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Empire Mutual asks dept. approval of application to convert to stock form.

A plan of conversion of Empire Mutual Insurance Company to a stock company to be called the Empire Insurance Company was taken under advisement by the New York Insurance Department following a bearing in New York City on October 27.

The record remains open for possible written comments on the conversion plan for 10 days, according to Donald Lundgren, deputy superintendent of insurance, who presided at the hearing.

The plan of conversion involves the distribution of the company's common stock to eligible policyholders in satisfaction of their equitable share of the value of the company, except for those policyholders who would be entitled to IS shares or less. Such policyholders, according to the plan, would be paid in cash in lieu of common stock.

Proxy statements have been mailed to all eligible policyholders explaining the plan and its purpose. A special meeting of policyholders to vote on the plan and to count the proxies will be held at the company's offices on November 17. Only those who were policyholders of Empire Mutual as of December 19, 1985, will be eligible to vote on the plan at the policyholders meeting or to have their proxies counted. The eligibility date was set in the plan of conversion, which was adopted by the company's board of directors on December 30, 1985, and was subsequently amended to revise some technical aspects.

Oliver L. Patrell, president and chief executive officer, accompanied by Mort Weinberg, executive vice president, made the presentation for the company at the department hearing. Additional testimony was offered by Donald D. Gabay, of Stroock & Strook & Lavan, counsel to the company. A statement in support of the conversion was made by Jeff Greenfield, an agent with NGL Insurance Group of Lynbrook, chairman of the Insurance Producers Council of the Empire Group.

An integral part of the conversion plan and the issuance of stock in the new company is the exchange of shares for the surplus notes held by certain subsidiaries of PHLCORP, Inc., successor corporation to Baldwin-United. The former Baldwin-United came into the picture in September, 1980, when its principals entered into an agreement with the Superintendent of Insurance to advance $25 million to Empire Mutual and its subsidiary stock company, Allcity, to bring the two insurers out of rehabilitation.

The money was secured by surplus notes which entitled the noteholders to receive 75.1 percent of the net income of Empire or to be charged 75.1 percent if there was a loss. There were no due dates on the surplus notes, but they could be called in the event a policyholder vote failed to keen the eight designated directors of the noteholders on the Empire Mutual board.

On September 26, 1983, Baldwin-United, because of its own insurmountable problems, filed for reorganization under the federal bankruptcy law and subsequently, on November 13, 1986, a plan of reorganization was approved with a successor corporation formed under the name PHLCORP.

That corporation and its subsidiaries have now indicated that they intend to exercise the option under Section 7307 of the Insurance Law of New York to exchange the surplus notes for shares of stock. A similar election is expected from the Insurance Commissioner of Wisconsin who holds some surplus notes, equal to $2,200,000, growing out of the reorganization of Baldwin-United, according to Patrell.

Patrell reported at the hearing that there have been no payments of principal or interest on the surplus bonds, and that as of June 30,1987, the value of the surplus notes, based on the formula in the original agreement had reached $53,175,230. The noteholders will become stockholders to the extent of their holdings.

Patrell explained the motivation for the conversion to stock form, noting that it is in the best interest of the policyholders and the company and will permit the increase in surplus to enable the insurer to expand its operations. It was because of its inability to raise capital in any other manner that the surplus note device was used in 1980 in the agreement with Baldwin-United, he commented.

He said the company anticipates there will be a public market for the common stock of the reorganized insurer, which will permit trading by shareholders and purchases by new investors. The company intends to seek a listing of the shares in one or two securities exchanges or into the NASDAQ order to facilitate trading.
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Title Annotation:LOOKING BACK ... Insurance Advocate, 25 years ago
Publication:Insurance Advocate
Date:Oct 29, 2012
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