Form Over Matter: Differences in the Incentives to Convert Using Full Versus Partial Demutualization in the U.S. Life Insurance Industry

30 Pages Posted: 24 May 2012

See all articles by Otgontsetseg Erhemjamts

Otgontsetseg Erhemjamts

University of San Francisco; Bentley University - Department of Finance

Richard D. Phillips

Georgia State University - Risk Management & Insurance Department

Multiple version iconThere are 2 versions of this paper

Date Written: June 2012

Abstract

We explore the recent wave of demutualizations in the U.S. life insurance industry and analyze if the motives were similar for mutual life insurers that fully demutualized versus those that converted to mutual holding company (MHC) form. We find that fully demutualizing insurers were primarily motivated by a desire to gain access to external capital markets while those that chose MHC were motivated by other incentives including a tax‐based incentive. We also document that after conversion, fully demutualizing insurers more aggressively increase their exposure to risks they have a comparative advantage to bear than do firms that convert to MHC.

Suggested Citation

Erhemjamts, Otgontsetseg and Phillips, Richard D., Form Over Matter: Differences in the Incentives to Convert Using Full Versus Partial Demutualization in the U.S. Life Insurance Industry (June 2012). Journal of Risk and Insurance, Vol. 79, Issue 2, pp. 305-334, 2012, Available at SSRN: https://ssrn.com/abstract=2065682 or http://dx.doi.org/10.1111/j.1539-6975.2011.01424.x

Otgontsetseg Erhemjamts (Contact Author)

University of San Francisco ( email )

2130 Fulton Street
San Francisco, CA 94117
United States

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States
781-891-2823 (Phone)

Richard D. Phillips

Georgia State University - Risk Management & Insurance Department ( email )

P.O. Box 4036
Atlanta, GA 30303
United States
404-413-7009 (Phone)

HOME PAGE: http://robinson.gsu.edu/profile/richard-d-phillips/

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