Editing Demutualization (section)

== Types of demutualizations ==
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There are three general methods in which an organization might demutualize, '''full demutualization''', '''sponsored demutualization''', and into a '''mutual holding company (MHC)'''. In any type of demutualization, insurance policies, outstanding loans, etc., are not directly affected by the organization's change of legal form.

* In a '''full demutualization''', the mutual completely converts to a stock company, and passes on its own (newly issued) stock, cash, and/or policy credits to the members or policyholders. No attempt is made to preserve mutuality in any form. However, in a full demutualization of a [[mutual savings bank]], stock is issued to investors in an [[initial public offering]], while the depositors, who theoretically owned the bank before demutualization, do not automatically receive stock and must separately invest. Under United States federal and state regulations, depositors receive first priority to purchase the stock before any other investors.<ref>{{Cite web|url=https://www.sec.gov/reportspubs/investor-publications/investorpubsmutualconversionhtm.html|title=SEC.gov {{!}} Mutual-to-Stock Conversions: Tips for Investor|last=[[U.S. Securities and Exchange Commission]]|website=www.sec.gov|access-date=2019-08-21}}</ref>
* A '''sponsored demutualization''' is similar; the mutual is fully demutualized and its policyholders or members are compensated. The difference is that the mutuality is essentially ''bought'' by a stock corporation. Instead of receiving stock in the formerly mutual company, stock in the new parent company is granted instead.
* A '''mutual holding company''' is a hybrid concept, part stock company and part mutual company. Technically, the members still own over 50% of the company as a whole. Because of this, they are generally not significantly compensated for what would otherwise be viewed as loss of property. (This is also why many jurisdictions, including [[Canada]],<ref>{{cite web|title=Demutualization Regime for Canadian Life insurance Companies, page 16 (August 1998) |publisher=Department of Finance, Canada |url=http://www.fin.gc.ca/toce/1998/demutual_e.html |access-date=2007-01-08 |archive-url=https://web.archive.org/web/20061208235606/http://www.fin.gc.ca/toce/1998/demutual_e.html |archive-date=2006-12-08 |url-status=dead }}</ref> disallow the formation of MHCs.) The core participants are isolated into a special segment of the company, still viewed as "mutual". The rest is a stock company. This part of the business might be publicly traded, or held as a wholly owned subsidiary until such time that the organization should choose to go public.

Mutual holding companies are not allowed in New York where attempts by mutual insurance to pass permissible legislation failed. Opponents of mutual insurance holding companies referred to the establishment of mutual holding companies in New York as "Legalized Theft".{{citation needed|date=July 2020}}

Some MHC demutualizations have been planned as the first of a two-stage process. The second stage would be full demutualization once the transition pains into MHC status are complete. In other cases, the MHC is the final stage.

Note that some mutual companies, such as [[Nationwide Mutual Insurance Company]] and the [[Massachusetts Mutual Life Insurance Company|MassMutual]], have owned stock companies listed on a stock exchange. Nationwide bought back its subsidiary stock company in full, on December 31, 2008.<ref>{{cite press release |url=http://www.nationwide.com/newsroom/nf-merger-news-release.jsp |title=Nationwide Mutual Completes Nationwide Financial Services Transaction |date=January 2, 2009 |access-date=7 April 2012}}</ref> These are not MHCs, however; they are simply mutual companies which have majority control over one or more stock companies. Other mutual companies may own some of another company's stock, but as simply an asset, not something they actually control. Finally, many mutual companies, including Nationwide and MassMutual, have wholly owned subsidiaries. The subsidiaries may technically be stock companies, but the mutual owns all the stock. For example, the ''New York Life Insurance and Annuity Corporation'' (NYLIAC) is a wholly owned subsidiary of the [[New York Life Insurance Company]] (NYLIC). A person may purchase an insurance policy from either company, but only those who own participating policies from NYLIC are mutual members. Other policyholders are customers.