[D093]

demutualization

The process where an insurance company owned by its policyholders (a mutual company) converts its charter to that of a company owned by shareholders (a stock company). The process may involve returning to the policyholders shares of stock or other value for their loss of ownership interest (membership rights) in the mutual company prior to the company conversion to a stock company. The process is regulated by the state where the demutualizing company is domiciled. More and more states are permitting a hybrid approach (mutual holding company) that combines both mutual policyholder ownership and marketable stock.

(See mutual holding company.)