American Family Mutual Insurance Co., headquartered in Madison, Wis., announced the filing of a plan to create a mutual holding company that it says would provide more flexibility to pursue customer-driven initiatives while preserving the company’s founding principle of policyholder ownership.
The plan was recently approved by the company’s board of directors and filed with the Wisconsin Office of the Commissioner of Insurance (OCI). The plan is subject to OCI review and approval, as well as approval of existing policyholders of American Family Mutual Insurance Co.
Coverage, premium rates and claims handling under existing American Family insurance policies would be unaffected by the change to a mutual holding company. Company and agent operations would also be unaffected, according to the company’s announcement.
American Family operates as a mutual company and is owned by its policyholders. Under the proposed restructure, American Family would continue to operate under the principles and culture of a mutual company. A mutual holding company would be the group’s new parent company, with American Family Mutual Insurance Co. (AFMIC) becoming a stock subsidiary with 100 percent of the stock ultimately controlled by the mutual holding company.
Policyholders of American Family Mutual Insurance Co. would exchange their membership rights for similar membership rights in the mutual holding company. Certain membership rights, as permitted by law, would also be extended to policyholders of certain other American Family group subsidiaries.
“Through the years, American Family has established new subsidiaries to facilitate expansion into new states and offer new products through our American Family agents,” said David Holman, American Family chief strategy officer and corporate secretary. “Policyholders of certain subsidiaries don’t have membership rights now, but would have these rights under the new structure.”
In addition, a mutual holding company structure would allow American Family to extend membership rights to policyholders of new subsidiaries it could create to offer new products in the future.
The mutual holding company would be legally domiciled in Wisconsin, joining American Family Mutual Insurance Co. and other subsidiaries, including several that are being re-domiciled to Wisconsin for efficiency and tax reasons.
The board of directors and officers of the holding company would be the same as the board of directors and officers of American Family Mutual Insurance Co. prior to the change. Also, American Family board members, officers and other employees would not receive any additional compensation, stock or benefits as a result of this change.
A mutual holding company would create additional flexibility to invest in or acquire non-insurance companies, using an intermediate holding company that would facilitate those transactions. A mutual holding company structure would also better position American Family to consider future potential mergers and acquisitions with other mutual insurance companies, the company said.
Under Wisconsin law, conversion to a mutual holding company is subject to a public administrative hearing and prior approval from the insurance commissioner’s office. Following those steps, the company would seek approval from eligible policyholders who would vote by proxy, mailed to them with an information booklet that thoroughly explains the conversion plan, or in person at a special policyholder meeting.
Dates for the administrative hearing, proxy mailing and policyholder meeting are still to be determined. The company hopes to complete the process by the end of 2016.
Source: American Family Insurance Co.