1. What is occurring?
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?
- 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?
4. Will MLMIC get a rating from A.M. Best?
5. Will policyholders receive a payout?
6. Is the receipt of cash by owners of eligible policies taxable?
7. Will any MLMIC director, officer or staff member receive a payout?
8. Will policyholders continue to be owners of MLMIC?
9. How will the demutualization and acquisition affect my insurance policy?
10. Will policyholders continue to receive dividends?
11. What will happen to MLMIC rates?
12. If I have a claim, what will happen?
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. To approve the transaction, we will need at least two-thirds of the votes cast by those eligible to vote. If approved, 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 5/23/2017.