1. What is occurring?

MLMIC, as a mutual insurance company, is currently owned by its policyholders. Policyholders’ ownership interests in MLMIC are known as “Policyholder Membership Interests.” These Policyholder Membership Interests include the right to vote on matters submitted to a vote of members (such as the election of directors) and the right to participate in any distribution of surplus, earnings and profits.

Demutualization is the process by which a mutual insurance company converts from a company that is owned by its policyholders into a stock insurance company that is owned by its shareholders. In a sponsored demutualization, the stock of the converted mutual is acquired by a sponsor. National Indemnity Company (“Sponsor”), a subsidiary of Berkshire Hathaway Inc., is the sponsor of the proposed demutualization of MLMIC. If the proposed demutualization of MLMIC is approved by both policyholders and the New York State Department of Financial Services (the “Department”), and the conditions are satisfied or waived in accordance with the plan of conversion and the acquisition agreement, all Policyholder Membership Interests will be extinguished, and Sponsor will become the sole owner of MLMIC.

2. Why is MLMIC demutualizing?

After careful deliberation, the Board of Directors of MLMIC determined that becoming a wholly owned subsidiary of the Sponsor following the completion of the demutualization, and thereby becoming a member of the Berkshire Hathaway group of companies (the “Berkshire Hathaway Group”) is in the best interests of MLMIC and its policyholders because, among other things:
  • such affiliation will help ensure the continuity of MLMIC’s medical professional liability insurance and other business and will enhance the competitiveness of MLMIC;
  • MLMIC will become a member of a group that includes other insurers that specialize in providing liability insurance coverage to healthcare providers. The affiliation will provide additional healthcare contacts and insights for MLMIC;
  • such affiliation will enhance MLMIC’s financial strength and will provide MLMIC with greater resources to back its obligations to policyholders and to underwrite additional business; and
  • such affiliation will provide MLMIC with increased flexibility to support the growth of existing product lines.

3. Why is Berkshire Hathaway interested in acquiring MLMIC?

Berkshire Hathaway values our operations, Board of Directors, staff and endorsed partners and is committed to MLMIC’s future success and its dedication to serving policyholders. Berkshire Hathaway’s CEO Warren Buffett said, “MLMIC is a gem of a company that has protected New York’s physicians, mid-level providers, hospitals and dentists like no other for over 40 years. We welcome the chance to add them to the Berkshire Hathaway family and enhance their capacity to serve these and other policyholders for many years to come.”

4. Will MLMIC get a rating from A.M. Best?

MLMIC is currently not rated by A.M. Best but will seek a rating from them once the transaction closes. National Indemnity Company is rated A++ by A.M. Best.

5. Will policyholders receive a payout?

Once the transaction is completed, each owner of an eligible policy will be entitled to receive a proportionate share of all of the cash consideration paid by National Indemnity Company. In most cases, the person or entity that paid the premium will be considered as the owner of the eligible policy. As required under the New York Insurance Law, proportionate shares will be determined by dividing the premium paid on each eligible policy from July 14, 2013, through July 14, 2016, by the total premium MLMIC received for all policyholders during that period. Such proportionate share will then be multiplied by the cash consideration received from National Indemnity Company to determine the amount of cash allocable to such policyholder. We currently estimate that each owner’s cash entitlement will be approximately equal to the sum of the premiums paid to us on the applicable eligible policy during such three-year period. Please note that this is an estimate only and that the actual amount will be determined as of closing and in accordance with all applicable New York insurance law and regulatory requirements. Policies issued with an effective date on or after July 15, 2016, will not be eligible for this cash payout.

6. Is the receipt of cash by owners of eligible policies taxable?

The receipt of cash by owners of eligible policies will be a taxable transaction for U.S. federal income tax purposes.

7. Will any MLMIC director, officer or staff member receive a payout?

No MLMIC director, officer or staff member will receive any of the cash consideration payout from National Indemnity Company in connection with the transaction other than any proportionate share such person is entitled to receive in their capacity as an eligible policyholder.

8. Will policyholders continue to be owners of MLMIC?

Following the conversion from a mutual to a stock company (and subsequent acquisition by Sponsor), policyholders will no longer have an ownership interest in MLMIC and all Policyholder Membership Interests will be extinguished.

9. How will the demutualization and acquisition affect my insurance policy?

Policyholders will see no change in MLMIC’s operations and commitment to policyholder-first service. Consummation of the sponsored demutualization will not increase premiums or reduce the coverage under your Policy.

10. Will policyholders continue to receive dividends?

After the transaction is completed, policyholders will no longer have an ownership interest in MLMIC and, as such, will not receive any dividends.

11. What will happen to MLMIC rates?

MLMIC will remain a licensed insurer of New York State, regulated by the Department. Premium rates for physicians will continue to be set by the Department. Premium rates for hospitals, dentists, mid-level providers and other lines of business will continue to be approved by the Department.

12. If I have a claim, what will happen?

There will be no change in our claim handling, operations or philosophy of providing a strong defense against claims brought against our policyholders.

13. What are the next steps?

The transaction is on track and progressing forward in accordance with the measures and actions required under New York Insurance Law Section 7307 (NYIL §7307), designed to protect “the interests of the policyholders and the public.”

We are, however, disappointed that the process is taking slightly longer than anticipated. We had anticipated a culmination of the process in the third quarter of 2017. We are now hopeful that the process will be completed by year end 2017.

Policyholders can expect several major milestones to occur between now and the expected close of the transaction.

The estimated timeline for these milestones is currently as follows:

1. In accordance with NYIL §7307, MLMIC is being examined by the NYS Department of Financial Services (DFS) to assess the financial condition of the Company. That examination is expected to be completed during the second quarter of 2017.

2. In accordance with NYIL §7307, the DFS will also conduct an independent valuation of the Company to assess the fairness of the cash consideration to be paid by Berkshire to owners of eligible MLMIC policies from July 14, 2013 through July 14, 2016. This valuation is expected to be completed during the third quarter of 2017.

3. In accordance with NYIL §7307, once the examination and independent valuation are done, MLMIC’s Board will request permission from the Superintendent to submit a Plan of Conversion for approval by DFS. MLMIC will then prepare and disseminate detailed information regarding the Plan of Conversion to all of those who are eligible to vote (i.e. those who were policyholders on July 14, 2016) on this transaction. The Superintendent will then hold a public hearing regarding the Plan of Conversion. Following this hearing, the Superintendent will review the Plan of Conversion, and if approved, will authorize MLMIC to conduct a vote.

4. In accordance with NYIL §7307, we expect to hold a vote of those eligible to vote on this transaction during the fourth quarter of 2017. If two-thirds or more of those voting elect to proceed with the transaction, the transaction will close and Berkshire will authorize distribution of payments shortly thereafter.

In the meantime, MLMIC will continue to provide the policyholder-first service it has delivered to healthcare providers in New York State for over 40 years.

Information updated as of 2/15/2017.