The board of directors of Lebanon Mutual Insurance Co. of Cleona, Pa., has adopted a plan to convert the insurer from a mutual to a stock organization.
Under the plan, Lebanon will convert from a Pennsylvania mutual insurance company to a Pennsylvania stock insurance company pursuant and will become a wholly-owned subsidiary of a newly formed holding company incorporated at the direction of Lebanon.
Lebanon has more than 100 agents and writes only in Pennsylvania. Seventy-percent of its business is commercial lines, mostly Main Street small business type accounts.
The plan must be approved by the Pennsylvania Department of Insurance and a vote of at least two-thirds of the votes cast at a meeting of the eligible policyholders of Lebanon.
Rollin Rissinger, president of the company, said the company is looking to raise capital under what is a sponsored conversion plan.
Griffin MTS Partners LLC, a private equity investment vehicle, will act as sponsor of the conversion. Griffin has agreed to advance all costs associated with the conversion from mutual to stock form and to absorb these costs in the event the transaction is not completed for any reason other than the abandonment of the transaction by Lebanon. In addition, Griffin has agreed to purchase up to 35 percent of the stock offered in the conversion.
Shares of common stock of the newly formed holding company will be offered at a predetermined and uniform price first to eligible policyholders; second, to a tax-qualified employee stock benefit plan to be established by Lebanon; third, to the directors, officers and employees of Lebanon; and fourth to Griffin in an amount not to exceed 35 percent of the total. Shares not subscribed for in the subscription offering may be offered to the general public in a community offering. Agents of Lebanon and individuals living in Berks, Dauphin, Lancaster and Lebanon Counties will be given preference in the community offering. Shares remaining unsold, if any, may then be offered to the general public in an underwritten public offering.
The aggregate purchase price of the common stock to be sold in the offering will be based upon an independent appraisal of Lebanon which has not yet been made. The appraisal will reflect the estimated pro forma market value of Lebanon.
Lebanon estimates that the offering will be made in the third quarter of 2008.
Lebanon Mutual began writing fire insurance for local businesses, dwellings and farms in 1856. Its charter was granted on June 18 of that year.
In 1996 its direct written premiums stood at just over $12 million while its policyholder surplus was less than $5.5 million. At the end of 2006, it reported written premiums had “increased modestly” while its policyholder surplus had nearly doubled.
Source: Lebanon Mutual
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