Estimated MLMIC Acquisition Payout to Nearly Double
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Estimated MLMIC Acquisition Payout to Nearly Double

Estimated MLMIC Acquisition Payout to Nearly Double

As part of the ongoing acquisition of MLMIC by National Indemnity Company (NICO), a Berkshire Hathaway subsidiary, MLMIC recently announced updates on the transaction’s progress, including new estimates on the payout for eligible policyholders.

MLMIC is a mutual insurance company and is currently owned by its policyholders/insured physicians. Once the transaction between MLMIC and NICO is complete, the company will be demutualized and will turn into a stock insurance company that is owned by NICO’s shareholders. This means that during demutualization, each eligible policyholder will receive a payout from the transaction.

Any individual who was a policyholder between July 15, 2013 and July 14, 2016 (payout period) is eligible for the payout.  Current MLMIC insured status is not required.  When this deal was originally announced in 2017, policyholders were expected to receive a payout equal to 1 times the annual premium paid during the payout period as part of their MLMIC acquisition by Berkshire Hathaway.

Now, MLMIC is estimating each eligible policyholder’s payout will be 1.9 times the sum of the premiums paid from during the payout period (Source: https://www.mlmic.com/mlmic-joins-berkshire-hathaway-faq/, point #5). This nearly-doubled payout is a welcome surprise and due in part because MLMIC’s value has increased since the original transaction agreement.

For example, if a physician was insured during the entire payout period and paid $20,000 in malpractice premium annually, they would be eligible to receive a $114,000 payout based on the new estimates.  This is $54,000 more than the original estimate.

The transaction is projected to be complete by September 30, 2018.  Once this occurs, payment terms will be outlined.  This is all pending final approval by MLMIC policyholders eligible to vote on the transaction and the Superintendent of Financial Services of the State of New York.

 

Phalanx Healthcare Solutions is a New York based medical malpractice insurance consultant specializing in insurance and reinsurance solutions for physicians, physician organizations, and healthcare systems. For more information, visit our web site at www.phalanxllc.com.

3 Comments
  • Morton L Glaser, Md
    Posted at 11:49h, 30 July Reply

    Why is the pay out based on premium paid The higher premium meant a greater risk to the company Why should it men a greater share of ownership?
    Is it taxed as income or capital gain?

  • Frank S Cohen
    Posted at 15:36h, 21 August Reply

    How will this be taxed? Short term or long term capital gain?

  • evetsnibur
    Posted at 11:13h, 16 October Reply

    is this payout taxable??

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