A small Pennsylvania insurance company, Old Guard Group Inc., aims to be first among insurers to convert from mutual to stock ownership, using the favorable rules under which thrifts have raised $25 billion since the 1970s.

The Lancaster-based property and casualty insurer is offering 3.86 million shares at $10 per share to its policyholders, employees, managers, and residents of several designated Pennsylvania counties.

Shares left over from that offering will be offered to the public.

Old Guard must raise at least $28.5 million-its appraised value-for the conversion to go through.

Veterans of thrift deals said Old Guard could initiate a profitable trend in the insurance business but warned that the first such transactions are anything but a sure thing.

"These insurance companies (are) where we were about 20 years ago with thrifts," said Mark B. Cohen, a principal at Sandler O'Neill & Partners, Great Neck, N.Y.

"In earlier years of thrift conversions, depositors didn't really know that much about these deals, and a lot of these deals were largely undersubscribed," Mr. Cohen said.

"There's no guarantee" that Old Guard will be able to sell enough shares to convert, said Doug Faucette of Muldoon, Murphy & Faucette of Washington.

But Robert E. Kafafian, executive vice president of Hopper Soliday & Co., said he believes converting insurers will quickly benefit from the trail blazed by thrift conversions.

Hopper Soliday, a subsidiary of Dauphin Deposit Corp., Harrisburg, Pa., is underwriting the subscription and community offering.

Since the early days, depositors and investors have come to view thrift conversions as lucrative opportunities to buy discounted stock.

Just last month, Roslyn Bancorp, a Long Island thrift, had to return $1.3 billion of the $1.7 billion bid by investors in a heavily oversubscribed stock offering.

Mr. Cohen and Mr. Faucette, both of whom worked on the Roslyn deal, said they expect conversions from mutual to public ownership to become a staple among insurers, too, as the industry consolidates to beat back mounting competition from other financial institutions.

Roughly 650 mutual insurers do business, according to SNL Securities, Charlottesville, Va. But only three states-Pennsylvania, Illinois, and Michigan-allow insurers to use the thrift conversion model.

In other states, mutual insurers must return surplus premiums to policyholders before raising an equivalent amount of capital in a public offering.

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