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The pace of demutualization among major U.S. life insurance companies increased sharply after the mid-1990s. Five of the fifteen largest U.S. life insurers demutualized between 1997 and 2001, and the largest, Metropolitan Life Insurance Company, demutualized in 2000. Ten other major life insurance companies, with total assets in 2003 of $775 billion, demutualized over the same time period. The regulatory and competitive environment in the life insurance industry has changed dramatically in recent years. These changes include: (1) the fact that consumers have shown declining interest in the traditional life insurance products of risk bearing and transfer, while revenues from the wealth management and annuity business have offered new growth opportunities; (2) deregulation of the financial services industry, culminating in passage of the Gramm-Leach-Bliley Act in 1999, which demolished the traditional barriers between commercial banking, insurance, and investment banking; (3) changes in the Internal Revenue Code that eliminated the tax advantages of a mutual insurer; and finally, (4) increasing interest shown by foreign life insurance companies in the U.S. market. Demutualization has been undertaken by many mutual life insurance companies as a strategic response to deal with these numerous changes in the financial services market. This study focuses on the long-run performance of life insurance IPOs issued pursuant to demutualization and compares the performance of these IPOs to the performance of several market indexes.


College of Management at University of Massachusetts Boston, Financial Services Forum, Working Paper 1013.

Published in Journal of the Academy of Finance, Fall 2006, Vol. 4 Issue 2, pp. 162-171.

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