NEW YORK, Nov. 18, 1996 — Insurance Services Office, Inc.'s (ISO) member insurers voted today to convert the company to a for-profit stock corporation.
The conversion, which becomes effective Jan. 1, is intended to retain and enhance ISO's value to customers, and maintain ISO's leadership position in the industry.
At a membership meeting today, the proposal received 117,837,329 votes out of a total of 162,394,940 eligible votes, or nearly 73 percent of the eligible votes. A favorable vote of two-thirds of the members' votes was needed for approval.
As previously announced, the plan to convert the company from a non-stock, nonprofit membership corporation was unanimously recommended to the membership by ISO's board in September. The plan calls for creating two classes of ISO stock and an Employee Stock Ownership Plan (ESOP).
"ISO's conversion to a for-profit corporation puts the company at the threshold of a new era marked by a strengthened partnership of shareholding insurers, managers and employees," said Fred R. Marcon, ISO's chairman, president and chief executive officer.
"As a for-profit corporation, we will have greater incentives for cost control, efficiencies and customer-responsiveness," Marcon said. "And we will have the long-term financial flexibility and access to capital needed to develop and support new products in a more technology- and capital-intensive business environment."
The conversion provides for the continued availability of ISO's products and services. "We remain dedicated to serving the property/casualty insurance industry with accuracy, objectivity and professionalism," he said.
ISO's conversion to a for-profit corporation is the latest step in ISO's evolution that has made the company a leading insurance information-services provider. Last year, insurers transferred control of ISO to a board with a majority of independent, noninsurer directors.
When the conversion plan is implemented, about 85 percent of ISO's outstanding shares will be owned in the form of class B common stock by property/casualty insurers that are ISO members under the company's nonprofit structure. About 10 percent will be owned by the newly established ESOP in the form of class A common stock. About 5 percent will be owned by ISO management, also in the form of class A common stock, through purchases and awards under newly established management-incentive plans.
Ownership of ISO's class A shares is restricted to the company's directors and employees, and to the ESOP. Ownership of class B shares is restricted to insurance and reinsurance companies. Class A and class B shares rank equally with regard to dividends and economic ownership rights. Neither class of shares will be available to the public.
Under the conversion plan, holders of Class A shares will elect seven of 11 directors to ISO's board. The seven will be individuals not affiliated with insurers and not employed by ISO. Holders of Class B shares will elect three directors — individuals who are senior officers of insurance companies. ISO's chief executive officer will serve on the board as chairman. All of ISO's current directors will serve until its 1998 annual meeting.
In voting on the conversion each ISO member was entitled to one vote, plus one vote for every dollar that member paid for services purchased from ISO and its subsidiaries during the year ended June 30.