what is demutualization 
demutualization is a process by which a private member owned company such as a co op or a mutual life insurance company legally changes its structure in order to become a public traded company owned by shareholders understanding demutualizationdemutualization involves the complex process of transitioning a company s financial structure from a mutual company into a shareholder driven model mutual companies not to be confused with mutual funds are entities seeded by private investors who are also customers or members of these operations businesses such as insurance companies savings and loan associations banking trusts and credit unions are commonly structured as mutual companies mutual insurance companies typically collect policyholder premiums from their members and spread risk and profits through various mechanisms in america this practice dates back to 1716 when the nation s first ever insurance company was created by the synod of philadelphia which structured the operation as a mutual company in 2000 and 2001 a flurry of noteworthy demutualization events occurred in the insurance space with the demutualization of prudential insurance company sun life assurance company phoenix home life mutual insurance company principal life insurance company and the metropolitan life insurance company metlife the demutualization processin a demutualization a mutual company elects to change its corporate structure to a public company where prior members may receive a structured compensation or ownership conversion rights in the transition in the form of shares in the company several demutualization methodologies exist in a full demutualization a company launches an initial public offering ipo where it auctions stock to shareholders who may trade their equity positions over a public market exchange under this scenario the former members of the mutual company do not automatically receive stock and must consequently invest separately alternatively with the sponsored demutualization method after the ipo former members of the mutual company automatically receive shares in the newly formed company under this model members typically receive greater compensation for their previous membership and generally don t have to invest personal capital in the newly issued shares however they may buy additional shares if they choose 