Georgia’s largest medical malpractice insurer aims to convert from a “mutual’’ company to a stock company, according to filings with the state insurance department.
Atlanta-based MAG Mutual is a leading carrier in the Southeast for physician coverage and has about half of the medical malpractice insurance market in Georgia.
Mutual companies are owned by policyholders. The proposed reorganization, if approved by policyholders and state Insurance Commissioner Ralph Hudgens, would create a new mutual holding company. That entity would then form an “intermediate” holding company, which would own a converted stock insurance company.
Policyholders would own the mutual holding company but would not receive stock.
“This really is a structural matter only, with 100 percent of the company being owned by our policyholders, both before and after the transaction,’’ said MAG Mutual Executive Vice President Joe Cregan in an email to GHN. “Their ownership, voting and policyholder rights all remain intact.”
“We have sent a communication about the … proposal to each of our policyholders and will be further communicating with them directly.”
Cregan said Wednesday that the stock would not be publicly traded.
According to the National Association of Insurance Commissioners, the most common motive for converting from a mutual to a stock company is the desire to raise capital to fund growth.
The state insurance department will hold a public hearing on the proposed MAG Mutual reorganization plan May 31. The agency recently rejected a MAG Mutual request to not hold a hearing.
“Right now we’re calling for an open, transparent and public process,’’ said Jay Florence, deputy insurance commissioner.
Florence said it would be the first time a mutual insurance company in Georgia converts to a stock company.
MAG Mutual, in a letter this month to state regulators, said “there are no offerings of voting stock to officers, directors or any other persons. Nor have we made any offer of voting stock to members.”
The reorganization will benefit policyholders, the letter to the insurance department states. The new structure “provides greater flexibility – and we believe greater financial stability and competitiveness – for the long-term benefit of … current and future policyholders.’’
MAG Mutual provides medical professional liability insurance in several Southeastern states.
The company recorded more than $915 million in policyholders surplus during 2016, according to the insurance department.