Company Overview
Mutual Insurers Holding Company (“MIHC”) was the mutual holding company for First Nonprofit Insurance Company, a property and casualty insurer, with approximately $70 million of annual premiums and $50 million of statutory surplus, focused on serving nonprofit corporations throughout the United States.
Situation
As a subsidiary of a mutual holding company domiciled in a state (like the vast majority of states in the U.S.) which does not statutorily facilitate capital formation for mutual companies, First Nonprofit did not have access to capital to support future growth. First Nonprofit engaged Griffin to conduct a strategic alternatives study to help it better understand the strategic alternatives available to it, as well as the impact of each potential alternative on its policyholders, employees, agents and other constituents. To maximize the number of potential alternatives available to it, each of MIHC and First Nonprofit redomesticated to Delaware, a subscription rights state which facilitates, and statutorily permits, raising growth capital for mutual companies.
Solution
Griffin, on behalf of First Nonprofit, conducted a multi-pronged competitive process in which First Nonprofit considered, among other alternatives, (i) a stand-alone subscription rights conversion, (ii) a subscription rights sponsored conversion, and (iii) a mutual affiliation, reinsurance agreement or surplus note transaction. As a result of the competitive process, First Nonprofit determined that it was in its best interest to engage in a subscription rights sponsored conversion transaction with AmTrust.
In the transaction with AmTrust, (i) MIHC converted from a mutual holding company to a stock company, (ii) AmTrust offered its publicly traded stock to First Nonprofit’s policyholders, directors and employees at up to a 20% discount to its market price, (iii) AmTrust purchased all of MIHC’s newly authorized stock and MIHC and First Nonprofit became wholly-owned subsidiaries of AmTrust, and (iv) the First Nonprofit Foundation received a significant charitable contribution to permit it to continue to support nonprofits. As a wholly-owned subsidiary of AmTrust, First Nonprofit and its policyholders will benefit from AmTrust’s financial support and AmTrust’s “A(IX)” rating by A.M. Best, and First Nonprofit will have access to AmTrust’s IT infrastructure and management team, opportunities to reduce expenses, and will serve as AmTrust’s platform for nonprofit business.
Griffin Financial Group, with a focus on advising mutual insurance companies regarding their strategic and capital alternatives, was uniquely suited to assist First Nonprofit with this transaction and we are pleased to have initiated and advised on this first of its kind transaction.
For more information on this transaction, contact Jeffrey A. Harenza at 610.478.2158. For more information on Griffin’s insurance group please contact Jeff Harenza or Jeffrey P. Waldron at 610.205.6028.
