictions for mutual insurance company to acquire a
subsidiary company, depending on the size of the acquisition.
At least five merits drive the trend toward the restructuring of the mutual
life insurance companies: a need for increased access to capital and financial
flexibility; enhanced corporate structure flexibility; ability to use stock as an
acquisition currency; management recruitment and accountability; and tax savings.
The conversion of a mutual life insurance company to a stock life
insurance company is typically accomplished by one of two methods-a full
demutualization or the formation of mutual life insurance holding company
(MHC). Both of these options enable the mutual company to raise capital by
issuing stock.
In a full demutualization, the ownership interests in the mutual company
are extinguished in exchange for cash or stock of the controlling entity. Thus the
members receive an immediate, direct economic benefit. The controlling entity can
be either the stock life insurance company into which the mutual life insurance
company is converted or an existing or newly formed stock holding company that
owns all of the stock of the converted mutual company. Generally, as an integral
part of the process, the new stock holding company conducts an initial public
offering (IPO) of its stock. Although most stock holding company is formed by
the mutual company as a part of the demutualization process, there is no reason
an affiliated company could not sponsor a mutual life insurance company’s
demutualization and provide to the coverting mutual’s policyowners cash or stock
consideration in exchange for the extinguishment of their membership interests.
In an MHC reorganization the mutual insurance company restructures itself
by organizing into two separate entities-an mutual holding company and a stock
insurance company. The policyowners’ membership interests in the mutual life
insurance company are exchanged for membership interests in the newly-formed
MHC. As a result, the policyowners’ membership interests in the MHC will be
similar to their membership interests in the mutual life insurance company prior to
the reorgan...