Watch for It – Brickstreet Conversion

The other day I read in the paper where Brickstreet no longer wishes to cover state agencies because the claims exceed the premium dollars.  Hmmm.  Normally that would result in a premium increase request not a desire to walk away from a large part of a company’s customer base.  Wonder if anything else is going on?

I speculate as follows.  Brickstreet is presently a mutual not a stock company.  This means it is owned by its policyholders not by shareholders.  On occasion mutuals convert to stock companies which then leaves the policyholders as just that – customers – and the ownership with its benefits flows to the shareholders. If Brickstreet were to be sold now to a larger insurance company that would require the approval of the policyholders/owners (West Virginia being probably the largest one) and if approved the dollars would go to these policyholders/owners.

Now if Brickstreet can “dump” state agencies then it can convert to a stock company and the approval process would not include the scrutiny of a “big dog” owner like the state.  Most policyowners would probably go ahead and approve the conversion since no one would have much of a vested interest in studying the proposal, hiring experts or negotiating for a better deal.

Once the conversion is approved, customarily stock options are issued to insiders.  Then if the company is sold the insiders walk away with a “ton” of cash. 

Something for the Legislature to consider and be aware of it seems to me.

This is just speculation on my part but I have to wonder. 

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