§ 59A-34-39 — Conversion of mutual to stock insurer

A. A domestic mutual insurer may become a stock insurer under such reasonable plan and procedure as may be approved by the superintendent after a hearing thereon of which notice was given to the insurer, its directors or trustees, its officers, employees and its members, all of whom shall have right to appear and be heard at the hearing. B. The superintendent shall not approve any such plan or procedure unless: (1) it is lawful, fair and equitable, and free of reasonable objections; and (2) it is subject to approval by vote of not less than two-thirds of those of the insurer's current members who are entitled to vote and vote thereon in person, by proxy, or by mail at a meeting of members called for the purpose pursuant to reasonable notice and procedure approved by the superintendent. As to a life insurer the right to vote may be limited to members who hold policies other than group policies or term policies for terms of less than twenty (20) years, and whose policies have been in force for not less than one (1) year; and (3) the equity of each member in the insurer's surplus is determinable under a fair and reasonable formula approved by the superintendent, which formula may exclude any member whose equity would in amount fall below a reasonable sum stated therein; and (4) the plan gives to each member of the insurer preemptive right to acquire his proportionate part of all of the proposed capital stock of the insurer within a designated reasonable period, as such part is determinable under the plan of conversion, and to apply upon the purchase price thereof his equity in the insurer as determined under Paragraph (3) above; and (5) the members entitled to participate in purchase of stock shall include not less than all current policyholders of the insurer and each existing person who had been a policyholder of the insurer within three (3) years prior to the date the plan was submitted to the superintendent; and (6) shares are to be offered to members at a price not greater than to be thereafter offered under the plan to others; and (7) the plan provides for payment of cash to each member not electing to purchase the shares to which preemptively entitled, in an amount found by the superintendent to be reasonable but not in excess of fifty percent (50%) of the amount of his equity, and which cash payment shall constitute payment and discharge in full of the member's equity or property interest in the mutual insurer. A member shall not have preemptive right to purchase less than all of the shares to which preemptively entitled; and (8) the plan, when completed, would provide for the converted insurer paid-in capital stock and surplus in amount not less than minimum paid-in capital stock and surplus required of a new domestic stock insurer upon initial authorization to transact like kinds of insurance; and (9) the superintendent finds that the insurer's management has not, through reduction in volume of new business written, or cancellations or other means sought to reduce, limit or affect the number or identity of the insurer's members to be entitled to participate in such plan or to secure for individuals comprising management any unfair advantage through such plan. C. Subsection B above shall not be deemed to prohibit inclusion in the plan of provisions under which individuals comprising the insurer's management, employee and agency personnel may be entitled to purchase for cash at the same price as offered to the insurer's members, shares of stock not purchased by members on the preemptive offering to members, in accordance with such reasonable classification of such individuals as may be included in the plan and approved by the superintendent. D. No director, officer, agent or employee of the insurer, or any other person, shall receive any fee, commission or other valuable consideration whatsoever, other than usual and regular salaries and compensaion [compensation], for in any manner aiding, promoting or assisting in such conversion except as set forth in the plan approved by the superintendent. This provision shall not be deemed to prohibit payment of reasonable fees and compensation to attorneys, accountants, actuaries and other specialists whose services are reasonably required under the plan and performed in the independent practice of their professions even though also directors of the insurer.

Legislative History

Laws 1984, ch. 127, § 585.