Demutualization of Insurance Companies

Lon · Post by **Lon** » Wed Sep 17, 2008 9:01 am

For many years there were many insurance companies that operated strictly as mutual companies that were actually owned by policy holders and nary one single stockholder. For the most part they were very well run with profits being paid to policy holders via dividends and the salaries of CEO's quite reasonable in contrast to other industries. We have seen big companies like Prudential, Connecticut Mutual, Mass Mutual and others go from being a mutual to a stock owned company.

What brought this about was the more favorable tax situation applied to Stock Owned Insurance Companies that put the Mutuals at a tax disadvantage. Had a company like AIG been operated as a mutual I doubt that they would have ever been in their present mess.

QUINNSCOMMENTARY · Post by **QUINNSCOMMENTARY** » Wed Sep 17, 2008 9:59 am

I doubt that follows. Prudential and MetLife are two of the biggest and they have not gotten into the mortgage related mess that AIG did and both of those were mutual companies that converted. I think part of the move was the ability to raise capital and expand into new businesses.

Lon · Post by **Lon** » Wed Sep 17, 2008 10:13 am

QUINNSCOMMENTARY;986507 wrote: I doubt that follows. Prudential and MetLife are two of the biggest and they have not gotten into the mortgage related mess that AIG did and both of those were mutual companies that converted. I think part of the move was the ability to raise capital and expand into new businesses.

That's true, but my point is that if AIG ha been run as a Mutual, I doub't that they would have gotten into the mortgage mess.

QUINNSCOMMENTARY · Post by **QUINNSCOMMENTARY** » Wed Sep 17, 2008 3:45 pm

Lon;986523 wrote: That's true, but my point is that if AIG ha been run as a Mutual, I doub't that they would have gotten into the mortgage mess.

Perhaps, don't know. Maybe if Greenberg was still there it would be different, who knows, but I do know that my company pension trust fund just lost $12 million on Lehman Brothers. The good news is it is out of $2 billion.