MassMutual still under pressure to go public

While other mutual life insurance companies are happily converting to public ownership, MassMutual is fighting an effort by a policyholder group to force it to go public.

Such conversions have meant a windfall for many policyholders even as they provide management with improved access to capital markets and the ability to match banks’ resources.

Since 1992, more than a dozen mutual insurance companies have demutualized and distributed more than $40 billion in cash, stock and policy credits to their policyholders.

In November, John Jameison, a retired Butler, Pa., lawyer and former minister and radio talk show host, formed the MassMutual Owners Association and mounted a campaign to urge the Springfield, Mass., insurer to convert to a stock company and distribute its surplus assets to policyholders.

Chairman and CEO Robert O’Connell quashed the effort at Massachusetts Mutual Life Insurance Co.’s annual meeting in April, and the company changed its bylaws to make it more difficult for policyholders to bring future proposals to a vote without approval from the board of directors. But the association is determined to fight on.

Meanwhile, policyholders of Principal Financial Group Inc. will be the latest to collect a windfall. Investment bankers are expected to kick off the road show this week for the Des Moines, Iowa, mutual life insurer, the latest such company to offer shares to the public.

As part of its estimated $2.2 billion offering, slated for early October, Principal plans to distribute 260 million shares to policyholders in exchange for their membership interests.

At $19.50 per share, the midpoint of the proposed offering-price range, Principal policyholders are expected to receive more than $6.8 billion in shares, policy credits and cash payments.

In the case of MassMutual, Mr. Jameison won’t disclose how many policyholders he has attracted, but he says members include traditional customers, as well as current and former MassMutual agents who own policies.

not a holder

Mr. Jameison, 60, isn’t a MassMutual policyholder. He says he became interested in MassMutual after the insurer had garnered attention from consumer groups in 1999 when it successfully backed legislation permitting the formation of mutual insurance holding companies in Massachusetts.

The controversial structure enables insurers to sell up to 49% of the company to the public without compensating its policyholders.

Late last month, Mr. Jameison launched a second petition drive aimed at forcing MassMutual to demutualize. Such a conversion would result in the insurer’s paying out $4.5 billion in surplus capital to policyholders, according to Mr. Jameison’s estimates.

So far, he says, the group has reached nearly 6,000 policyholders, and it is attempting to obtain a complete policyholder list to mount a mail and telephone appeal. Mr. Jameison says MassMutual has been dragging its feet in turning over that list.

on the table

A spokesman for the Massachusetts attorney general’s office, without providing further details, says that it is looking into concerns about the issue.

The group must win support from one-half of 1% of MassMutual policyholders to force a special meeting. MassMutual says that it hasn’t yet determined how many of its policyholders are eligible to vote.

“There is an easy way or a hard way for the company to do this,” says Mr. Jameison. “They are going to give us the list whether they have to be pummeled around or whether they are going to belly up to the bar.”

While some analysts and groups supported making MassMutual more responsive to policyholder proposals, there is no broad support for the demutualization campaign.

“I’m not in favor of policyholders trying to force the company to demutualize,” says Glenn Daily, a fee-only insurance consultant in New York.

“That’s just greed.”

“Demutualization can be done in a fair way,” adds J. Robert Hunter, a former Texas insurance commissioner who is director of insurance for the Consumer Federation of America in Washington.

“We think the best option is to stay a mutual because in the long run it means policyholders will have good options, including better dividend payments.”