text:
(a) The reserve required by the table of commensurate values for each annuity contract issued must be invested in investments specified in Sections 1170 through 1182 except that a certificate holder may invest in investment companies registered under the federal Investment Company Act of 1940, and in securities, including interests in those investment companies, listed and traded on the New York Stock Exchange, the American Stock Exchange or regional stock exchanges or the National Market System of the Nasdaq Stock Market or successors to such exchanges or market having the same qualifications, to the extent of the lesser of net worth (assets over liabilities and reserves) of the certificate holder or 50 percent of these general investments. This section does not permit investment in options or commodity exchanges.

(b) The certificate holder may invest in other investments as permitted by and subject to the written consent of the commissioner.

history: (History: Amended by Stats. 2005, Ch. 253, Sec. 2. Effective September 22, 2005.)


kind: section

code: INS

text:
(a) Prior to admission each applicant shall file with the commissioner an accurate and complete financial statement consisting of a balance sheet and income and expense statement, showing the current condition of the applicant and sworn to by the officer of the applicant having the responsibility for preparing the statement.

(b) If the applicant is already transacting a grants and annuities business in another state, an accurate and complete financial statement showing the condition of the present grants and annuities business, sworn to by the officer having the responsibility for preparing the statement, shall be submitted.

(c) One hundred and twenty days after the end of their fiscal year, every certificate holder, except a certificate holder that also holds a certificate of authority pursuant to Article 3 (commencing with Section 699) of Chapter 1 of Part 2 of Division 1, shall make and file with the commissioner an accurate and complete financial statement, consisting of a balance sheet and income and expense statement, showing the current condition of the certificate holder’s grants and annuities operation on a form prescribed by the commissioner.

history: (History: Amended by Stats. 2005, Ch. 173, Sec. 1. Effective January 1, 2006.)

division: 2. CLASSES OF INSURANCE

part: 2. LIFE AND DISABILITY INSURANCE

chapter: 12. Grants and Annuities Societies

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 12. Grants and Annuities Societies


text: The commissioner may, in his discretion and after hearing, require the disposal of any investment made in violation of the provisions of this chapter; pending disposal pursuant to such order, no value shall be allowed for such investment in any financial statement or report required to be filed with the commissioner and purporting to show the financial condition of the owner thereof for the purpose of determining whether such owner is solvent or insolvent.

history: (History: Added by Stats. 1978, Ch. 795.)


text: The commissioner may adopt reasonable rules and regulations as may be necessary to carry out the provisions of this chapter pursuant to the provisions of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. Pursuant to these provisions, the commissioner may also amend or repeal the rules and regulations.

history: (History: Amended by Stats. 1982, Ch. 454, Sec. 119.)


text: Nothing contained in Section 11521, 11521.1, 11521.2, 11521.4, 11523.6, or paragraph (6) of subdivision (a) of Section 11523 shall apply to any grants and annuities certificate holder that also holds a certificate of authority pursuant to Article 3 (commencing with Section 699) of Chapter 1 of Part 2 of Division 1. A grants and annuities certificate holder subject to this section shall display clearly and conspicuously, and in the type specified, the disclosure required by paragraph (7) of subdivision (a) of Section 11523 in all agreements issued under this chapter.

history: (History: Amended by Stats. 2006, Ch. 740, Sec. 11. Effective January 1, 2007.)


text:
Every organization or person holding a certificate of authority to receive transfers under this chapter shall make and file with the commissioner information regarding each agreement entered into between the permit or certificate holder and the transferor. The information requested by the commissioner shall be provided in the number, form, and format, at the intervals, and by the methods prescribed by the commissioner. The organization or person shall pay a basic fee to the commissioner for the filing of the requested information. The basic fee as provided in this section shall be established by rules and regulations adopted by the commissioner pursuant to Section 11521.5 for information filed by the organization or person where information is filed regarding up to 10 agreements within any calendar quarter. Thereafter, within each calendar quarter, the fee for information filed regarding each agreement shall be as follows: 50 percent of the basic fee for information filed regarding 11 to 20 agreements filed; 20 percent of the basic fee for information filed regarding 21 to 30 agreements filed; 10 percent of the basic fee for information filed regarding 31 to 40 agreements filed; and 5 percent of the basic filing fee for information filed regarding 41 or more agreements.

The fees as provided herein shall be paid with the filing of the information regarding the agreements by the organization or person.

history: (History: Amended by Stats. 2005, Ch. 253, Sec. 3. Effective September 22, 2005. Operative January 1, 2006, by Sec. 5 of Ch. 253.)


text:
(a) The annuity agreement shall show each of the following:

(1) The value of the property transferred.

(2) The amount of annuity agreed to be paid to the transferor or his nominee.

(3) The manner in which, and the intervals at which, the annuity is to be paid.

(4) The age, in years, at or nearest the date of the agreement, of the person during whose life the annuity is to be paid.

(5) The effective date of the agreement.

(6) The signature of each donor.

(7) The following clause, in at least 12-point boldface type, located on the same page as and in the immediate proximity of the donor signature line: “Annuities are subject to regulation by the State of California. Payments under this agreement, however, are not protected or otherwise guaranteed by any government agency or the California Life and Health Insurance Guarantee Association.

(b) Every organization or person holding a certificate of authority to receive transfers under this chapter shall annually certify to the commissioner that all agreements entered into during the time period covered by the certification show all of the information set forth in subdivision (a). The certification shall be in the number, form, and format, by the method, and at the time prescribed by the commissioner. The commissioner may from time to time as he or she deems necessary require that a copy of each agreement be submitted to the department.

history: (History: Amended by Stats. 2005, Ch. 253, Sec. 4. Effective September 22, 2005. Operative January 1, 2006, by Sec. 5 of Ch. 253.)


text:
Any person holding a certificate of authority under this chapter may reinsure its total liability under an annuity agreement (as defined in Section 11523) with an admitted insurer for a single premium. In such event, such certificate holder may take credit for such reinsurance in reduction of the amount of the reserve fund it is required to maintain under the provisions of Section 11521, subject to the following conditions:

(a) Such certificate holder shall file with the commissioner a copy of the reinsurance contract specifying which annuity agreement previously filed pursuant to Section 11522 is thereby reinsured.

(b) Such certificate holder shall enter into a written agreement with the annuitant and the reinsurer agreeing that if it should for any reason be unable to continue the making of the annuity payments required by its annuity agreement, the annuitant shall receive payments directly from the reinsurer and that such reinsurer shall be credited with all such direct payments in the accounts between it and such reinsurer.

(c) Any commission granted by the reinsurer on the reinsurance shall be payable only to the certificate holder which shall pay no commission directly or on account of such reinsurance.

history: (History: Added by Stats. 1969, Ch. 516.)


text: No grants and annuities society applying for admission to this state, or transacting in this state, the business described in this chapter shall transact or be authorized to transact a variable annuity business as described in Section 10506.

history: (History: Added by Stats. 1980, Ch. 200, Sec. 1.)


text: Except as prescribed in this chapter, such organization or person shall be otherwise exempt from the provisions of this code and other insurance laws of this state, except the provisions of Sections 730 to 736, inclusive, Sections 790 to 790.10, inclusive, Section 1011, Sections 1012 to 1044, and Sections 1056.5 to 1061. The cost and expense of examining such organization or person shall be paid as prescribed in Section 736.

history: (History: Amended by Stats. 1980, Ch. 209, Sec. 6.)


text: A solvent domestic incorporated insurer having a paid-in capital represented by outstanding shares of capital stock and issuing, on a reserve basis, nonassessable policies of life insurance or of both life and disability insurance, may convert itself into an incorporated mutual life insurer, or life and disability insurer, issuing nonassessable policies on a reserve basis. To that end it may provide and carry out a plan for the acquisition of the outstanding shares of its capital stock for the benefit of its policyholders, or any class or classes of its policyholders, by complying with the requirements of this chapter.

history: (History: Amended by Stats. 1937, Ch. 735.)

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 13. Voluntary Mutualization of Incorporated Life and Life and Disability Insurers Having a Capital Stock and Issuing Nonassessable Policies on a Reserve Basis > 1. Authority and Requirements to Mutualize


text:
Such plan shall include appropriate proceedings for amending the insurer’s articles of incorporation to give effect to the acquisition, by said insurer, for the benefit of its policyholders or any class or classes thereof, of the outstanding shares of its capital stock and the conversion of the insurer from a stock corporation into a nonstock corporation for the benefit of its members. The members of such nonstock corporation shall be the policyholders from time to time of the class or classes for whose benefit the stock of the insurer was acquired, and the policyholders of such other class or classes as may be specified in such corporation’s articles of incorporation as they may be amended from time to time. Such plan shall be:

(a) Adopted by a vote of a majority of the directors.

(b) Approved by the vote of the holders of at least a majority of the outstanding shares at a special meeting of shareholders called for that purpose, or by the written consent of such shareholders.

(c) Submitted to the commissioner and approved by him in writing.

(d) Approved by a majority vote of all the policyholders of the class or classes for whose benefit the stock is to be acquired voting at an election by the policyholders called for that purpose, subject to the provisions of Section 11528. The terms “policyholder” and “policyholders” as used in this chapter shall be deemed to mean the person or persons insured under an individual policy of life insurance, or of disability insurance, or of any combination of life and disability insurance. They shall also include the person or persons to whom any annuity or pure endowment is presently or prospectively payable by the terms of an individual annuity or pure endowment contract, except where the policy or contract declares some other person to be the owner or holder thereof, in which case such other person shall be deemed the policyholder. In any case where such policy or contract names two or more persons as joint insureds, payees, owners or holders thereof, the persons so named shall be deemed collectively to be but one policyholder for the purpose of this chapter. In any case where a policy or contract shall have been assigned by assignment absolute on its face to an assignee other than the insurer, and such assignment shall have been filed at the principal office of the insurer at least 30 days prior to the date of any election or meeting referred to in this chapter, then such assignee shall be deemed at such election or meeting to be the policyholder. For the purpose of this chapter the terms “policyholder” and “policyholders” include the employer to whom, or a president, secretary or other executive officer of any corporation or association to which a master group policy has been issued, but exclude the holders of certificates or policies issued under or in connection with a master group policy. Beneficiaries under unmatured contracts shall not as such be deemed to be policyholders.

(e) Filed in the office of the Insurance Commissioner after having been approved as provided in subdivisions (b), (c) and (d) of this section.

history: (History: Amended by Stats. 1969, Ch. 49.)

chapter: 13. Voluntary Mutualization of Incorporated Life and Life and Disability Insurers Having a Capital Stock and Issuing Nonassessable Policies on a Reserve Basis

article: 1. Authority and Requirements to Mutualize


text: The commissioner shall examine the plan submitted under subdivision (c) of Section 11526. The commissioner shall not approve the plan unless in the commissioner’s opinion the rights and interests of the insurer, its policyholders, and shareholders are protected and the commissioner is satisfied that the plan will be fair and equitable in its operation.

history: (History: Amended by Stats. 1983, Ch. 142, Sec. 93.)


text:
The election prescribed by subdivision (d) of Section 11526, shall be called by the board of directors or the president and every policyholder of the class or classes for whose benefit the stock is to be acquired, whose insurance shall have been in force for at least one year prior to the election shall have one vote, regardless of the number of policies or amount of insurance the policyholder holds, and regardless of whether the policies are policies of life insurance or policies of disability insurance. Notice of the election shall be given to policyholders entitled to vote by mail from the principal office of the insurer at least 30 days prior to the date set for the election, in a sealed envelope, postage prepaid, addressed to the policyholder at that person’s last known address.

Voting shall be by one of the following methods:

(a) At a meeting of those policyholders, held pursuant to the notice, by ballot in person or by proxy.

(b) If not by the method described in subdivision (a), then by mail pursuant to a procedure and on forms to be prescribed by the plan.

The election shall be conducted under the direction and supervision of three impartial and disinterested inspectors appointed by the insurer and approved by the commissioner. In case any person appointed as inspector fails to appear at the meeting or fails or refuses to act at the election, the vacancy, if occurring in advance of the convening of the meeting or in advance of the opening of the mail vote, may be filled in the manner prescribed for the appointment of inspectors and, if occurring at the meeting or during the canvass of the mail vote, may be filled by the person acting as chairperson of the meeting or designated for that purpose in the plan. The decision, act, or certificate of a majority of the inspectors shall be effective in all respects as the decision, act, or certificate of all. The inspectors of election shall determine the number of policyholders, the voting power of each, the policyholders represented at the meeting or voting by mail, the existence of a quorum, and the authenticity, validity, and effect of proxies. They shall receive votes, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result, and do such other acts as are proper to conduct the vote with fairness to all policyholders. The inspectors of election shall, before commencing performance of their duties, subscribe to and file with the insurer and with the commissioner an oath that they, and each of them, will perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practicable. On the request of the insurer, the commissioner, a policyholder or his or her proxy, the inspectors shall make a report in writing of any challenge or question or matter determined by them and execute a certificate of any fact found by them. They shall also certify the result of the vote to the insurer and to the commissioner. Any report or certificate made by them shall be prima facie evidence of facts stated therein. All necessary expenses incurred in connection with the election shall be paid by the insurer. For the purpose of this section, a quorum shall consist of 5 percent of the policyholders of the insurer entitled to vote at the election.

history: (History: Amended by Stats. 1983, Ch. 142, Sec. 94.)


text:
In carrying out any such plan, the insurer may acquire any shares of its own stock by gift, bequest or purchase. Any shares so acquired shall, unless as a result of such acquisition all of the shares of the insurer shall have been acquired, be acquired in trust for the policyholders of the class or classes for whose benefit the plan provides that the stock of the insurer shall be acquired as hereinafter provided. Such shares shall be assigned and transferred on the books of such insurer to three or more trustees appointed by the insurer and approved by the commissioner under a trust agreement approved by the commissioner. Such trustees shall hold such stock in trust until all of the outstanding shares of capital stock of such insurer have been acquired, but for not longer than 30 years with such extensions of not more than five years each as may be granted by the commissioner. Such extensions may be granted by the commissioner if the plan so provides and if in his opinion the plan of acquisition of all of such stock can be completed within a reasonable period. Such trustees shall vote such stock at all corporate meetings at which stockholders have the right to vote. When all of the outstanding shares of capital stock of such insurer have been acquired, all said shares shall be canceled, the certificate of amendment of the insurer’s articles of incorporation giving effect thereto shall be filed in accordance with the provisions of Chapter 9 (commencing with Section 1300) of Division 1 of Title 1, of the Corporations Code, and the insurer shall become a nonstock corporation for the profit of its members and such trust shall thereupon terminate. Thereafter such corporation shall be conducted for the mutual benefit, ratably, of its policyholders of the class or classes for whose benefit the stock was acquired and shall have power to issue nonassessable policies on a reserve basis subject to all provisions of law applicable to incorporated life insurers or life and disability insurers, as the case may be, issuing nonassessable policies on a reserve basis. Policies so issued may be upon the basis of full or partial participation therein as agreed between the insurer and the insured.

Upon the termination of any such voting trusts, either in accordance with its terms or as hereinabove provided, such plan of mutualization shall terminate, unless theretofore completed. Upon such termination, unless the plan of mutualization provides for the disposition of the shares acquired by the insurer under such plan or for the disposition of the proceeds thereof, the shares held by such trustees shall be disposed of in accordance with an order of the superior court of the county in which is located the principal office of such insurer, made upon a verified application of the commissioner.

history: (History: Amended by Stats. 1978, Ch. 349.)

article: 2. Execution of Plan

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 13. Voluntary Mutualization of Incorporated Life and Life and Disability Insurers Having a Capital Stock and Issuing Nonassessable Policies on a Reserve Basis > 2. Execution of Plan


text: Any such plan of mutualization may provide for the creation of a voting trust under a trust agreement for the holding and voting by three or more trustees of any portion or all of the shares of the insurer not acquired upon the adoption of such plan. The voting trustees shall be named in accordance with such plan or, if no provision is made therein for the naming of such trustees, then by the insurer. The voting trust agreement and voting trustees shall be subject to the approval of the commissioner. Any or all of the trustees under such voting trust agreement may be the same person or persons as any or all of the trustees referred to in Section 11529. Such voting trust agreement shall provide that in the event of acquisition by the insurer of any of the shares of stock held thereunder in accordance with the provisions of the plan, such shares so acquired together with the voting rights thereof shall be transferred by the trustees named under the provisions of this section to the trustees named under the provisions of Section 11529. Any voting trust agreement created pursuant to the provisions of this section may be made irrevocable for not longer than thirty (30) years and thereafter until the termination of the trust provided for in Section 11529. The trust created pursuant to the provisions of this section shall terminate in any event upon termination of the trust provided for in Section 11529. Upon the termination of the trust created pursuant to the provision of this section, any shares held in such trust shall revert to the persons entitled thereto by law.

history: (History: Added by Stats. 1947, Ch. 223.)

article: 2. Execution of Plan


text: Every payment for the acquisition of any shares of the capital stock of such insurer, the purchase price of which is not fixed by such plan, shall be subject to the prior approval of the commissioner. Neither such plan, nor any such payment, may be approved by the commissioner unless he finds that the rights and interests of the insurer, its policyholders, and shareholders are protected.

history: (History: Amended by Stats. 1947, Ch. 223.)

article: 2. Execution of Plan


text: The trustees referred to in section 11529 shall file with such insurer and with the commissioner a verified acceptance of their appointments and verified declarations that they will faithfully discharge their duties as such trustees. All dividends and other sums received by said trustees on the shares held by them, after paying the necessary expenses of executing their trust, shall be immediately repaid to such insurer for the benefit of all who are, or may become, policyholders of such insurer of the class or classes for whose benefit the stock of such insurer was acquired and entitled to participate in the profits thereof and shall be added to and become a part of the assets of such insurer.

article: 2. Execution of Plan


text: Such insurer, after mutualization, shall be a continuation of the original insurer, and such mutualization shall not affect such insurer’s certificate of authority nor existing suits, rights or contracts except as provided in said plan for the acquisition of the outstanding shares of the capital stock of such insurer, approved as provided in this chapter. Such insurer, after mutualization, shall exercise all the rights and powers and perform all the duties conferred or imposed by law upon insurers writing the classes of insurance written by it, and to protect rights and contracts existing prior to mutualization, subject to the effect of said plan. The board of directors of such insurer, prior to mutualization, may adopt amendments to its bylaws to take effect upon mutualization.

history: (History: Amended by Stats. 1959, Ch. 1105.)

article: 2. Execution of Plan


text: An annual meeting of members shall be held at 10 o'clock in the morning of the fourth Tuesday of March of each year at the principal office of the insurer, unless a different time or place be provided in the by-laws.

history: (History: Added by Stats. 1941, Ch. 379.)

article: 2. Execution of Plan


text: Special meetings of the members, for any purpose or purposes whatsoever, may be called at any time by the president, or by the board of directors, or by one or more members holding not less than one-fifth of the voting power of such insurer, or by such other officers or persons as the by-laws authorize.

article: 2. Execution of Plan


text:
Notice of all meetings of members whether annual or special shall be given in writing to the members entitled to vote by the secretary, or an assistant secretary, or other person charged with that duty, or if there be no such officer, or in case of his neglect or refusal, by any director or member. At the option of the insurer such notice may be imprinted on premium notices or receipts or on both.

A notice may be given by such insurer to any member either personally, or by mail, or other means of written communication, charges prepaid, addressed to such member at his address appearing on the books of the insurer, or given by him to the insurer for the purpose of notice. If a member gives no address, notice shall be deemed to have been given him if sent by mail or other means of written communication addressed to the place where the principal office of the insurer is situated, or if published at least once in some newspaper of general circulation in the county in which said office is located.

Notice of any meeting of members shall be sent to each member entitled thereto not less than seven days before such meeting, unless the bylaws provide otherwise.

Notice of any meeting of members shall specify the place, the day, and the hour of the meeting and the general nature of the business to be transacted.

Notice of an annual meeting to be held at the time and place specified in Section 11532.1 shall be sufficiently given if published at least once in each of four successive weeks in a newspaper of general circulation in the county in which the principal office of such insurer is located, and if so published no other notice of such meeting shall be required.

article: 2. Execution of Plan


text: The presence in person or by proxy of 5 per cent of the members entitled to vote at any meeting shall constitute a quorum for the transaction of business, unless otherwise provided in the by-laws.

article: 2. Execution of Plan


text: Each such member shall have one vote at any meeting of members regardless of the number of policies or the amount of insurance that such member holds and regardless of whether such policies are policies of life insurance, or of disability insurance, or both. Any member entitled to vote shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent and filed with the secretary of such insurer.

article: 2. Execution of Plan


text: The directors of the insurer in office at the time the insurer is mutualized as provided in this chapter shall continue in office until the first annual meeting of members. At the first annual meeting of members and at each annual meeting thereafter directors shall be elected by the members for the term or terms authorized by this chapter.

article: 2. Execution of Plan


text: The articles of incorporation or the bylaws may provide that the directors may be divided into two or more classes whose terms of office shall expire at different times, but no term shall continue longer than six years. In the absence of such provisions, each director, except members of the board of directors at the time the insurer is mutualized, shall be elected for a term of one year. All directors shall hold office for the term for which they are elected and until their successors are elected and qualified. A director may, but need not be a member or policyholder of the insurer of which he is acting as director. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum, and each director so elected shall hold office until the next annual meeting.

article: 2. Execution of Plan


text: All insurers mutualized under the provisions of this chapter shall be subject to all other applicable provisions of this code and to the provisions of the general corporation law as provided in Section 1140 of this code.

article: 2. Execution of Plan


text:
The provisions of Article 8 of Chapter 1 of Part 2 of Division 1 of this code shall not apply to any of the following:

(a) Shares of the capital stock of such insurer acquired as provided in section 11529 and assigned and transferred to the trustees as is provided in said section, and the assignment and transfer of said shares as so provided.

(b) Any certificate or other instrument issued to a policyholder of such mutualized insurer conferring or evidencing membership in such mutualized insurer or conferring or evidencing such member’s right to participate in the profits or share in the assets of such mutualized insurer by virtue of his membership therein, and the issuance of such certificate or other instrument.

(c) The plan for the acquisition of the outstanding shares of the capital stock of such insurer authorized by the provisions of this chapter, the submission of said plan to the commissioner and to the policyholders of such insurer as provided in this chapter, and the approval and carrying out of said plan or any part thereof in accordance with the provisions of this chapter.

history: (History: Added by Stats. 1935, Ch. 530.)

article: 2. Execution of Plan


text:
(a) A domestic incorporated mutual life insurer, or life and disability insurer, issuing nonassessable policies on a reserve basis may be converted into an incorporated stock life or stock life and disability insurer issuing, on a reserve basis, nonassessable policies of life insurance or of both life and disability insurance. To that end, it may provide and carry out a plan for the conversion by complying with the requirements of this chapter.

(b) A domestic incorporated mutual insurer not referred to in subdivision (a) and that is not a medical malpractice mutual insurer as defined in subdivision (i) of Section 4097.01, which may be referred to in this chapter as a mutual property-casualty insurer, may be converted into an incorporated stock property-casualty insurer. To that end, it may provide and carry out a plan for the conversion by complying with the requirements of this chapter. A medical malpractice mutual insurer as defined in subdivision (i) of Section 4097.01 may not convert to a stock insurer under this chapter.

(c) A mutual holding company may be converted into a stock corporation. To that end, it may provide and carry out a plan for the conversion by complying with the requirements of this chapter.

(d) As part of the conversion authorized in this section, a domestic incorporated mutual insurer may merge with an incorporated stock insurer, if the merging insurers comply with the provisions of this code applicable to their participation in the merger, or may transfer its domicile to any other state, if the insurer complies with Section 709.5.

history: (History: Amended by Stats. 1998, Ch. 421, Sec. 5. Effective January 1, 1999.)

path: 2. CLASSES OF INSURANCE > 2. LIFE AND DISABILITY INSURANCE > 14. Conversion of an Incorporated Mutual Life or Life and Disability Insurer into an Incorporated Stock Life Insurer Issuing Policies on a Reserve Basis > 1. Authority and Requirements to Convert


text:
The definitions in this section apply to the following terms when used in this chapter.

(a) “Adoption date” means the date the board of directors adopts the plan of conversion.

(b) “Converted company” means the converted insurer or converted mutual holding company, as the case may be.

(c) “Converted insurer” means the incorporated stock insurer into which a mutual insurer has been converted or merged or redomiciled in accordance with the provisions of this chapter.

(d) “Converted mutual holding company” means the stock corporation into which a mutual holding company has been converted in accordance with this chapter.

(e) “Converting mutual life company” means, for a plan of conversion under this chapter, the mutual life insurer or mutual holding company that is converting under such a plan.

(f) “Effective date” means, for the conversion of a mutual life insurer, the date upon which the conversion of the mutual life insurer is effective, as specified in the commissioner’s amendment to the mutual life insurer’s certificate of authority issued in accordance with Section 11542, as a result of conversion proceedings under this chapter. For the conversion of a mutual holding company, “effective date” means the date upon which the conversion of a mutual holding company is effective, as specified in the amended articles of incorporation of the mutual holding company filed with the Secretary of State in accordance with Section 11542, as a result of conversion proceedings under this chapter.

(g) “Eligible members” means, for the conversion of a mutual life insurer, the members of the mutual life insurer who are of record on the mutual life insurer’s adoption date. For the conversion of a mutual holding company, “eligible members” means the members of the mutual holding company who are of record on the mutual holding company’s adoption date.

(h) “Member” means a person who, by the records of the mutual company and by its articles of incorporation or bylaws, is deemed to be a holder of a membership interest in the mutual company. For a mutual life insurer, a plan of conversion may provide that the term “member” also includes a person who is the owner of a policy issued or assumed by an insurer, that, pursuant to court order, is to be merged into the converted company. On and after the effective date of a plan of conversion that creates a mutual holding company, the term “member” means a member of a mutual holding company, as provided in Section 11542.1.

(i) “Membership interests” means the interests of members arising under this code and the articles of incorporation and bylaws of the mutual company or otherwise by law. Membership interests include the right to vote for directors of the mutual company and the right to vote on any plan of merger, consolidation, reinsurance, or transfer of assets and liabilities of the mutual company. Membership interests do not include members’ rights in surplus, if any.

(j) “Mutual company” means, in the case of a plan of conversion, the mutual life insurer, mutual property-casualty insurer, or mutual holding company that is converting pursuant to such plan.

(k) “Mutual holding company” means a corporation organized under the laws of this state subject to the General Corporation Law as set forth in the Corporations Code. The articles of incorporation of a mutual holding company shall contain provisions stating the following:

(1) It is a mutual holding company organized under this chapter.

(2) One purpose of the mutual holding company is to hold not less than 51 percent of the voting stock of a stock holding company, which in turn holds all of the voting stock of a converted life insurer.

(3) It is not authorized to issue voting stock.

(4) Its members have the rights specified in Section 11542.1 and in its articles of incorporation and bylaws.

(5) Its assets and liabilities are subject to inclusion in the estate of the converted insurer in any proceedings successfully prosecuted against the converted insurer under Article 14 (commencing with Section 1010) or Article 14.3 (commencing with Section 1064.1) of Chapter 1 of Part 2 of Division 1.

(l) “Mutual insurer” means, in the case of a plan of conversion under this chapter, the mutual life insurer or mutual property-casualty insurer that is converting pursuant to such plan.

(m) “Mutual life insurer” means a domestic incorporated mutual life insurer, or domestic mutual life and disability insurer, that issues nonassessable policies on a reserve basis.

(n) “Person” means an individual, partnership, firm, association, corporation, joint-stock company, limited liability company, trust, government or governmental agency, state or political subdivision of a state, public or private corporation, board, association, estate, trustee, or fiduciary, or any similar entity.

(o) “Plan of conversion” or “plan” means a plan adopted by a mutual company in compliance with this chapter.

(p) “Policy” means an individual or group policy of insurance issued by a life insurer. If a policy of a mutual life insurer takes a form other than an individual form but holders of certificates or other interests under the policy are treated by the mutual life insurer as if they were holders of individual policies, the mutual life insurer may provide in its plan of conversion under this chapter that such a certificate or other interest is deemed to be a policy and deem the holder of the certificate or other interest to be an owner of a policy. Such a provision shall be for the sole purpose of determining the rights, if any, of policyholders of the mutual life insurer to vote upon and receive consideration under the plan of conversion and may not affect the other voting rights and qualifications of members of the mutual life insurer.

(q) “Policyholder” means the holder of a policy other than a reinsurance contract.

(r) “Rights in surplus,” for a mutual life insurer, means rights of members of the insurer to a return of that portion of the surplus that has not been apportioned or declared by the board of directors for policyholder dividends. “Rights in surplus” includes rights of members of the insurer to a distribution of surplus in liquidation or conservation of the insurer under this code, or in a dissolution or winding up. “Rights in surplus,” for a mutual holding company, means rights of members of the company to a return of any surplus that has not been apportioned or declared by its board of directors for member dividends. “Rights in surplus” includes rights of members of the mutual holding company to a distribution of surplus in liquidation or conservation of the insurer under this code, or in a dissolution or winding up. “Rights in surplus” does not include any right expressly conferred solely by the terms of an insurance policy.

(s) “Stock holding company” means a corporation authorized to issue one or more classes of capital stock, the corporate purposes of which include holding all of the voting stock in an insurer that has been converted from a mutual life insurer to a stock life insurer in proceedings under Section 11537.2 in which a mutual holding company is formed.

(t) “Voting stock” means securities of any class or any ownership interest having voting power for the election of directors, trustees, or management of a person, other than securities having voting power only because of the occurrence of a contingency. All references to a specified percentage of voting stock of any person mean securities having the specified percentage of the voting power in that person for the election of directors, trustees, or management of that person, other than securities having voting power only because of the occurrence of a contingency.

history: (History: Amended by Stats. 1999, Ch. 868, Sec. 2. Effective January 1, 2000.)

chapter: 14. Conversion of an Incorporated Mutual Life or Life and Disability Insurer into an Incorporated Stock Life Insurer Issuing Policies on a Reserve Basis

article: 1. Authority and Requirements to Convert


text:
The plan of conversion shall include appropriate proceedings for amending the mutual company’s articles of incorporation to give effect to the conversion from a nonstock corporation into a stock corporation. The plan shall be:

(a) Approved by a resolution of the majority of the board of directors. The resolution shall specify the reasons for and the purposes of the proposed conversion of the mutual company and the manner in which the conversion is expected to benefit and serve the best interests of the policyholders, for a mutual insurer, or members, for a mutual holding company.

(b) Submitted to the commissioner for consent in writing, subject to the provisions of Section 11538, by an application executed by an authorized officer of the mutual company and accompanied by the following documents, or true and correct copies of the documents:

(1) The proposed plan of conversion.

(2) The proposed articles of incorporation of each corporation that is a constituent corporation of the conversion.

(3) The proposed bylaws of each corporation that is a constituent corporation of the conversion.

(4) A list of the officers and directors, together with their biographies in the form customarily required by the commissioner, of each corporation that is a constituent corporation of the conversion.

(5) The resolution of the board of directors of the mutual company, certified by the secretary of the board of directors, authorizing the conversion under this chapter.

(6) Financial statements, which may be prepared on a pro forma basis, in the form required by the commissioner.

(7) For a conversion of a mutual insurer, a plan of operations for the converted insurer.

(8) A summary of the plan of conversion and drafts of written materials to be mailed to members seeking their approval of the plan.

(9) Other relevant information that the commissioner may require.

(c) Approved by a majority vote of the members of the mutual company voting at a meeting of the members called for that purpose, subject to the provisions of Section 11539.

(d) Filed in the office of the commissioner after receipt of the commissioner’s consent, and after having been approved as provided in Sections 11538 and 11539, respectively.

history: (History: Amended by Stats. 1996, Ch. 406, Sec. 4. Effective August 19, 1996.)


text:
For the conversion of a mutual property-casualty insurer, the plan for conversion shall include the following:

(a) A fair and reasonable formula, approved by the commissioner, for determining the equity of each eligible member in the insurer. The equity shall be based upon an appraisal of the fair value of the insurer by one or more qualified disinterested persons appointed by the insurer with the approval of the commissioner. Those persons shall consider the assets and liabilities of the insurer and any factors bearing on the value of the mutual insurer.

(b) Each eligible member of the mutual insurer shall be given a preemptive right to acquire his or her proportionate part of all of the proposed capital stock of the insurer, within a designated reasonable period, by applying upon the purchase of such part the amount of his or her equity as determined under the formula described in subdivision (a).

(c) The members entitled to participate in the purchase of stock or distribution of assets shall be limited to all current policyholder members whose policies have been of record for not less than one year prior to the date the board of directors adopted the plan of conversion.

(d) Each member not applying his or her equity upon the purchase price of stock shall elect to receive either a cash payment or a certificate of contribution. The cash payment shall not be greater than 50 percent of his or her equity as determined by the formula in subdivision (a). The certificate of contribution shall be in an amount equal to 100 percent of his or her equity, as determined by the formula in subdivision (a), shall bear interest at the rate established in Section 10489.4 for minimum standard valuation of all life insurance policies of more than 20 years’ duration issued in the year, and shall be repayable within 10 years or, if necessary under the terms of the plan, later, only on written approval of the commissioner and only out of surplus in excess of an amount established in the plan. Any member not electing to receive cash or purchase stock shall be deemed to have elected to receive a certificate of contribution. The stock purchased, cash payment, or certificate of contribution shall constitute full payment and discharge of the member’s equity or property interest in the mutual insurer, and, notwithstanding any other provision of law, the member shall have no other rights with respect thereto.

(e) The number of shares to be authorized for the new stock insurer, their par value, and the method for determining the price at which the shares will be offered to eligible members, to the end that the plan, when completed, would provide for the converted insurer paid-in capital and surplus in an amount not less than the minimum paid-in capital and surplus required of a domestic stock insurer upon initial authorization to transact like kinds of insurance.

(f) Provision for the offering to others of shares not purchased by eligible members within the designated period referred to in subdivision (b) at a price not less than the offering price to members.

history: (History: Amended by Stats. 1996, Ch. 406, Sec. 5. Effective August 19, 1996.)


text: For the conversion of a mutual life insurer, the plan of conversion shall provide for either a mutual holding company in compliance with Section 11537.2 or for consideration in compliance with Section 11537.3. For the conversion of a mutual holding company, the plan of conversion shall provide for consideration in compliance with Section 11537.3.

history: (History: Added by Stats. 1996, Ch. 406, Sec. 6. Effective August 19, 1996.)


text: A plan of conversion adopted by a mutual life insurer for the establishment of a mutual holding company shall provide that the mutual life insurer will become a stock life insurer, that the members of the mutual life insurer will become members of a mutual holding company, that the mutual holding company will acquire at least 51 percent of the voting stock of the stock holding company, and that the stock holding company will acquire all of the voting stock of the converted insurer.

history: (History: Added by Stats. 1996, Ch. 406, Sec. 7. Effective August 19, 1996.)


text:
A plan of conversion adopted by a converting mutual life company shall include the following:

(a) (1) The plan provides that each member’s membership interests and rights in surplus are extinguished and each eligible member will receive, without payment, nontransferable subscription rights to purchase a portion of the capital stock of a corporation which will issue the subscription rights, or, in lieu thereof, shares of capital stock or other securities of the issuer, cash, premium credits, or credits to policy account values having an aggregate value equal to the aggregate exercise price of the subscription rights that otherwise would have been allocated to the member. The issuer is either (A) the converted insurer, (B) a corporation, the voting stock of which is owned by the mutual life insurer or the mutual holding company, as the case may be, or by any other persons, that will acquire in the conversion all the voting stock of the converted insurer, or (C) a corporation, all of the voting stock of which is owned by the mutual holding company into which both the mutual holding company and the stock holding company will be merged.

(2) The subscription rights are allocated in whole shares among the eligible members. The subscription rights, capital stock, cash, premium credits, and credits to policy account values are allocated among the eligible members using a fair and equitable formula. This formula will either (A) allocate a fixed component per capita among eligible members (specifying how joint owners will be treated for this purpose) and allocate a variable component among eligible members in proportion to the cash value of policies held by them, or (B) allocate the subscription rights, capital stock, cash, or credits in any other manner that the commissioner may approve.

(b) The plan specifies or authorizes the board of directors of the converting mutual life company to set the expiration date of the subscription rights, if any, allocated by the plan. The exercise price per share of the subscription rights is 50 percent of the price per share at which the capital stock of the issuer is first offered to the public in the offering referred to in subdivision (d), as fixed at the time of the offering by the boards of directors of the converting mutual life company and the issuer or committees of the boards.

(c) The plan provides that any eligible member not exercising the subscription rights, if any, allocated to the member will instead receive alternative forms of consideration having an aggregate value equal to the aggregate exercise price of the subscription rights allocated to the member. The alternative forms of consideration may include shares of capital stock of the issuer, cash, premium credits, or credits to policy account values. The choices available to the eligible member shall be specified in the plan. The choices available may take into account the type of policy, size of policy, tax status of the member, and other factors that the commissioner determines are appropriate.

(d) The plan provides that the issuer will make a public offering of its capital stock at a price determined by the boards of directors of the converting mutual life company and the issuer. The number of shares to be offered is determined according to the plan and may include any shares issuable upon exercise of subscription rights that are not exercised. The plan may also provide for the issue and sale of securities of the issuer to other persons at the time of the public offering. However, any plan provisions pertaining to the issuance and sale of securities to the insurer’s officers, directors, employees, agents, and employee benefit plans for their benefit shall be subject to Section 11540.

(e) The plan of a mutual life insurer may provide for the establishment, for policyholder dividend purposes only, of a closed block. The closed block will consist of all of the participating individual policies of life insurance of the mutual life insurer in force on the effective date of the plan for which the insurer had an experience-based dividend scale payable in the year in which the plan is adopted. Assets of the insurer shall be allocated to the closed block in an amount that produces cash-flows, together with anticipated revenues from the closed block business, expected to be sufficient (1) to support the closed block business, including payment of claims and those expenses and taxes specified in the plan and (2) to provide for continuation of dividend scales in effect on the adoption date if the experience underlying the scales continues, and for appropriate adjustments in the scales if the experience changes. The plan may provide for conditions under which the converted insurer may cease to maintain the closed block and its allocated assets. Regardless of such a cessation, the obligation under the policies constituting the closed block business remain the obligations of the converted insurer. Dividends on those policies shall be apportioned by the board of directors of the converted insurer in accordance with the terms of the policies.

(f) In lieu of the provisions contemplated by subdivisions (a) to (d), inclusive, a plan may be adopted by a converting mutual life company that:

(1) Is fair and equitable to the members of the converting mutual life company and provides for consideration to the members having a value equal to or greater than the value of the consideration that would have been payable to the members pursuant to a plan of conversion contemplated by subdivisions (a) to (d), inclusive.

(2) Has been approved by a resolution of the majority of the board of directors that specifies the basis on which the board of directors of the converting mutual life company finds that adopting the plan of conversion under this subdivision meets the requirements of paragraph (1).

(3) Provides that each member’s membership interests and rights in surplus are extinguished and each eligible member will receive, without payment by the member, consideration that is allocated among the eligible members using a fair and equitable formula. This formula will either (A) allocate a fixed component per capita among eligible members, specifying how joint owners will be treated for this purpose, and allocate a variable component among eligible members in proportion to the cash value of policies held by them, or (B) allocate the consideration in any other manner that the commissioner may approve.

(4) Provides that eligible members may receive one or more kinds of consideration, including shares of capital stock of the converting mutual life company or shares of capital stock (or interests in shares of capital stock) of a corporation that, after the conversion, directly or indirectly, controls the converted insurer, cash, premium credits, or credits to pay policy account values, as set forth in the plan.

(5) Provides for either of the following:

(A) The conversion of the converting mutual life company into a domestic stock corporation.

(B) The conversion of the converting mutual life company by means of a merger (i) in the case of a mutual life insurer into a domestic stock corporation, provided the corporation has been issued a certificate of authority, or (ii) in the case of a converting mutual holding company into a domestic or foreign stock corporation, and, in the case of that merger:

(I) The merger and conversion shall be subject to the provisions of this chapter other than subdivisions (a) to (d), inclusive.

(II) Chapter 11 (commencing with Section 1100), Chapter 12 (commencing with Section 1200), and Chapter 13 (commencing with Section 1300), of Division 1 of the Corporations Code shall not apply to the converting mutual life company in the merger except that Section 1107 of the Corporations Code shall apply.

(III) The merger and conversion shall become effective upon the filing of appropriate instruments with the Secretary of State.

(6) The plan may also provide for the converted company, or a corporation that will directly or indirectly control the converted insurer after the conversion, to issue and sell its securities to other persons at the time of the conversion. Any plan provisions pertaining to the issuance and sale of securities to the insurer’s officers, directors, employees, agents, and employee benefit plans for their benefit shall be subject to Section 11540.

history: (History: Amended by Stats. 1999, Ch. 868, Sec. 5. Effective January 1, 2000.)


text:
(a) The commissioner shall examine the plan submitted pursuant to subdivision (b) of Section 11536. As a part of the examination the commissioner may order a hearing on the plan after written notice of the hearing to the mutual company, and its members, all of whom shall have the right to appear at the hearing. The commissioner may require as a condition of consent that the mutual company make modifications of the proposed plan that the commissioner finds necessary for the protection of policyholders. The commissioner shall consent to the plan if he or she finds all of the following:

(1) For the conversion of a mutual insurer, the plan is fair and equitable to the insurer and its policyholders.

(2) For the conversion of a mutual holding company, the plan is fair and equitable to the company, its members, and the policyholders of the converted insurer.

(3) The plan does not violate the law.

(4) The converted insurer will, after the conversion, satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed.

(b) For the conversion of a converting mutual life company, the commissioner may appoint one or more actuarial, financial, or other consultants, including legal counsel, as the commissioner finds necessary to advise the commissioner in making the determination of whether the proposed plan of conversion meets the applicable requirements of this chapter. The converting mutual life company is responsible for the reasonable fees and expenses of any actuarial, financial, or other consultants, including legal counsel, appointed, and for the mailing and publication of notices to the mutual company and its members.

history: (History: Amended by Stats. 1999, Ch. 868, Sec. 6. Effective January 1, 2000.)


text: The meeting of members prescribed by subdivision (c) of Section 11536 shall be called by the board of directors, the chairperson of the board, or the president of the mutual company. Notice of the meeting shall be given to eligible members by mail at least 30 days prior to the date set for the meeting to members of the mutual company of record on the date the plan of conversion was adopted by the board of directors. Voting shall be by ballot, in person or by proxy. A quorum shall consist of 5 percent of the members of the mutual company entitled to vote at the meeting.

history: (History: Amended by Stats. 1996, Ch. 406, Sec. 10. Effective August 19, 1996.)


text:
(a) Nothing in this chapter shall be deemed to prohibit the inclusion in the plan of conversion of provisions under which the insurer’s officers, directors, employees, agents, and employee benefit plans for their benefit may be entitled, in accordance with reasonable classifications of those individuals and employee benefit plans as may be included in the plan, to purchase for cash, at the same price as offered to the public in the initial public offering, voting stock not purchased by members upon exercise of subscription rights. Nothing in this chapter shall be deemed to prohibit the establishment of stock option, incentive, and share ownership plans customary for publicly traded companies in the same and similar industries. The plan may not permit those persons to acquire more than 25 percent of the voting stock issued pursuant to the plan for a mutual life insurer having assets in excess of two hundred million dollars ($200,000,000) or 35 percent for a mutual life insurer having assets of two hundred million dollars ($200,000,000) or less.

(b) For the conversion of a mutual property-casualty insurer, subdivision (f) of Section 11537 does not prohibit the inclusion in the conversion plan of provisions under which the individuals comprising the insurer’s management, employees and agents are entitled to purchase for cash, at the same price as offered to the insurer’s members, shares of stock not taken by members on the preemptive offering to members, in accordance with such reasonable classifications of such individuals as may be included in the plan. The plan may not provide for such individuals to acquire in excess of 25 percent of the shares of stock issued pursuant to the plan for a mutual insurer having assets in excess of two hundred million dollars ($200,000,000) or 35 percent for a mutual insurer having assets of two hundred million dollars ($200,000,000) or less.

history: (History: Amended by Stats. 1996, Ch. 406, Sec. 11. Effective August 19, 1996.)


text: No director, officer, agent, or employee of the mutual company shall receive any fee, commission, or other valuable consideration whatsoever, other than regular salary and compensation, for in any manner aiding, promoting, or assisting in the conversion except as set forth in the plan approved by the commissioner. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys at law, accountants, and actuaries for services performed in the independent practice of their professions, even though they may also be directors of the mutual company.

history: (History: Amended by Stats. 1996, Ch. 406, Sec. 12. Effective August 19, 1996.)


text: At any time before that plan of conversion becomes effective as provided in Section 11542, the mutual company may, by resolution of a majority of the board of directors, amend the plan of conversion or withdraw the plan of conversion. Any plan amendment shall require the written consent of the commissioner. For a plan amendment, all references in this chapter to the plan of conversion shall be deemed to refer to the plan as amended, but no amendment shall be deemed to change the adoption date of the plan of conversion. No amendment may change the plan of conversion in a manner that the commissioner determines is materially disadvantageous to policyholders of the mutual life insurer or members of the mutual holding company, unless a further public hearing is held on the plan as amended, if the amendment is made after the initial public hearing, or if the plan as amended is submitted for reconsideration by the members if the amendment is made after the plan has been approved by the members.

history: (History: Added by Stats. 1996, Ch. 406, Sec. 13. Effective August 19, 1996.)


text:
(a) Upon consent by the commissioner to the plan of conversion of a mutual insurer and filing of the plan of conversion in accordance with the provisions of this chapter, the commissioner shall issue a new certificate of authority to the converted insurer. Upon issuance of the certificate of authority to a mutual insurer and subject to subdivision (a) of Section 110 of the Corporations Code, the Secretary of State shall accept for filing the articles of incorporation, certificate of amendment of articles of incorporation, or agreement of merger and officers’ certificates of the converted insurer for the conversion of a mutual insurer. For a plan of conversion in accordance with Section 11537.2, the Secretary of State shall accept for filing the articles of incorporation of the mutual holding company and the stock holding company. Upon consent to the plan of conversion of a mutual holding company and filing of the plan of conversion in accordance with the provisions of this chapter, the Secretary of State shall accept for filing the articles of incorporation or certificate of amendment of articles of incorporation of the converted mutual holding company. The plan is effective upon the filing of the articles of incorporation or certificate of amendment of articles of incorporation.

(b) Upon the effective date of the plan of conversion of a mutual property-casualty insurer, the mutual insurer shall immediately become a stock corporation. The converted insurer shall be a continuation of the original mutual insurer, and the conversion shall in no way annul, modify, or change any of the original mutual insurer’s existing suits, rights, contracts, or liabilities except as provided in the approved conversion plan. The insurer, after conversion, shall exercise all the rights and powers and perform all the duties conferred or imposed by law upon insurers writing the classes of insurance written by it, and shall retain the rights and contracts existing prior to conversion, subject to the effect of the plan.

(c) Upon the effective date of the plan of conversion of a mutual life insurer in accordance with Section 11537.3, the mutual life insurer immediately becomes a stock corporation, all membership interests and rights in surplus are extinguished, and members eligible to exercise subscription rights or receive other consideration under the plan of conversion are entitled to receive the consideration in exchange for their membership interests and liquidation of their rights in surplus. The converted insurer is a continuation of the original mutual life insurer, and the conversion in no way annuls, modifies, or changes any of the original mutual life insurer’s existing suits, rights, contracts, or liabilities, except as provided in the plan of conversion. The insurer, after conversion, shall exercise all the rights and powers and perform all the duties conferred or imposed by law upon insurers writing the classes of insurance written by it, and shall retain the rights and contracts existing prior to conversion, subject to the effect of the plan.

(d) Upon the effective date of the plan of conversion of a mutual holding company, all membership interests and rights in surplus are extinguished, members eligible to receive consideration under the plan of conversion are entitled to receive the consideration in exchange for their membership interests and liquidation of their rights in surplus, and the plan otherwise becomes effective in accordance with its terms. The conversion in no way annuls, modifies, or changes any of the converting mutual holding company’s existing suits, rights, contracts, or liabilities, except as provided in the approved plan of conversion.

history: (History: Amended by Stats. 1996, Ch. 406, Sec. 14. Effective August 19, 1996.)


text:
(a) Upon the effective date of a plan of conversion in accordance with Section 11537.2, the mutual life insurer immediately becomes a stock corporation, the membership interests and rights in surplus of its members are extinguished, the members of the mutual life insurer immediately become members of the mutual holding company, all of the voting stock initially issued by the converted insurer is owned by the stock holding company, and all of the voting stock initially issued by the stock holding company is owned by the mutual holding company. The stock holding company may thereafter, subject to compliance with Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of Division 1, issue securities to other persons. After the effective date, owners of policies that are issued by a stock insurer that has been converted from a mutual life insurer pursuant to proceedings under this chapter shall become members of the mutual holding company immediately upon issuance of the policies. Any person may be a member of a mutual holding company.

(b) From the effective date, the mutual holding company shall hold at least 51 percent of the issued and outstanding voting stock of the stock holding company and the stock holding company thereafter shall at all times hold all of the issued and outstanding voting stock of the converted insurer. The stock holding company may issue additional voting stock to the mutual holding company and, in addition, to other persons an amount of voting stock and securities convertible into voting stock, if in the aggregate, the issued and outstanding voting stock of the stock holding company not held by the mutual holding company does not exceed 49 percent of the issued and outstanding voting stock of the stock holding company. For purposes of the 49-percent limitation, any issued and outstanding securities of the stock holding company that are convertible into voting stock are considered issued and outstanding voting stock.

(c) The commissioner shall retain jurisdiction over the mutual holding company organized pursuant to this chapter. Except as provided in this code, a mutual holding company is subject to the provisions of the General Corporation Law in like manner with other corporations. However, provisions of that law referring to shareholders or members shall be applied as though those provisions referred to the members of a mutual holding company.

(d) With respect to the management, records, and affairs of a mutual holding company and except as otherwise provided in this chapter, a member of a mutual holding company has the same character of rights and relationship as a stockholder has toward a domestic stock life insurer subject to the provisions of this code.

(e) Each member of a mutual holding company is entitled to one vote on each matter coming to a vote at any meeting of members, regardless of the number of policies that the member holds.

(f) Notice of all meetings of members, whether annual or special, shall be given in writing to the members entitled to vote. The notice shall be given by the secretary, assistant secretary, or other persons charged with that duty. If there is no such officer, or if he or she neglects or refuses this duty, notice may be given by any director. At the option of the converted insurer, the notice may be imprinted on premium notices or receipts or on both. A notice may be given to any member either personally, or by mail, or other means of written communication, charges prepaid, addressed to the member at his or her address appearing on the books of the insurer or given by the member to the converted insurer for the purpose of notice. If a member gives no address, and if there is no address on the books of the insurer, notice shall be deemed to have been given the member if sent by mail or other means of written communication addressed to the place where the principal office of the converted insurer is situated, or if published at least once in a newspaper of general circulation in the county in which the office is located and in the newspaper that has the largest daily circulation in this state. Notice of any meeting of members shall be sent to each member entitled to notice not less than 14 days before a meeting. Notice of any meeting of members shall specify the place, the day, and the hour of the meeting and the general nature of the business to be transacted. For any member who gives no address and has no address on the books of the insurer, notice of an annual meeting to be held at the time and place specified is deemed adequate if published at least once in each of four successive weeks in a newspaper of general circulation in the county in which the principal office of the converted insurer is located and in the newspaper that has the largest daily circulation in this state. If the notice is so published, no other notice of the meeting is required.

(g) The presence in person or by proxy of 5 percent of the members of a mutual holding company entitled to vote at any meeting constitutes a quorum for the transaction of all business of the mutual holding company, including, but not limited to, the amendment of the articles of incorporation or bylaws of the mutual holding company.

(h) Any required member approval shall be by the affirmative vote of a majority of the members who vote, or a higher percentage of the members as may be required by law or the articles of incorporation, a quorum being present.

(i) The articles of incorporation or the bylaws of the mutual holding company may provide that the directors may be divided into two or more classes whose terms of office shall expire at different times. No term shall continue longer than six years. In the absence of such provisions, each director shall be elected for a term of one year. All directors shall hold office for the term for which they are elected and until their successors are elected and qualified. A director may, but need not, be a member of the mutual holding company of which he or she is acting as director. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum. Each director so elected shall hold office until the next annual meeting.

(j) If any proceedings under Article 14 (commencing with Section 1010), Article 14.3 (commencing with Section 1064.1), Article 14.5 (commencing with Section 1065.1), or Article 15.5 (commencing with Section 1077), of Chapter 1 of Part 2 of Division 1, are brought naming as a party a stock insurer created as a result of proceedings authorized by this chapter, the mutual holding company formed as part of the conversion automatically becomes a party to the proceedings. All of the assets of the mutual holding company, including, but not limited to, its interest in the stock holding company formed pursuant to this chapter, are deemed assets of the estate of the stock life insurer to the extent necessary to satisfy claims of persons against the stock life insurer who have claims falling within the priorities established in paragraphs (1) to (5), inclusive, of subdivision (a) of Section 1033. Claims of persons in their capacity as members of the mutual holding company shall be claims falling within the priority established in paragraph (6) of subdivision (a) of Section 1033. A mutual holding company may not dissolve, liquidate, or wind up and dissolve without the prior written approval of the commissioner or the court pursuant to proceedings brought pursuant to Article 15 (commencing with Section 1070) of Chapter 1 of Part 2 of Division 1.

(k) Membership interests in a mutual holding company are exempt from Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of Division 1. A description of the membership interests and related factual disclosure shall not be considered to be an inducement to buy insurance in violation of Section 10430. Any promise of returns, profits, or distributions, or representations with regard to the benefits of membership, made as an inducement in connection with the issuance and delivery of a policy is subject to Section 10430 and the remedy provided in Section 10433.

history: (History: Added by Stats. 1996, Ch. 406, Sec. 15. Effective August 19, 1996.)


text:
(a) Prior to, and for a period of five years following, the effective date of the plan of conversion, no person or group of persons acting in concert shall directly or indirectly offer to acquire or acquire in any manner the beneficial ownership of 5 percent or more of any class of voting securities of a converted insurer or of a person that controls, as defined by subdivision (c) of Section 1215, the converted insurer, without the prior consent of the commissioner. Any application for that approval shall contain information as the commissioner may require and shall be accompanied by a filing fee in an amount equal to the filing fee specified in Section 1215.2.

(b) In the event of any violation of this section, or of any action that, if consummated, would constitute a violation, all voting securities of the converted insurer or of the person acquired by any person in excess of the maximum amount permitted to be acquired by the person pursuant to this subdivision shall be deemed to be nonvoting securities of the converted insurer or of that person. The violation or action may be enforced or enjoined by an appropriate proceeding commenced by the converted insurer, a person, the commissioner, any policyholder or stockholder of the converted insurer, or the person on behalf of the converted insurer or the person in the superior court in the judicial district in which the converted insurer has its home office or in any other court having jurisdiction. The court may issue any order it finds necessary to cure the violation or to prevent the proposed action. In addition to the foregoing, whenever it appears to the commissioner that any person has committed a violation of this section, the commissioner may proceed as provided in Article 14 (commencing with Section 1010) of Chapter 1 of Part 2 of Division 1 to take possession of the property of the converted insurer and to conduct the business thereof.

(c) For the purposes of this section, “beneficial ownership,” with respect to voting securities, means the sole or shared power to vote, or direct the voting of, voting securities or the sole or shared power to dispose, or direct the disposition, of voting securities.

(d) For the purposes of this section, “voting security” includes voting stock as defined in Section 11535.1, any preorganization certificate or subscription, including subscription rights issued pursuant to a plan of conversion, or any security convertible, with or without consideration, into voting security, or carrying any warrant or right to subscribe for, or purchase any, voting security, or any such warrant or right.

(e) For the purposes of this section, “offer” includes an offer to buy or acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of a security or interest in a security for value.

history: (History: Amended by Stats. 2017, Ch. 417, Sec. 30. (AB 1696) Effective January 1, 2018.)


text: Unless otherwise provided in the plan of conversion, the directors and officers of the mutual company shall serve as directors and officers of the converted company until new directors and officers have been duly elected and qualified pursuant to the articles of incorporation and bylaws of the stock company.

history: (History: Amended by Stats. 1996, Ch. 406, Sec. 17. Effective August 19, 1996.)


text:
(a) Notwithstanding any other provision of law and except as otherwise provided in subdivision (b), actions concerning any plan of conversion, proposed plan of conversion, plan amendment, or proposed plan amendment under this chapter or any acts taken or proposed to be taken under this chapter shall be commenced within one year after the plan of conversion or plan amendment is filed in the office of the commissioner pursuant to subdivision (d) of Section 11536 or subdivision (a) of Section 11542, or six months from the effective date of the plan of conversion, whichever is later. If the plan of conversion is withdrawn, the actions or acts shall be commenced within six months from the date the board of directors approves a resolution to withdraw the plan. If an action concerns or arises out of a plan amendment or proposed plan amendment made under Section 11546, the applicable time period is measured from the filing, effective date, or approval of withdrawal of the plan amendment, whichever is later.

(b) Judicial review of any act of the commissioner or any other governmental body or officer concerning or arising out of any plan of conversion, proposed plan of conversion, plan amendment, or proposed plan amendment under this chapter may only be had by filing a petition for a writ of mandate within 30 days of the date of the act. However, any petition seeking judicial review shall be filed no later than 30 days from the effective date of the plan of conversion or plan amendment, whichever is the subject of the petition.

history: (History: Added by Stats. 1996, Ch. 406, Sec. 18. Effective August 19, 1996.)


text: The offer or sale of securities issued pursuant to the plan of conversion developed and approved in accordance with the provisions of this chapter, shall be exempt from Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of Division 1.

history: (History: Added by Stats. 1983, Ch. 988, Sec. 1.)


text: The commissioner shall have the authority from time to time, to make, amend and rescind such rules and regulations as may be necessary to carry out the provisions of this chapter. The commissioner shall also have the authority to charge and collect from the insurer for the actual amount of expenses reasonably incurred by the state in discharge of the commissioner’s duties hereunder.


text: Upon completion of the act of conversion and issuance of the certificate of authority under Section 11542, the Secretary of State shall accept for filing a verified copy of the amended articles of incorporation.


text:
(a) The amended articles of incorporation of a converted company that have been adopted pursuant to a plan of conversion and filed with the Secretary of State in accordance with Section 11542 may be further amended after the effective date pursuant to applicable law. The plan of conversion may be amended in other respects after the effective date of the plan as specified in this section. Such an amendment shall take effect upon filing with the Secretary of State after compliance with the following:

(1) Approval by a resolution of the majority of the board of directors of the converted company. The resolution shall specify the reasons for and the purposes of the proposed amendment.

(2) Submission to the commissioner for consent in writing, subject to the provisions of Section 11538.

(3) For the conversion of a mutual insurer, approval by a majority of those current policyholders of the corporation who were members of the former mutual insurer and were entitled to vote on the original plan of conversion approved pursuant to subdivision (c) of Section 11536 and who vote at a meeting called for that purpose.

(4) For the conversion of a mutual holding company, approval by a majority of those current members of the corporation who were members of the former mutual holding company and were entitled to vote on the original plan of conversion approved pursuant to subdivision (c) of Section 11536 and who vote at a meeting called for that purpose.

(5) Filed in the office of the commissioner after having been consented to and approved as contemplated by paragraphs (2), (3) and (4).

(b) If an amendment proposed under subdivision (a) would adversely affect the rights of one or more classes of members , but not all such members, then only the members of each class whose rights would be adversely affected by the proposed amendment are entitled to vote on the proposed plan amendment.

(c) A policyholder or member meeting prescribed by paragraph (3) or (4) of subdivision (a) shall be called by the board of directors, the chairperson of the board, or the president of the converted company. Notice of the meeting shall be given to policyholders or members entitled to vote at the meeting by mail at least 30 days prior to the date set for the meeting. Voting shall be by ballot, in person or by proxy. A quorum consists of 5 percent of the policyholders or members of the converted company entitled to vote at the meeting.

(d) At any time before the plan amendment becomes effective, the converted company may, by resolution of a majority of the board of directors, amend the plan amendment or withdraw its plan amendment. For an amendment to a plan amendment, all references in this section to the plan amendment shall be deemed to refer to the plan amendment as amended. Any amendment of the plan amendment shall require the written consent of the commissioner. No amendment shall be deemed to change the date of adoption of the plan amendment. No amendment made after approval by the policyholders or members as provided in paragraph (3) or (4) of subdivision (a) may change the plan amendment in a manner that the commissioner determines is materially disadvantageous to any of the affected policyholders or members unless the plan amendment as amended is submitted for reconsideration under the procedures prescribed for the original plan amendment policyholder or member approval.

history: (History: Added by Stats. 1996, Ch. 406, Sec. 19. Effective August 19, 1996.)


text: If the name of a mutual life insurer converting to a stock insurer pursuant to this chapter includes the word mutual, the new stock insurer may continue to use the word mutual in its name if the name includes a word or words that identify the new stock insurer as a stock insurer and the commissioner finds that the continued use of the word mutual in its name is not likely to mislead or deceive the public.

history: (History: Added by Stats. 1996, Ch. 406, Sec. 20. Effective August 19, 1996.)


text:
(a) Pursuant to this section, a mutual holding company may merge into a foreign mutual holding company that is domiciled in a state to which the converted insurer has transferred its domicile or will transfer its domicile concurrently with the merger. The merger shall be effected pursuant to an agreement of merger between the mutual holding company and the foreign mutual holding company in accordance with the General Corporation Law, to the extent not inconsistent with this section. The merger shall take effect upon filing the agreement of merger with the California Secretary of State after compliance with the following:

(1) Approval of the agreement of merger by a resolution of the majority of the board of directors of the mutual holding company and signing of the agreement of merger by the parties thereto.

(2) Approval of an amendment to the converted insurer’s plan of conversion in accordance with Section 11547 by a resolution of the majority of the board of directors of the converted insurer in order to reflect appropriately the merger and transfer of domicile.

(3) Submission of the agreement of merger and the amendment to the commissioner for consent in writing.

(4) Approval of the agreement of merger by a majority of the members of the mutual holding company who vote at a meeting called for that purpose.

(5) Approval of the amendment by a majority of the members of the mutual holding company who were members of the converted insurer and were entitled to vote on the original plan of conversion approved pursuant to subdivision (c) of Section 11536 and who vote at a meeting called for the purpose.

(6) Filing of the agreement of merger in the office of the commissioner after having been consented to and approved as contemplated by paragraphs (2), (3), (4), and (5).

(b) The submission to the commissioner prescribed in paragraph (3) of subdivision (a) shall be accompanied by a filing fee of eight thousand one hundred dollars ($8,100), evidence that the foreign mutual holding company that will survive the merger is qualified as a foreign corporation under the General Corporation Law, and any other relevant information that the commissioner may require.

(c) The meetings of members prescribed in paragraphs (4) and (5) of subdivision (a) and shall be called by the board of directors, the chairperson of the board, or the president of the mutual holding company, and may be combined at a single meeting with separate voting by those eligible to vote on the matters referred to in paragraphs (4) and (5) of subdivision (a). Notice of the meeting shall be given by mail to members entitled to vote at the meeting at least 30 days prior to the date set for the meeting. Voting shall be by ballot, in person, or by proxy. A quorum for each such matter consists of 5 percent of the members of the mutual holding company entitled to vote at the meeting on the matter.

(d) The commissioner shall consent to any proposed merger and amendment if he or she determines that the merger will be fair and equitable to the mutual holding company and its members.

history: (History: Added by Stats. 2006, Ch. 740, Sec. 12. Effective January 1, 2007.)


text: As used in this article, the term “liability” means liability and common carrier liability insurance.

history: (History: Enacted by Stats. 1935, Ch. 145.)

chapter: 1. General Regulations

article: 1. Reserves of Insurers

path: 2. CLASSES OF INSURANCE > 3. LIABILITY, WORKERS' COMPENSATION, AND COMMON CARRIER LIABILITY INSURANCE > 1. General Regulations > 1. Reserves of Insurers


text: As used in this article, the term “compensation” means workers’ compensation insurance.

history: (History: Amended by Stats. 1981, Ch. 714, Sec. 272.)

part: 3. LIABILITY, WORKERS' COMPENSATION, AND COMMON CARRIER LIABILITY INSURANCE

article: 1. Reserves of Insurers


text:
As used in this article, the term “earned premium,” means the amount remaining of the gross premiums charged on all policies written, including all determined excess and additional premiums, after deducting the aggregate of:

(a) Return premiums other than premiums returned to policyholders as dividends.

(b) Reinsurance premiums and premiums on policies canceled.

(c) Unearned premiums on policies in force.

article: 1. Reserves of Insurers


text:
As used in this article, the terms “loss payments,” and “loss expense payments,” mean all payments to claimants or on account of claims. Such payments include but are not restricted to those for:

(a) Medical and surgical attendance.

(b) Legal expense.

(c) Salaries and expenses of investigators, adjusters and field men.

(d) Rents.

(e) Stationery, telegraph and telephone charges.

(f) Postage.

(g) Salaries and expenses of office employees.

(h) Home office expenses, and all other payments made on account of claims, whether or not such payments are allocated to specific losses.

article: 1. Reserves of Insurers


text:
In estimating the condition of any insurer admitted to transact such liability or compensation insurance, the commissioner shall charge as liabilities, among any other items, the following:

(a) All outstanding indebtedness of such insurer.

(b) A premium reserve on policies in force, equal to the unearned portions of the gross premiums charged for covering the risks and computed on each respective risk from the date of the issuance of the policy.

(c) Proper reserves for outstanding losses, computed as set forth in this article.

article: 1. Reserves of Insurers


text:
An insurer transacting such compensation or liability insurance shall include the following schedules in its annual statement required by law:

(a) A schedule showing distribution of unallocated liability loss expense payments.

(b) A schedule showing distribution of unallocated compensation loss expense payments.

(c) A schedule of its experience under policies of such insurance, in such form as the commissioner prescribes.

article: 1. Reserves of Insurers


text:
Each insurer transacting insurance covering liability for malpractice of any person licensed under the Dental Practice Act (Chapter 4 (commencing with Section 1600) of Division 2 of the Business and Professions Code), under the Medical Practice Act (Chapter 5 (commencing with Section 2000) of Division 2 of the Business and Professions Code), or under the State Bar Act (Chapter 4 (commencing with Section 6000) of Division 3 of the Business and Professions Code), shall report all of the following statistics to the commissioner, by profession and by medical specialty, upon request of the commissioner:

(a) The total number of doctors or lawyers written during the immediately preceding calendar year.

(b) The total amount of premiums received from insureds, both written and earned (as reported in the annual statement), during the immediately preceding calendar year.

(c) The number of claims reported to the insurer for the first time separately by the year the claim occurred, and the number of claims reported closed during a previous calendar year which were reopened separately by the year the claim occurred.

(d) The total number of claims outstanding, together with the monetary amount reserved for loss and allocated loss expense, in the annual statement as of December 31 of the calendar year next preceding, separately stated by the year the claim occurred.

(e) (1) The number of claims closed with payment to the claimant during the calendar year next preceding, to be reported by the year the claim occurred, (2) the total monetary amount paid thereon, reported by the year the claim occurred, and (3) the total allocated loss expense paid thereon, reported by the year the claim occurred.

(f) The monetary amount paid on claims during the calendar year next preceding, to be reported separately by the year the claim occurred, with allocated loss expense paid, to be reported separately by the year the claim occurred.

(g) The number of claims closed without payment to the claimant during the calendar year next preceding, by the year the claim occurred, and the allocated loss expense paid thereon, separately by the year the claim occurred.

(h) The monetary amount reserved in the annual statement for the calendar year next preceding on claims incurred but not reported to the insurer.

(i) The number of lawsuits filed against the insurer’s insureds, and the number of doctors, included therein, during the calendar year next preceding, to be separately reported by the year the claim occurred.

(j) A distribution by size of payment for those claims closed during the calendar year next preceding, showing the number of claims and total amount paid for each monetary category, as determined by the commissioner.

history: (History: Amended by Stats. 1995, Ch. 586, Sec. 1. Effective January 1, 1996.)

article: 1. Reserves of Insurers


text: The reserve for outstanding losses and loss expenses under such liability or compensation insurance shall be determined in accordance with the regulations of the commissioner promulgated pursuant to Section 923.5.

history: (History: Amended by Stats. 1982, Ch. 454, Sec. 121.)

article: 1. Reserves of Insurers


text: Whenever the reserves for outstanding liability or compensation losses and loss expenses of any insurer, computed pursuant to this article, seem inadequate to the commissioner, he shall require such insurer to maintain additional reserves.

history: (History: Amended by Stats. 1969, Ch. 705.)

article: 1. Reserves of Insurers


text:
A policy insuring against losses set forth in subdivision (a) shall not be issued or delivered to any person in this state unless it contains the provisions set forth in subdivision (b). Such policy, whether or not actually containing such provisions, shall be construed as if such provisions were embodied therein.

(a) Unless it contains such provisions, the following policies of insurance shall not be thus issued or delivered:

(1) Against loss or damage resulting from liability for injury suffered by another person other than (i) a policy of workers’ compensation insurance, or (ii) a policy issued by a nonadmitted Mexican insurer solely for use in the Republic of Mexico.

(2) Against loss of or damage to property caused by draught animals or any vehicle, and for which the insured is liable, other than a policy which provides insurance in the Republic of Mexico, issued or delivered in this state by a nonadmitted Mexican insurer.

(b) Such policy shall not be thus issued or delivered to any person in this state unless it contains all the following provisions:

(1) A provision that the insolvency or bankruptcy of the insured will not release the insurer from the payment of damages for injury sustained or loss occasioned during the life of such policy.

(2) A provision that whenever judgment is secured against the insured or the executor or administrator of a deceased insured in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment.

history: (History: Amended by Stats. 1976, Ch. 1145, Sec. 1.)

path: 2. CLASSES OF INSURANCE > 3. LIABILITY, WORKERS' COMPENSATION, AND COMMON CARRIER LIABILITY INSURANCE > 1. General Regulations > 2. Actions on Policies Containing Liability Provisions


text:
(a) A policy insuring against legal liability arising from the rendering of professional services by an insured licensed pursuant to the provisions of Division 2 (commencing with Section 500) of the Business and Professions Code, or Chapter 4 (commencing with Section 6000) of Division 3 of the Business and Professions Code, and which generally limits the coverage thereof to liability for only those claims that are first made against the insured while the policy is in force, shall not be issued or delivered to any person in this state unless the application or proposal therefor complies with subdivision (b) and the policy complies with subdivision (c).

(b) The form of application or proposal for any such policy described in subdivision (a) shall recite prominently and conspicuously at the heading thereof that it is an application or proposal for a claims-made policy.

(c) Each such policy described in subdivision (a) shall contain on the face page thereof a prominent and conspicuous legend or statement substantially to the following effect:

NOTICE “Except to such extent as may otherwise be provided herein, the coverage of this policy is limited generally to liability for only those claims that are first made against the insured while the policy is in force. Please review the policy carefully and discuss the coverage thereunder with your insurance agent or broker.”

history: (History: Added by Stats. 1974, Ch. 513.)

article: 2. Actions on Policies Containing Liability Provisions