ALBANY Thousands of jobs and millions of dollars in state and local tax revenues face an uncertain future if New York's state Legislature fails to pass legislation to allow mutual life insurance companies to change their corporate structure, the state's leading business organization said today.
"If the Legislature adjourns without adopting mutual holding company legislation, New York State's ability to create and retain jobs in mutual life companies will be put in peril," said Daniel B. Walsh, President of The Business Council.
"Our mutual life companies will have very real and significant incentives to move existing jobs to other states and to create new jobs in other states if those other states provide the kind of operating flexibility not currently available in New York State," Walsh said.
Walsh also noted that jobs could leave the state if one or more of New York's companies is purchased in a takeover or consolidation, and that Congress is considering legislation that would make it easier for mutual life companies to relocate from states that don't permit them to form mutual holding company structures.
Legislation that would allow the policyholders of a mutual life insurance company to decide if the company may reorganize as a mutual holding company (MHC) has stalled in the state Assembly. A mutual company cannot sell stock to raise capital to finance growth opportunities, but if it restructures as an MHC, a stock company could be formed under the MHC, which would be controlled by the company's policyholders.
"The MHC option gives a mutual company access to the capital it needs to compete in today's business environment without sacrificing the policyholder control and customer focus that distinguishes mutual companies," Walsh said.
If New York's mutual companies are denied the same opportunity that now exists in 19 other states and the District of Columbia, Walsh said, two options remain: relocating to one of those states or becoming a stock company. Relocation has obvious negative consequences for the state's economy. Becoming a stock company makes them a target for takeover, which could mean the new owner moves all or part of its new company's operations and jobs out of New York.
Walsh said that when American General, a Texas firm, purchased U.S. Life, which was based in New York, 1200 jobs were eliminated, including 250 in New York.
Earlier this week, the Life Insurance Council of New York (LICONY) released an economic profile of New York's four largest mutual life insurance companies by Price Waterhouse. The survey shows that these four companies directly employ 12,260 people in New York State and another 21,639 New Yorkers are authorized to sell insurance as agents or brokers from these companies. The four companies paid more than $80 million in state and local taxes last year and have in force more than 2.1 million policies with New York residents.
"This legislation protects all of the rights and benefits policyholders had when they bought their policies," Walsh said. "In addition, they will be insured with a stronger company with more competitively priced products. In the end, it's the policyholders who can decide for themselves whether the mutual holding company is the way to go for their companies. This legislation only gives them that choice the same choice that exists in virtually every other state that is home to a mutual life insurance company."
The Business Council is New York's largest broad-based business group, representing more than 4,000 member companies large and small across the state. Based in Albany, it lobbies for a better business climate and offers cost-cutting services to its members.