Medical Liability Mutual Insurance Company
Notice of Public Hearing to Consider Plan of Conversion from Property and Casualty Mutual Insurance Company to Property and Casualty Stock Insurance Company
Notice is hereby given that the New York State Superintendent of Financial Services (the “Superintendent”) has scheduled a public hearing for August 23, 2018 at 10:00 a.m. Eastern Daylight Time, at the offices of the New York State Department of Financial Services (the “Department”), One State Street, New York, New York 10004, 6th Floor, in the main hearing room, for purposes of considering the Plan of Conversion (the “Plan”) adopted by the Board of Directors of Medical Liability Mutual Insurance Company (“MLMIC”) on May 31, 2018, which provides for the conversion of MLMIC, pursuant to Section 7307 of the New York State Insurance Law, from a property and casualty mutual insurance company to a property and casualty stock insurance company to be renamed and known as MLMIC Insurance Company (the “Conversion”).
Following the public hearing, the Superintendent may approve, refuse to approve, or require modifications to the Plan.
Section 7307 of the New York State Insurance Law governs the proposed Conversion and defines those policyholders that are entitled to vote on the Conversion and those that are entitled to receive a share of the purchase price to be paid by National Indemnity Company, a subsidiary of Berkshire Hathaway Inc. (the “Sponsor”), to acquire MLMIC. MLMIC is responsible for determining the policyholders eligible for voting and payment, based on the dates set forth in the law.
If the Superintendent ultimately approves the Plan (including if she requires any modifications to the Plan, and MLMIC modifies the Plan accordingly), then the policyholders of MLMIC entitled by law and MLMIC’s bylaws may vote whether or not to approve the Plan at vote scheduled by MLMIC. If ten percent (10%) of such policyholders vote on the Plan in person or by proxy, a quorum shall be met and the vote counted. If two-thirds (2/3) of such policyholders approve the Plan (and only upon the closing of the acquisition of MLMIC by the Sponsor), such Conversion will take place.
If the Plan is approved by both the Superintendent and the policyholders entitled to vote, and MLMIC converts to stock form (subject to the closing of the acquisition of MLMIC by the Sponsor), the Plan provides a distribution to eligible policyholders in the amount of $2.502 billion. The Sponsor will receive 100% of the stock in MLMIC pursuant to an acquisition agreement.
There are also conditions to the closing of the sale to Sponsor, including, but not limited to: a loss portfolio transfer with the Sponsor assuming all of MLMIC’s existing insurance liabilities as of the closing (involving transferred assets and reserves currently estimated at $3.13 billion), an extraordinary dividend of $1.905 billion to the Sponsor, and a quota share reinsurance agreement with the Sponsor and an affiliate of the Sponsor assuming a combined 85% of MLMIC’s post-closing business. Each of the listed conditions requires the approval of the Superintendent.
Upon the completion of the Conversion:
(a) the corporate existence of MLMIC shall be continued as a stock insurance company;
(b) all the rights, titles, franchises and interests of MLMIC as a mutual insurance company in and to every species of property, real, personal, and mixed, and things in action thereunto belonging, shall be deemed transferred to and vested in MLMIC as a stock insurance company without any deed or transfer; and
(c) MLMIC as a stock insurance company shall be deemed to have assumed all the obligations and liabilities of MLMIC as a mutual insurance company.
The Department’s examination of MLMIC as of June 30, 2016 indicated that MLMIC’s surplus as regards policyholders was $1,865,459,468. A copy of the Department’s report on examination is available.
The Department engaged Ernst & Young Investment Advisers LLP as an adviser to appraise and report to the Superintendent the fair market value of MLMIC in connection with the Conversion on the basis of MLMIC’s latest filed annual statement and any significant subsequent developments. The appraisal report reflects an analysis of MLMIC as of March 23, 2018 and was provided solely for the Department’s reliance and not the reliance of MLMIC, any policyholder, or any other person. For informational purposes, the full text of the written appraisal report, which sets forth assumptions made, matters considered and qualifications and limitations on review undertaken by Ernst & Young Investment Advisers LLP is available on the Department’s website.
A copy of the Plan, including all exhibits thereto, may be obtained by making a written request to Medical Liability Mutual Insurance Company, Two Park Avenue, Room 2500, New York, NY 10016, calling MLMIC at 888-998-7871, or reviewing it on MLMIC’s website at: https://mlmic.com.
All comments/objections must be submitted in writing, preferably before the hearing, but no later than August 28, 2018. Due to time constraints, oral testimony at the public hearing will be limited. Anyone submitting oral testimony must also provide a transcript or written summary thereof. All oral and written testimony timely submitted will be reviewed and considered as part of the public record of the hearing.
Members of the public who wish to attend this hearing must register in advance at: [email protected] or (212) 709-7763. All visitors must be registered in the building’s security system and show valid, government-issued identification upon arrival. Any questions regarding the hearing can be directed to: Bernard Lott, New York State Department of Financial Services, One State Street, New York, NY 10004, (212) 709-7763.
Any person wishing to make an oral statement at the public hearing must also register to do so no later than August 17, 2018, by writing to the New York State Department of Financial Services, c/o Linda Krebs, Property Bureau – MLMIC Demutualization, One State Street, New York, NY 10004, or by e-mailing [email protected] and must explain the need to comment orally, rather than only in writing. Any written testimony, comments or objections may also be submitted to the same address or e-mail address on or before August 28, 2018.
Interpreter services will be made available at the hearing to hearing impaired persons at no charge, upon written request submitted by August 8, 2018. The written request must be addressed to Linda Krebs, New York State Department of Financial Services, One State Street, 4th Floor, New York, NY 10004 or by e-mail to [email protected].