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.
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., 503 US 79 (1992).
The conventional response to this heightened competition has been to demutualize
, moving capital to a holding company that is free to make more attractive investments and subjecting it to the demands of the stock market.
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." The average underpricing for the demutualization sample is lower than that for the overall IPO sample, which includes all industries.
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.
By statute, if a firm fully demutualizes
, the mutual's policyholders must be given some form of compensation for this organizational change since they are relinquishing their ownership interests.
And even though the potential of an improved equity market and economy could tempt some to demutualize
, most mutual holding companies are comfortable where they are.
Daido, based in Osaka, would be Japan's first mutual insurance company to ''demutualize
In a sponsored demutualization, a mutual company opts to demutualize
as part of a decision to be acquired, most typically by a stock company.
and Asahi Mutual Life Insurance Co., but the latter two companies first must demutualize
, converting themselves into stock companies.
First, companies can take steps to lessen the risk that policyholders will ever want to demutualize
. Second, companies can create roadblocks to the formation and success of an inappropriate or untimely demutualization movement.