Demutualization

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Related to Demutualize: mutualisation

Demutualization

Refers to the process that has come about as the result of many not-for-profit exchanges (mutual companies owned by groups of members) converting to for-profit and then shareholder companies in order to go public.

Demutualization

The process by which a mutual company becomes a publicly-traded company. A mutual company is a company owned by its members or users for the benefit of those members or users. In demutualization, the members give up their rights and receive shares in the company in return, which the (now former) members may then sell. Demutualization happens most often when a stock exchange owned by its members goes public.

As an aside, a mutual company should not be confused with a mutual fund.
References in periodicals archive ?
First, we improve on the existing literature by considering the method of conversion in an effort to gain additional insight into what motivated insurers to demutualize generally and then to explore if the motivations were similar across the firms that chose to fully demutualize versus those that chose to adopt the MHC form.
Economical's mutual policyholders are the owners of the Company, as determined by law, the Company's by-laws and by the precedent of the mutual life companies which were allowed to demutualize in the 1990s.
The National Office also rejected the argument that the payment constituted a charge for the right to demutualize and thus provided the taxpayer with significant long-term benefits in keeping with INDOPCO, Inc.
Any company planning to demutualize must submit a conversion plan to its state insurance commissioner for approval, and its policyholders must vote for demutualization by either a 2/3 or 3/4 margin, depending on the state.
If we apply a relative standard to examine the question of whether policyholders of insurers that demutualize are harmed by underpricing, then the answer becomes "not necessarily.
Apparently, insurers may intend to demutualize to increase surplus or equity through issuing stock, but their rate of return or financial condition does not improve after conversion.
In addition, he said there will be less push among personal lines companies to demutualize because their capital needs are smaller than those of their commercial lines counterparts.
16 /PRNewswire/ -- The Pacific Exchange (PCX) announced today that its Board of Governors unanimously approved plans to demutualize and convert the not-for-profit membership organization into a for-profit shareholder-owned corporation.
In a sponsored demutualization, a mutual company opts to demutualize as part of a decision to be acquired, most typically by a stock company.
The Board of Directors of Security Mutual has agreed to adopt a plan of reorganization under which the company will demutualize in order to convert from a mutual insurance company to a stock company and become a wholly owned subsidiary of The Ohio National Life Insurance Company.
but the latter two companies first must demutualize, converting themselves into stock companies.
Daido Life is the first company to demutualize and become a listed company in the Japanese life sector.