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Tuesday, September 15, 2009

Insurance rebel demands vote on Hand in Hand plan

Lawyer Carl Esser has asked the Pennsylvania Insurance Department to intervene in efforts by the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire (called the "Hand-in-Hand" for its logo) to reorganize the Colonial-era, member-owned mutual as a stock company. 

The Contributionship told members, in a letter July 16, that reorganization would give it "greater strategic and financial flexibility" so it can "engage in mergers with both mutual and stock insurance companies, and to access the capital markets." It needs two-thirds of members to agree for the change to happen.

But Esser sees this as a first step on the road to oblivion that has swallowed other ex-mutuals like PSFS. He wants the state to force a vote on a proposal that would transfer members' share of the company, not to a holding company, but to the members themselves. Excerpt from his letter to the state:

"I have been a member of the Contributionship since 1975...  Founded by Ben Franklin and his colleagues over 250 years ago, it has a long and distinguished history.  The corporate structure devised by Ben Franklin has served the company well for all those 250 years and I doubt that anyone could improve upon it.

"Now the Board of Directors of the Contributionship has proposed a mutual-to-stock reorganization in which all of the stock of the demutualized Contributionship will be issued to TPC Holdings, Inc. for no consideration. 

"My proposal encourages the Board to revise the Plan of Reorganization (so that) at least some of the stock is issued or offered to the Contributionship's members (and) the stock is issued to the Contributionship's members for no consideration or is offered to the Contributionship's members at a price to be set by the Board of Directors."

Esser also challenged the ill-fated reorganization of Philadelphia's other colonial-era insurer, the Green Tree, a few years back. "What happened with the Green Tree I'm trying to avoid here," Esser told me. "The Green Tree hired a go-go president who tried to expand the insurance business very rapidly. They went bankrupt and became insolvent." 

He says the Hand-in-Hand's management is stronger than Green Tree's was, "but go-go structures over time attract go-go management, and that's exactly what the Contributionship does not need. It needs what it's had for many years: conservative, cautious management... Don't mistake my gracious manner for a lack of resolve. I intend to pursue this."
Posted by Joseph N. DiStefano @ 11:58 AM  Permalink | Post a comment
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About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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