Savings bank life insurance was established in Massachusetts in 1907, and for 85 years was sold through a system of life insurance departments located in mutual savings banks. In 1992, legislation consolidated this system into a single stock insurance company – SBLI – and created two classes of stock in the new company, which was issued to the system’s member banks. Certain insurance policyholders, however, retained their participating policies which carried certain indicia of “ownership.” The resulting ownership structure, therefore, presented unique governance issues and challenges.
Several Goodwin practices collaborated to represent SBLI in all aspects of the conversion, including regulatory approvals, corporate governance, surplus note issuance and fighting back an 11th-hour attempt by a plaintiff’s law firm to enjoin the transaction. This precedent-setting conversion simplifies the current complex hybrid corporate structure and aligns SBLI’s ownership structure with its historic mission of providing safe, low-cost insurance to the public while providing career opportunities and employment for Massachusetts citizens. It also addresses the pressure on ownership of common stock by SBLI’s bank shareholders resulting from recent changes to regulatory capital requirements and other considerations.
The deal, which closed July 26 and was followed closely in the Boston press, has attracted the attention of Columbia University’s Business School, which is including it as a case study in its curriculum. SBLI is now owned exclusively by its policyholders and holders of annuity contracts, who have gained membership rights in the mutual company, including the right to annually elect directors and to consider other matters at annual and special meetings. The conversion will have no effect on existing insurance policies or annuity contracts or on policyholder dividends, nor will it change the operation of the company, now known as The Savings Bank Mutual Life Insurance Company of Massachusetts.