Final answer:
Demutualization is the process that transforms a mutual insurer into a stock company, enabling it to issue stock in an Initial Public Offering (IPO).
The rate of return from stock sales isn't promised but depends on dividends and share value appreciation. A board of directors, elected by shareholders, makes company decisions.
Step-by-step explanation:
The process by which a mutual insurer becomes a stock company is known as demutualization. This transformation allows the insurer to raise capital by selling stock in an Initial Public Offering (IPO).
An IPO is a significant event because it provides the company with financial capital for expansion and offers a mechanism for early-stage investors, such as venture capitalists, to realize a return on their investments.
Companies do not promise a specific rate of return when they sell stock; instead, the return comes from dividends and any potential increase in share value.
In a company owned by a large number of shareholders, decisions are generally made by a board of directors elected by the shareholders.