"Demutualization" refers to a reorganization, in which a mutual insurance company becomes a stock company.  This is accomplished through the payment of stock or cash to policyholders upon the discontinuation of the mutual company.  Demutualization has no impact on the actual insurance policy.

After demutualization, shareholders of common stock own the new company. The new shares they hold represent their ownership interests in the company, and entitle them to vote at shareholder meetings and to dividends declared on their shares, among other things.

The new shares are typically listed on one of the major stock exchanges. This provides the potential for raising capital by having other investors buy shares of the company. It also provides a market for policyholders who received stock in a demutualization to sell their shares. Neither of these actions affects the contract rights (coverage and benefits) set forth in the original policies.

Mutual companies sometimes seek to convert to a stock form of ownership for various reasons.  Usually, the reasons relate to a desire to raise capital and enhance the financial strength of the organization.

Between 1985 and 2003, more than 20 life insurance companies underwent demutualizations. The names of the larger companies that have reorganized during this period can be found on the "Overview of Demutualized Companies" link at left.

In the United States and Canada, no mutual insurance company may demutualize without undergoing rigorous regulatory scrutiny and gaining the approval to demutualize from the appropriate governmental agencies. This is to protect the interests of and to ensure the fair and equitable treatment of the company’s policyholders.

For more information, continue to the “Frequently Asked Questions” link at left.