THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, September 12, 1996 TAG: 9609120328
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
DATELINE: RICHMOND LENGTH: 59 lines
After three days of public hearings, the State Corporation Commission advised Trigon Blue Cross Blue Shield on Wednesday to modify parts of its plan for converting from a policyholder-owned organization to a for-profit company traded on Wall Street.
The three-member commission didn't approve or reject Trigon's application for converting to a stock company or indicate when it might announce a decision.
However, Trigon's willingness to act on the SCC's concerns suggested that the plan will eventually be approved. The state insurance commissioner testified Wednesday that Trigon's plan is fair and equitable to policyholders.
SEC Commission Chairman Theodore V. Morrison Jr. told lawyers for Trigon, the state's Bureau of Insurance and the Attorney General's office that he and other commissioners want to move quickly on the application. Morrison told them to file their briefs on modifications to Trigon's plan by Friday, Sept. 20. Trigon's lawyers had already agreed to the proposed changes, including one specifying when a stock-option plan for Trigon executives would take effect.
Trigon Chairman Norwood H. Davis Jr. told the commission Tuesday that stock options would be essential for the company to retain key managers and attract new ones.
Trigon has said it needs capital from the stock market to expand beyond Virginia and to compete against other large health care providers.
One modification to the plan would shorten the period during which a single investor or prospective acquirer could own no more than 5 percent of Trigon's common stock. As it stands, Trigon's conversion plan bars someone from accumulating more than 5 percent of the company's stock for five years after the conversion to a stock company. Trigon agreed Wednesday to reduce that limit to 30 months.
Trigon has said the restriction was necessary to foster stability in the price and trading of the company's shares. However, members of the SCC asked whether a five-year restriction would harm investors by significantly delaying the opportunity for selling Trigon to another company and reducing the value of Trigon's shares.
Trigon's conversion plan calls for distributing common stock to its policyholders and selling additional shares through an initial public offering to be managed by Merrill Lynch & Co.
The insurance company's policyholders approved this conversion plan in a special vote last Friday.
During Wednesday's hearings, Virginia insurance commissioner Alfred W. Gross said the bureau's responsibility was to determine whether the plan was fair and equitable to Trigon policyholders, not to devise a better plan.
Gross told the commission that Trigon's plan met the bureau's tests for fairness and equitability. Afterward, four consultants advising the insurance bureau on tax, accounting, actuarial and investment banking issues said the details of Trigon's plan were comparable to the conversion plans of other large mutual insurance companies that they had examined.
Gross also told the SCC that the insurance bureau planned to monitor Trigon's proposed public stock offering for fairness issues. Trigon's lawyers acknowledged that the bureau had the power to intervene in the stock offering, which could bring the process to a halt. by CNB