The application by Reno-based EIG Mutual Holding Co. to convert itself from a mutual insurance company into a publicly held stock company is the first of its kind in Nevada.
And that means that state regulators are learning the ropes of a conversion as they work through the approval process.
The basics of the proposal announced last week are fairly straightforward:
EIG Mutual Holding, the parent of Employers Insurance Company of Nevada, currently is owned by about 6,500 small businesses that purchase workers compensation coverage through the company.
After the conversion, they would give up their membership interests in the company. Instead, they'd be given publicly traded stock.
State law requires that the company get the approval of the insurance commissioner after a public hearing, which probably will be scheduled in October.
In fact, the state has been much more deeply involved for about three months, said John Orr, deputy insurance commissioner.
The state agency has hired lawyers, investment bankers, actuaries and other specialists to help it sort through the proposal and make sure it provides a fair shake to the policyholders who currently own EIG Mutual Holding Co.
Orr said regulators are moving carefully because this marks the first time that an insurer domiciled in Nevada has made the conversion from a mutual ownership into a stock company. The conversions have been common elsewhere in the industry.
The company's plan calls for it to offer cash or stock at least equal to the surplus on its books. That surplus totaled $554 million on June 30. Owners of policies in effect on August 17 are eligible to participate in the conversion.
The company expects the conversion to be completed in the first quarter of 2007.
Douglas Dirks, chief executive officer of EIG Mutual, said the proposed conversion would provide more flexibility to the company, particularly as it looks to expand into other markets.
The company currently offers workers comp coverage in eight states through Employers Insurance Company of Nevada and Employers Compensation Insurance Co. and provides care-management services through Employers Occupational Health Inc.
Gov. Kenny Guinn noted the company was founded in 1999 to privatize the troubled workers comp system in Nevada.
"It will be an outstanding success story if it gets approved," the governor said. "It looks like what we're doing here is working."
Advisors to EIG Mutual Holding Company include the law firms Skadden, Arps, Slate, Meagher & Flom LLP and Lionel Sawyer & Collins and the Tillinghast business of Towers Perrin on actuarial matters.
