Nearly all of United Heritage's policyholders supported the insurer's planned conversion to a mutual holding company in a vote completed Aug. 23, 2001, officials from the insurance company report.

Citing a need for more flexibility in its operations, in July, the board of directors of United Heritage Mutual Life Insurance Co. annoiced plans to transform into a mutual holding company.

If all approvals are received, United Heritage will reorganize into a mutual holding company, which, like other structures of mutual companies, would still be entirely owned by policyholders. The mutual holding company would then create an intermediate stock holding company, which, in turn, would entirely control the stock insurance companies that would sell insurance policies.

The plan has the tentative approval of the Idaho Insurance Commissioner, pending any appeals. All of the states in which United Heritage does business must also approve of the change.

The insurer's name will change and a new company will be formed: United Heritage Financial Group. Under that parent organization, there will be three companies: United Heritage Life Insurance, United Heritage Financial Services, and United Heritage Property & Casualty Co.

United Heritage, of Meridian, Idaho, says that policyholders' rights would transfer to the new company and that the conversion "will not reduce or affect, in any way, the benefits, values, guarantees, or other terms of our policies or contracts, and will not change our premiums."

The conversion of mutual insurance companies to mutual holding companies has come under fire, with critics claiming that it creates conflicts of interest for the management and can be used to cheat policyholders out of the windfalls that have come if other insurers demutualized and issued stock in an initial public offering (IPO).

Although United Heritage says it has no current plans to issue stock, documents on the company Web site state that having the ability to do so was one of the primary reasons for the decision to convert.

The newly created intermediate stock holding company would be able to sell stock to raise money, but the mutual holding company would always retain control (usually by keeping just over 51 percent of the company's stock). If this were to happen, policyholders would be able to get "subscription rights," which is the right to purchase stock at the initial public offering (IPO) price.

In contrast, if the company simply demutualized into a stock insurance company, policyholders would be compensated for their loss of ownership of the company with shares of stock that they would not need to purchase.