Massachusetts regulatory officials have approved a plan of reorganizations and mergers for two domestic mut
ual insurers, Merrimack Mutual Fire Insurance Co. and Cambridge Mutual Fire Insurance Co.
The plan calls for a reorganization of each mutual as a domestic stock insurance company, the acquisition of each by intermediate holding companies own
ed by mutual holding companies, and the subsequent merger of the resulting entities into The Andover Comp
anies, Inc., a newly-formed Massachusetts mutual holding company.
The approval was signed by Insurance Commissioner Michael T. Caljouw on December 18 after weigh
ing testimony offered during a public hearing that was held by the Massachusetts Division of Insurance (DOI) in October.
Both mutuals are now part of the Andover Companies that are headquartered in Andover, Mass. Bay State
Inc. is also part of the group. Members of the group offer personal lines products including homeowners, condo
and renters insurance and business insurance products that they distribute through independent agents. They are licens
ed in the six New England states, Illinois, New Jersey and New York.
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DOI retained Attorney J. David Leslie of the law firm of Davis, Malm and D’Agostine to participate in a working grou
p tasked with examining the proposed transactions and preparing recommendations. Leslie’s practice focuses
on representing insurance regulators in complex matters.
The working group recommended approval of the plan. Le
slie testified that the working group found that the proposed transactions are in the best interests of the Merrimack and Cambridge companies and will enhance the
ir operations. The group also concluded that the proposed transactions are fair and equitable to the mutuals’ policyholders as a class and minimize any po
tential adverse effects. The reorganizations and mergers will not affect their rights and obligations under their curren
t policies. Also, the transactions will not substantially lessen competition in any line of insurance business,
according to the working group. The reorganized companies will continue to compete in their current lines of business, the group agreed.
In explaining how the plan came about at the public hearing, Charles DiGrande, president and chief executi
ve officer, said the directors felt that continuing to operate as mutuals would place them at a competitive disadvantage. They determined that to grow strategi
cally and remain strong and competitive in the industry the com
panies needed the “structural, financial, and strategic flexibility” to respond quickly and decisively to changing circumstances.
At the same time, they also felt that a full demutualiza
tion, without the creation of the new mutual holding company, would have “deprived the policyholders of their ownership interests in the companies, and shifted that ownership to stockholders.”