Barger & Wolen Completes First California Demutualization Since 1997


On March 27th, 2013, Barger & Wolen partners Robert Hogeboom and Dennis Quinn received consent from California Insurance Commissioner Dave Jones for the conversion of Merced Mutual Insurance Company (Merced) from a mutual insurer to a stock insurer. The demutualization was California’s first since 1997 and its first property and casualty demutualization since 1985. 

The transaction was a sponsored demutualization that also required that the California Department of Insurance (CDI) provide Form A consent to the acquisition of Merced by United Heritage Financial Group, Inc. of Meridian, Idaho, (United Heritage) and an amendment of the company’s certificate of authority to change its name to “Merced Property & Casualty Company” and to add automobile as a new class of insurance. Merced, which was formed in 1906 and maintains its headquarters in Atwater, California, formerly specialized in the sale of homeowners and residential property insurance, will begin offering automobile insurance products.

The Form A consent order issued by the CDI allowed United Heritage to acquire over 94% of Merced’s stock. United Heritage owns three other insurers that are domiciled in Idaho and Oregon. Merced is the United Heritage group's first California domiciled subsidiary insurer.

The Plan of Conversion (Plan) involved a lengthy approval process with the CDI and included both a CDI public hearing on the application and a special meeting of the policyholders to approve the Plan. 

The Plan became effective on April 1 upon recording of Merced's new articles of incorporation converting it to a stock insurer.

Don Duran, President and CEO of Merced, engineered the demutualization and acquisition with United Heritage President and CEO, Dennis Johnson, in order to partner with a well capitalized insurance group that shared Merced’s mutual insurance company culture and possessed expertise in underwriting auto insurance. The sale of auto and packaged products is expected to complement Merced's existing homeowners line to further serve California's Central Valley.

Hogeboom, who over the span of 30 years has formed and worked on the acquisition of numerous insurers, described the sponsored demutualization as being the most complicated of all of the transactions that he has completed. Dennis Quinn, who specializes in corporate and regulatory transactions, worked on the securities aspects of the Plan and the drafting of its major documents. Hogeboom notes that CDI senior staff, John Finston, Al Bottalico, James Holmes and Jon Tomashoff were instrumental in bringing the plan to completion.

United Heritage Press Release


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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