(215 ILCS 5/53) (from Ch. 73, par. 665)
(Section scheduled to be repealed on January 1, 2027)
Sec. 53. Deposit. (a) A company subject to the provisions of this Article shall make and
maintain with the Director for the protection of all creditors,
policyholders and policy obligations of the company, a deposit of
securities having a
fair market value equal to the minimum surplus required to be maintained
under Section 43.
The Director may release the required deposit of securities
upon receipt of
an order of a court having proper jurisdiction or
upon: (i)
certification by the company that it has no outstanding creditors,
policyholders, or policy obligations in effect and no plans to engage in the
business of insurance; (ii) receipt of a lawful resolution of the company's
board of directors effecting the surrender of its articles of incorporation for
administrative dissolution by the Director; and (iii) receipt of the name and
forwarding address for each of the final officers and directors of the company,
together with a plan of dissolution approved by the Director.
(b) All deposits by insurers subject to this Article must be limited to the following types: (1) United States government bonds, notes, and bills |
| for which the full faith and credit of the government of the United States is pledged for the payment of principal and interest.
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(2) United States public bonds and notes of any state
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| or of the District of Columbia, or Canadian public bonds and notes of any province thereof, for which the full faith and credit of the issuer has been pledged for the payment of principal and interest.
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(3) United States and Canadian county, provincial,
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| municipal, and district bonds and notes for which the issuer has lawful authority to levy taxes or make assessments for the payment of principal and interest.
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(4) Bonds and notes of any federal agency that are
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| guaranteed as to payment of principal and interest by the United States.
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(5) International development bank bonds, bonds
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| issued by the State of Israel and sold through the Development Corporation for Israel or its successor entities, and notes issued, assumed, and guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, or the International Finance Corporation.
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(6) Corporate bonds and notes of any private
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| corporations that are not affiliates or subsidiaries of the insurer, which corporations are organized under the laws of the United States, Canada, any state, the District of Columbia, any territory or possession of the United States, or any province of Canada.
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(7) Certificates of deposit.
(c) To be eligible for deposit under subsection (b), any bond or note must have the following characteristics:
(1) The bond or note must be interest-bearing or
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| interest-accruing, and the insurer must be the exclusive owner of the interest accruing thereon and entitled to receive the interest for its account.
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(2) The issuer must be in a solvent financial
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| condition and the bond or note must not be in default.
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(3) The bond, note, or debt of the issuing country
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| must be rated in one of the 4 highest classifications by an established, nationally recognized investment rating service or must have been given a rating of 1 by the Securities Valuation Office of the National Association of Insurance Commissioners.
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(4) The market value of the bond or note must be
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| readily ascertainable or the value of the bond or note must be obtainable by the insurer or its custodian from the issuer's fiscal agent.
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(5) The bond or note must be the direct obligation of
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(6) The bond or note must be stated in United States
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(7) The bond or note must be eligible for book-entry
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| form on the books of the Federal Reserve's book-entry system or in a depository trust clearing system or on the books of the issuer's transfer agent or evidenced by a certificate delivered to the insurer or its custodian.
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(d) To be eligible for deposit under item (7) of subsection (b), a certificate of deposit must have the following characteristics:
(1) The certificate of deposit must be issued by a
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| bank, savings bank, or savings association that is organized under the laws of the United States, of this State, or of any other state and that has a principal office or branch office in this State that is authorized to receive deposits in this State.
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(2) The certificate of deposit must be
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| interest-bearing and may not be issued in discounted form.
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(3) The certificate of deposit must be issued for a
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| period of not less than one year.
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(4) The issuing bank, savings bank, or savings
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| association must agree to the terms and conditions of the Director regarding the rights to the certificate of deposit and must have executed a written certificate of deposit agreement with the Director. The terms and conditions of the agreement shall include, but need not be limited to:
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(A) Exclusive authorized signature authority for
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| the chief financial officer.
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(B) An agreement to pay, without protest, the
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| proceeds of its certificate of deposit to the Director within 30 business days after presentation.
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(C) A prohibition against levies, setoffs,
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| survivorship, or other conditions that might hinder the Director's ability to recover the full face value of a certificate of deposit.
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(D) Instructions regarding interest payments,
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| renewals, taxpayer identification, and early withdrawal penalties.
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(E) An agreement to be subject to the
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| jurisdiction of the courts of this State, or those of the United States that are located in this State, for the purposes of any litigation arising out of this Section.
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(F) Such other conditions as the Director
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(e) The Director may refuse to accept certain securities or refuse to accept the reported market value of certain securities offered pursuant to this Section in order to ensure that sufficient cash and securities are on hand to meet the purposes of the deposit. In making a refusal under this subsection (e), the guidelines for use of the Director may include, but need not be limited to, whether the market value of the securities cannot be readily ascertained and the lack of liquidity of the securities. Securities refused under this subsection (e) are not acceptable as deposits.
(f) All deposits required of a domestic insurer pursuant to the laws of another state, province, or country must be comprised of securities of the kinds required under subsection (b), having the characteristics required under subsections (c) and (d), and permitted by the laws of the other state, province, or country, except common stocks, mortgages or loans of any kind, real estate investment trust funds or programs, commercial paper, and letters of credit.
(Source: P.A. 98-110, eff. 1-1-14; 98-969, eff. 1-1-15 .)
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(215 ILCS 5/59.1)
(Section scheduled to be repealed on January 1, 2027)
Sec. 59.1. Conversion to stock company.
(1) Definitions. For the purposes of this Section, the following terms shall
have the meanings indicated:
(a) "Eligible member" is a member as of the date the |
| mutual company's board of directors adopts a plan of conversion. A person insured under a group policy is not an eligible member, unless:
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(i) the person is insured or covered under a
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| group life policy or group annuity contract under which funds are accumulated and allocated to the respective covered persons;
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(ii) the person has the right to direct the
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| application of the funds so allocated;
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(iii) the group policyholder makes no
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| contribution to the premiums or deposits for the policy or contract; and
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(iv) the mutual company has the names and
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| addresses of the persons covered under the group life policy or group annuity contract.
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A person whose policy is issued after the board of
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| directors adopts the plan but before the plan's effective date is not an eligible member but shall have those rights set forth in subsection (10) of this Section.
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(b) "Converted stock company" is an Illinois
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| domiciled stock company that converted from an Illinois domiciled mutual company under this Section.
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(c) "Plan of conversion" or "plan" is a plan adopted
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| by an Illinois domestic mutual company's board of directors under this Section to convert the mutual company into an Illinois domiciled stock company.
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(d) "Policy" includes an annuity contract.
(e) "Member" means a person who, on the records of
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| the mutual company and pursuant to its articles of incorporation or bylaws, is deemed to be a holder of a membership interest in the mutual company.
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(2) Adoption of the plan of conversion by the board of directors.
(a) A mutual company seeking to convert to a stock
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| company shall, by the affirmative vote of two-thirds of its board of directors, adopt a plan of conversion consistent with the requirements of subsection (6) of this Section.
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(b) At any time before approval of a plan by the
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| Director, the mutual company by the affirmative vote of two-thirds of its board of directors, may amend or withdraw the plan.
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(3) Approval of the plan of conversion by the Director of Insurance.
(a) Required findings. After adoption by the mutual
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| company's board of directors, the plan shall be submitted to the Director for review and approval. The Director shall approve the plan upon finding that:
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(i) the provisions of this Section have been
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(ii) the plan will not prejudice the interests of
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(iii) the plan's method of allocating
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| subscription rights is fair and equitable.
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(b) Documents to be filed.
(i) Prior to the members' approval of the plan, a
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| mutual company seeking the Director's approval of a plan shall file the following documents with the Director for review and approval:
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(A) the plan of conversion, including the
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| independent evaluation of pro forma market value required by item (f) of subsection (6) of this Section;
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(B) the form of notice required by item (b)
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| of subsection (4) of this Section for eligible members of the meeting to vote on the plan;
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(C) any proxies to be solicited from eligible
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| members pursuant to subitem (ii) of item (c) of subsection (4) of this Section;
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(D) the form of notice required by item (a)
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| of subsection (10) of this Section for persons whose policies are issued after adoption of the plan but before its effective date; and
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(E) the proposed articles of incorporation
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| and bylaws of the converted stock company.
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Once filed, these documents shall be approved or
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| disapproved by the Director within a reasonable time.
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(ii) After the members have approved the plan,
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| the converted stock company shall file the following documents with the Director:
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(A) the minutes of the meeting of the members
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| at which the plan was voted upon; and
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(B) the revised articles of incorporation and
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| bylaws of the converted stock company.
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(c) Consultant. The Director may retain, at the
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| mutual company's expense, any qualified expert not otherwise a part of the Director's staff to assist in reviewing the plan and the independent evaluation of the pro forma market value which is required by item (f) of subsection (6) of this Section.
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(4) Approval of the plan by the members.
(a) Members entitled to notice of and to vote on the
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| plan. All eligible members shall be given notice of and an opportunity to vote upon the plan.
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(b) Notice required. All eligible members shall be
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| given notice of the members' meeting to vote upon the plan. A copy of the plan or a summary of the plan shall accompany the notice. The notice shall be mailed to each member's last known address, as shown on the mutual company's records, within 45 days of the Director's approval of the plan. The meeting to vote upon the plan shall not be set for a date less than 30 days after the date when the notice of the meeting is mailed by the mutual company. If the meeting to vote upon the plan is held coincident with the mutual company's annual meeting of policyholders, only one combined notice of meeting is required.
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(c) Vote required for approval.
(i) After approval by the Director, the plan
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| shall be adopted upon receiving the affirmative vote of at least two-thirds of the votes cast by eligible members.
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(ii) Members entitled to vote upon the proposed
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| plan may vote in person or by proxy. Any proxies to be solicited from eligible members shall be filed with and approved by the Director.
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(iii) The number of votes each eligible member
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| may cast shall be determined by the mutual company's bylaws. If the bylaws are silent, each eligible member may cast one vote.
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(5) Adoption of revised articles of incorporation. Adoption of the revised
articles of incorporation of the converted stock company is necessary to
implement the plan and shall be governed by the applicable provisions of
Section 57 of this Code. For a Class 1 mutual company, the members may adopt
the revised articles of incorporation at the same meeting at which the members
approve the plan. For a Class 2 or 3 mutual company, the revised articles of
incorporation may be adopted solely by the board of directors or trustees, as
provided in Section 57 of this Code.
(5.5) Prior to the completion of a plan of conversion filed by a mutual
company with the Director, no person shall knowingly acquire, make any offer,
or make any announcement of an offer for any security issued or to be issued by
the converting mutual company in connection with its plan of conversion or for
any security issued or to be issued by any other company authorized in
item(c)(i) of subsection (6) of this Section and organized for purposes of
effecting the conversion, except in compliance with the maximum purchase
limitations imposed by item (i) of subsection (6) of this Section or the terms
of the plan of conversion as approved by the Director.
(6) Required provisions in a plan of conversion. The following provisions
shall be included in the plan:
(a) Reasons for conversion. The plan shall set forth
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| the reasons for the proposed conversion.
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(b) Effect of conversion on existing policies.
(i) The plan shall provide that all policies in
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| force on the effective date of conversion shall continue to remain in force under the terms of those policies, except that any voting rights of the policyholders provided for under the policies or under this Code and any contingent liability policy provisions of the type described in Section 55 of this Code shall be extinguished on the effective date of the conversion.
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(ii) The plan shall further provide that holders
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| of participating policies in effect on the date of conversion shall continue to have the right to receive dividends as provided in the participating policies, if any.
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(iii) Except for a mutual company's participating
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| life policies, guaranteed renewable accident and health policies, and non-cancelable accident and health policies, the converted stock company may issue the insured a nonparticipating policy as a substitute for the participating policy upon the renewal date of a participating policy.
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(c) Subscription rights to eligible members.
(i) The plan shall provide that each eligible
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| member is to receive, without payment, nontransferable subscription rights to purchase a portion of the capital stock of the converted stock company. As an alternative to subscription rights in the converted stock company, the plan may provide that each eligible member is to receive, without payment, nontransferable subscription rights to purchase a portion of the capital stock of: (A) a corporation organized and owned by the mutual company for the purpose of acquiring or holding all the stock of the converted stock company; or (B) a stock insurance company owned by the mutual company into which the mutual company will be merged.
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(ii) The subscription rights shall be allocated
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| in whole shares among the eligible members using a fair and equitable formula. This formula may but need not take into account how the different classes of policies of the eligible members contributed to the surplus of the mutual company.
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(d) Oversubscription. The plan shall provide a fair
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| and equitable means for the allocation of shares of capital stock in the event of an oversubscription to shares by eligible members exercising subscription rights received pursuant to item (c) of subsection (6) of this Section.
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(e) Undersubscription. The plan shall provide that
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| any shares of capital stock not subscribed to by eligible members exercising subscription rights received under item (c) of subsection (6) of this Section shall be sold in a public offering through an underwriter. If the number of shares of capital stock not subscribed by eligible members is so small or the additional time or expense required for a public offering of those shares would be otherwise unwarranted under the circumstances, the plan of conversion may provide for the purchase of the unsubscribed shares by a private placement or other alternative method approved by the Director that is fair and equitable to the eligible members.
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(f) Total price of stock. The plan shall set the
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| total price of the capital stock equal to the estimated pro forma market value of the converted stock company based upon an independent evaluation by a qualified person. The pro forma market value may be the value that is estimated to be necessary to attract full subscription for the shares as indicated by the independent evaluation.
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(g) Purchase price of each share. The plan shall set
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| the purchase price of each share of capital stock equal to any reasonable amount that will not inhibit the purchase of shares by members. The purchase price of each share shall be uniform for all purchasers except the price may be modified by the Director by reason of his consideration of a plan for the purchase of unsubscribed stock pursuant to item (e) of subsection (6) of this Section.
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(h) Closed block of business for participating life
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| policies of a Class 1 mutual company.
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(i) The plan shall provide that a Class 1 mutual
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| company's participating life policies in force on the effective date of the conversion shall be operated by the converted stock company for dividend purposes as a closed block of participating business except that any or all classes of group participating policies may be excluded from the closed block.
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(ii) The plan shall establish one or more
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| segregated accounts for the benefit of the closed block of business and shall allocate to those segregated accounts enough assets of the mutual company so that the assets together with the revenue from the closed block of business are sufficient to support the closed block including, but not limited to, the payment of claims, expenses, taxes, and any dividends that are provided for under the terms of the participating policies with appropriate adjustments in the dividends for experience changes. The plan shall be accompanied by an opinion of a qualified actuary or an appointed actuary who meets the standards set forth in the insurance laws or regulations for the submission of actuarial opinions as to the adequacy of reserves or assets. The opinion shall relate to the adequacy of the assets allocated to the segregated accounts in support of the closed block of business. The actuarial opinion shall be based on methods of analysis deemed appropriate for those purposes by the Actuarial Standards Board.
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(iii) The amount of assets allocated to the
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| segregated accounts of the closed block shall be based upon the mutual company's last annual statement that is updated to the effective date of the conversion.
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(iv) The converted stock company shall keep a
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| separate accounting for the closed block and shall make and include in the annual statement to be filed with the Director each year a separate statement showing the gains, losses, and expenses properly attributable to the closed block.
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(v) Periodically, upon the Director's approval,
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| those assets allocated to the closed block as provided in subitem (ii) of item (h) of subsection (6) of this Section that are in excess of the amount of assets necessary to support the remaining policies in the closed block shall revert to the benefit of the converted stock company.
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(vi) The Director may waive the requirement for
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| the establishment of a closed block of business if the Director deems it to be in the best interests of the participating policyholders of the mutual insurer to do so.
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(i) Limitations on acquisition of control. The plan
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| shall provide that any one person or group of persons acting in concert may not acquire, through public offering or subscription rights, more than 5% of the capital stock of the converted stock company for a period of 5 years from the effective date of the plan except with the approval of the Director. This limitation does not apply to any entity that is to purchase 100% of the capital stock of the converted company as part of the plan of conversion approved by the Director or to a purchase of stock by a tax-qualified employee benefit plan pursuant to subscription grants granted to that plan as authorized under item (b) of subsection (7) of this Section and to a purchase of unsubscribed stock pursuant to item (e) of subsection (6) of this Section.
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(7) Optional provisions in a plan of conversion. The following provisions
may be included in the plan:
(a) Directors and officers subscription rights.
(i) The plan may provide that the directors and
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| officers of the mutual company shall receive, without payment, nontransferable subscription rights to purchase capital stock of the converted stock company or the stock of another corporation that is participating in the conversion plan as provided in subitem (i) of item (c) of subsection (6) of this Section. Those subscription rights shall be allocated among the directors and officers by a fair and equitable formula.
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(ii) The total number of shares that may be
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| purchased under subitem (i) of item (a) of subsection (7) of this Section may not exceed 35% of the total number of shares to be issued in the case of a mutual company with total assets of less than $50 million or 25% of the total shares to be issued in the case of a mutual company with total assets of more than $500 million. For mutual companies with total assets between $50 million and $500 million, the total number of shares that may be purchased shall be interpolated.
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(iii) Stock purchased by a director or officer
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| under subitem (i) of item (a) of subsection (7) of this Section may not be sold within one year following the effective date of the conversion.
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(iv) The plan may also provide that a director or
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| officer or person acting in concert with a director or officer of the mutual company may not acquire any capital stock of the converted stock company for 3 years after the effective date of the plan, except through a broker or dealer, without the permission of the Director. That provision may not apply to prohibit the directors and officers from purchasing stock through subscription rights received in the plan under subitem (i) of item (a) of subsection (7) of this Section.
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(b) Tax-qualified employee stock benefit plan. The
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| plan may allocate to a tax-qualified employee benefit plan nontransferable subscription rights to purchase up to 10% of the capital stock of the converted stock company or the stock of another corporation that is participating in the conversion plan as provided in subitem (i) of item (c) of subsection (6) of this Section. That employee benefit plan shall be entitled to exercise its subscription rights regardless of the amount of shares purchased by other persons.
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(8) Alternative plan of conversion. The board of directors may adopt a plan
of conversion that does not rely in whole or in part upon the issuance to
members of non-transferable subscription rights to purchase stock of the
converted stock company if the Director finds that the plan does not prejudice
the interests of the members, is fair and equitable, and is based upon an
independent appraisal of the market value of the mutual company by a qualified
person and a fair and equitable allocation of any consideration to be given
eligible members. The Director may retain, at the mutual company's expense,
any qualified expert not otherwise a part of the Director's staff to assist in
reviewing whether the plan may be approved by the Director.
(9) Effective date of the plan. A plan shall become effective when the
Director has approved the plan, the members have approved the plan, and the
revised articles of incorporation have been adopted.
(10) Rights of members whose policies are issued after adoption of the plan
and before its effective date.
(a) Notice. All members whose policies are issued
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| after the proposed plan has been adopted by the board of directors and before the effective date of the plan shall be given written notice of the plan of conversion. The notice shall specify the member's right to rescind that policy as provided in item (b) of subsection (10) of this Section within 45 days after the effective date of the plan. A copy of the plan or a summary of the plan shall accompany the notice. The form of the notice shall be filed with and approved by the Director.
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(b) Option to rescind. Any member entitled to receive
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| the notice described in item (a) of subsection (10) of this Section shall be entitled to rescind his or her policy and receive a full refund of any amounts paid for the policy or contract within 10 days after the receipt of the notice.
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(11) Corporate existence.
(a) Upon the conversion of a mutual company to a
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| converted stock company according to the provisions of this Section, the corporate existence of the mutual company shall be continued in the converted stock company. All the rights, franchises, and interests of the mutual company in and to every type of property, real, personal, and mixed, and things in action thereunto belonging, is deemed transferred to and vested in the converted stock company without any deed or transfer. Simultaneously, the converted stock company is deemed to have assumed all the obligations and liabilities of the mutual company.
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(b) The directors and officers of the mutual company,
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| unless otherwise specified in the plan of conversion, shall serve as directors and officers of the converted stock company until new directors and officers of the converted stock company are duly elected pursuant to the articles of incorporation and bylaws of the converted stock company.
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(12) Conflict of interest. No director, officer, agent, or employee of the
mutual company or any other person shall receive any fee, commission, or other
valuable consideration, other than his or her usual 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 Director. This
provision does not prohibit the payment of reasonable fees and compensation to
attorneys, accountants, and actuaries for services performed in the independent
practice of their professions, even if the attorney, accountant, or actuary is
also a Director of the mutual company.
(13) Costs and expenses. All the costs and expenses connected with a plan of
conversion shall be paid for or reimbursed by the mutual company or the
converted stock company except where the plan provides either for a holding
company to acquire the stock of the converted stock company or for the merger
of the mutual company into a stock insurance company as provided in subitem (i)
of item (c) of subsection (6) of this Section. In those cases, the acquiring
holding company or the stock insurance company shall pay for or reimburse all
the costs and expenses connected with the plan.
(14) Failure to give notice. If the mutual company complies substantially
and in good faith with the notice requirements of this Section, the mutual
company's failure to give any member or members any required notice does not
impair the validity of any action taken under this Section.
(15) Limitation of actions. Any action challenging the validity of or
arising out of acts taken or proposed to be taken under this Section
shall be commenced within 30 days after the effective date of the plan.
(Source: P.A. 98-755, eff. 7-16-14 .)
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(215 ILCS 5/59.2)
(Section scheduled to be repealed on January 1, 2027)
Sec. 59.2.
Formation of mutual insurance holding company
and conversion of mutual company to stock
company.
(1) Definitions. For the purposes of this Section, the following terms
shall
have the meanings indicated:
(a) "Converted company" means an Illinois domiciled |
| stock insurance company subject to the provisions of Article II, except as otherwise provided in this Section, that continues in existence after a reorganization under this Section in connection with the formation of a mutual holding company.
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(b) "Converted mutual holding company" means the
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| stock corporation into which a mutual holding company has been converted in accordance with Section 59.1 and subsection (13) of this Section.
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(c) "Eligible member" means a member as of the date
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| the board of directors adopts a plan of MHC conversion under this Section. For the conversion of a mutual holding company, "eligible member" means a member of the mutual holding company who is of record as of the date the mutual holding company board of directors adopts a plan of conversion under Section 59.1.
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(d) "Intermediate holding company" means a
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| corporation authorized to issue one or more classes of capital stock, the corporate purposes of which include holding directly or indirectly the voting stock of a converted company.
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(e) "Member" means a person who, on the records of
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| the mutual company and pursuant to its articles of incorporation or bylaws, is deemed to be a holder of a membership interest in the mutual company and shall also include a person or persons insured under a group policy, subject to the following conditions:
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(i) the person is insured or covered under a
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| group life policy or group annuity contract under which funds are accumulated and allocated to the respective covered persons;
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(ii) the person has the right to direct the
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| application of the funds so allocated;
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(iii) the group policyholder makes no
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| contribution to the premiums or deposits for the policy or contract; and
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(iv) the mutual company has the names and
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| addresses of the persons covered under the group life policy or group annuity contract.
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On and after the effective date of a plan of MHC
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| conversion under this Section, the term "member" shall mean a member of the mutual holding company created thereby.
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(f) "Mutual holding company" or "MHC" means a
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| corporation resulting from a reorganization of a mutual company under this Section. A mutual holding company shall be subject to the provisions of this Article and to any other provisions of this Code applicable to mutual companies, except as otherwise provided in this Section. The articles of incorporation of a mutual holding company shall include provisions setting forth the following:
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(i) that it is a mutual holding company organized
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(ii) that the mutual holding company may hold not
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| less than a majority of the shares of voting stock of a converted company or an intermediate holding company, which in turn holds directly or indirectly all of the voting stock of a converted company;
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(iii) that it is not authorized to issue any
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| capital stock except pursuant to a conversion in accordance with the provisions of Section 59.1 and subsection (13) of this Section;
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(iv) that its members shall have the rights
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| specified in this Section and in its articles of incorporation and bylaws; and
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(v) that its assets shall be subject to inclusion
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| in the estate of the converted company in any proceedings initiated by the Director against the converted company under Article XIII.
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(g) "Mutual company" means for purposes of this
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| Section a mutual life insurer or mutual property-casualty insurer that may convert pursuant to a plan of MHC conversion under this Section.
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(h) "Plan of MHC conversion," or "plan" when used in
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| this Section means a plan adopted pursuant to this Section by the board of directors of an Illinois domestic mutual company for the conversion of the mutual company into a direct or indirect stock subsidiary of a mutual holding company.
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(i) "Policy" includes any group or individual
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| insurance policy or contract issued by a mutual company, including an annuity contract. The term policy does not include a certificate of insurance issued in connection with a group policy or contract.
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(j) "Policyholder" means the holder of a policy other
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| than a reinsurance contract.
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(2) Formation of mutual holding company and conversion of mutual company. A
mutual company, upon approval of the Director, may reorganize by forming a
mutual holding company and continue the corporate existence of the reorganizing
mutual company as a stock insurance company in accordance with this Section.
Upon effectiveness of a plan of MHC conversion, and without any further action:
(a) The mutual company shall become a stock
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| corporation, the membership interests of the policyholders in the mutual company shall be deemed extinguished and all eligible members of the mutual company shall be and become members of the mutual holding company, in accordance with the articles of incorporation and bylaws of the mutual holding company and the applicable provisions of this Section and Article III; and
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(b) all of the shares of the capital stock of the
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| converted company shall be issued to the mutual holding company, which at all times shall own a majority of the shares of the voting stock of the converted company, except that either at the time of conversion, or at a later time with the approval of the Director, an intermediate holding company or companies may be created, so long as the mutual holding company at all times owns directly or indirectly a majority of the shares of the voting stock of the converted company.
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(3) MHC membership interests.
(a) No member of a mutual holding company may
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| transfer membership in the mutual holding company or any right arising from the membership.
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(b) A member of a mutual holding company shall not,
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| as a member, be personally liable for the acts, debts, liabilities, or obligations of the company.
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(c) No assessments of any kind may be imposed upon
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| the members of a mutual holding company by the directors or members, or because of any liability of any company owned or controlled by the mutual holding company or because of any act, debt, liability, or obligation of the mutual holding company itself.
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(d) A membership interest in a domestic mutual
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| holding company shall not constitute a security under any law of this State.
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(4) Adoption of the plan of MHC conversion by the board of directors.
(a) A mutual company seeking to convert to a mutual
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| holding company structure shall, by the affirmative vote of two-thirds of its board of directors, adopt a plan of MHC conversion consistent with the requirements of subsection (8) of this Section.
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(b) At any time before approval of a plan by eligible
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| members, the mutual company, by the affirmative vote of two-thirds of its board of directors, may amend or withdraw the plan of MHC conversion.
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(5) Approval of the plan of MHC conversion by the Director.
(a) Required findings. After adoption or amendment
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| of the plan by the mutual company's board of directors, the plan of MHC conversion shall be submitted to the Director for review and approval. The Director shall hold a public hearing on the plan. The Director shall approve the plan upon finding that:
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(i) the provisions of this Section have been
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(ii) the plan is fair and equitable as it relates
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| to the interests of the members.
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(b) Documents to be filed.
(i) Prior to the members' approval of the plan of
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| MHC conversion, a mutual company seeking the Director's approval of a plan shall file the following documents with the Director for review and approval:
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(A) the plan of MHC conversion;
(B) the form of notice required by item (b)
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| of subsection (6) of this Section for eligible members to vote on the plan;
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(C) any proxies to be solicited from eligible
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| members and any other soliciting materials;
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(D) the proposed articles of incorporation
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| and bylaws of the mutual holding company, each intermediate holding company, if any, and the revised articles of incorporation and bylaws of the converted company.
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Once filed, these documents shall be approved or
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| disapproved by the Director within a reasonable time.
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(ii) After the members have approved the plan,
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| the converted company shall file the following documents with the Director:
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(A) the minutes of the meeting of the members
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| at which the plan of MHC conversion was voted upon; and
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(B) the articles and bylaws of the mutual
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| holding company and each intermediate holding company, if any, and the revised articles of incorporation and bylaws of the converted company.
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(c) The Director's approval of a plan pursuant to
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| this subsection (5) may be made conditional at the sole discretion of the Director whenever he determines that such conditions are reasonably necessary to protect policyholder interests. Such conditions may include, but shall not be limited to, limitations, requirements, or prohibitions as follows:
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(i) prior approval of any acquisition or
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| formation of affiliate entities of the MHC;
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(ii) prior approval of the capital structure of
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| any intermediate holding company or any changes thereto;
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(iii) prior approval of any initial public
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| offering or other issuance of equity or debt securities of an intermediate holding company or the converted company in a private sale or public offering;
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(iv) prior approval of the expansion of the
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| mutual holding company system into lines of business, industries, or operations not presented at the time of the conversion;
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(v) limitations on dividends and distributions if
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| the effect would be to reduce capital and surplus of the converted company, in addition to any limitations which may otherwise be authorized by law; and
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(vi) limitations on the pledge, incumbrance, or
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| transfer of the stock of the converted company.
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(d) Consultant. The Director may retain, at the
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| mutual company's expense, any qualified expert not otherwise a part of the Director's staff to assist in reviewing the plan of MHC conversion.
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(6) Approval of the plan by the members.
(a) Members entitled to notice of and to vote on the
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| plan. All eligible members shall be given notice of and an opportunity to vote upon the plan of MHC conversion.
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(b) Notice required. All eligible members shall be
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| given notice of the members' meeting to vote upon the plan of MHC conversion. The notice shall identify in reasonable detail the benefits and risks of the MHC conversion. A copy of the plan of MHC conversion or a summary of the plan, if so authorized by the Director, shall accompany the notice. If a summary of the plan accompanies the notice, a copy of the plan shall be made available without charge to any eligible member upon request. The notice shall state that approval by the Director does not constitute a recommendation that eligible members approve the plan. The notice shall be mailed to each member's last known address, as shown on the mutual company's records, within 45 days of the Director's approval of the plan. The meeting to vote upon the plan shall not be set for a date less than 60 days after the date when the notice of the meeting is mailed by the mutual company. If the meeting to vote upon the plan is held coincident with the mutual company's annual meeting of policyholders, only one combined notice of meeting is required.
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(c) Vote required for approval.
(i) After approval by the Director, the plan of
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| MHC conversion shall be adopted, at an annual or special meeting of policyholders at which a quorum is present, upon receiving the affirmative vote of at least two-thirds of the votes cast by eligible members.
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(ii) Members entitled to vote upon the proposed
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| plan may vote in person or by proxy. Any proxies to be solicited from eligible members, together with the related proxy statement and any other soliciting materials, shall be filed with and approved by the Director.
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(iii) The number of votes each eligible member
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| may cast shall be determined by the mutual company's bylaws. If the bylaws are silent, each eligible member may cast one vote.
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(7) Adoption of articles of incorporation. Adoption of articles of
incorporation for the mutual holding company, each intermediate holding
company, if any, and revised articles of incorporation for the converted
company is necessary to implement the plan of MHC conversion. Procedures for
adoption or revision of such articles shall be governed by the applicable
provisions of this Code or, in the case of an intermediate holding company, the
business corporation law of the state in which the intermediate
holding company is incorporated. For a Class I mutual
company, the members may
adopt revised articles of incorporation at the same meeting at which the
members approve the plan. For a Class 2 or 3 mutual company, the articles of
incorporation may be adopted solely by the board of directors or trustees, as
provided in Section 57 of this Code.
(8) Required provisions in a plan of MHC conversion. The following
provisions shall be included in the plan of MHC conversion:
(a) The plan shall set forth the reasons for the
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(b) Effect of MHC conversion on existing policies.
(i) The plan shall provide that all policies of
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| the converted company in force on the effective date of conversion shall continue to remain in force under the terms of those policies, except that any voting or other membership rights of the policyholders provided for under the policies or under this Code and any contingent liability policy provisions of the type described in Section 55 of this Code shall be extinguished on the effective date of the conversion.
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(ii) The plan shall further provide that holders
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| of participating policies in effect on the date of conversion shall continue to have the right to receive dividends as provided in the participating policies, if any.
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(iii) Except for a mutual company's life
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| policies, guaranteed renewable accident and health policies, and non-cancelable accident and health policies, the converted stock company may issue the insured a nonparticipating policy as a substitute for the participating policy upon the renewal date of a participating policy.
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(iv) The plan shall provide that a Class I mutual
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| company's participating life policies in force on the effective date of the conversion shall be operated by the converted company for dividend purposes as a closed block of participating business except that any or all classes of group participating policies may be excluded from the closed block. The plan shall establish one or more segregated accounts for the benefit of the closed block of business and shall allocate to those segregated accounts enough assets of the mutual company so that the assets together with the revenue from the closed block of business are sufficient to support the closed block including, but not limited to, the payment of claims, expenses, taxes, and any dividends that are provided for under the terms of the participating policies with appropriate adjustments in the dividends for experience changes. The plan shall be accompanied by an opinion of a qualified actuary or an appointed actuary who meets the standards set forth in the insurance laws or regulations for the submission of actuarial opinions as to the adequacy of reserves or assets. The opinion shall relate to the adequacy of the assets allocated to the segregated accounts in support of the closed block of business. The actuarial opinion shall be based on methods of analysis deemed appropriate for those purposes by the Actuarial Standards Board. The amount of assets allocated to the segregated accounts of the closed block shall be based upon the mutual company's last annual statement that is updated to the effective date of the conversion. The converted stock company shall keep a separate accounting for the closed block and shall make and include in the annual statement to be filed with the Director each year a separate statement showing the gains, losses, and expenses properly attributable to the closed block. Periodically, upon the Director's approval, those assets allocated to the closed block as provided herein that are in excess of the amount of assets necessary to support the remaining policies in the closed block shall revert to the benefit of the converted company. The Director may waive the requirement for the establishment of a closed block of business if the Director deems it to be in the best interests of the participating policyholders of the mutual company to do so.
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(c) The plan shall set forth the requirements for
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| granting membership interests to future policyholders of the converted company.
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(d) The plan shall include information sufficient to
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| demonstrate that the financial condition of the converted company will not be diminished by the plan of MHC conversion.
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(e) The plan shall include a description of any
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| current proposal to issue shares of an intermediate holding company or the converted company to the public or to other persons who are not direct or indirect subsidiaries of the mutual holding company.
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(f) The plan shall include the identity of the
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| proposed officers and directors of the mutual holding company and each intermediate holding company, if any, together with such other biographical information as the Director may request.
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(g) The plan shall include such other information as
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| the Director may request or may prescribe by rule.
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(9) Effective date of the plan of MHC conversion. A plan shall become
effective when the Director has approved the plan, the members have approved
the plan and the articles of incorporation of the mutual holding company, each
intermediate holding company, if any, and the revised articles of incorporation
of the converted company have been adopted and filed with the Director.
(10) Corporate existence.
(a) Upon the conversion of a mutual company to a
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| converted company according to the provisions of this Section, the corporate existence of the mutual company shall be continued in the converted company with the original date of incorporation of the mutual company. All the rights, franchises, and interests of the mutual company in and to every type of property, real, personal, and mixed, and things in action thereunto belonging, is deemed transferred to and vested in the converted company without any deed or transfer. Simultaneously, the converted company is deemed to have assumed all the obligations and liabilities of the mutual company.
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(b) The directors and officers of the mutual company,
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| unless otherwise specified in the plan of conversion shall serve as directors and officers of the converted company until new directors and officers of the converted company are duly elected pursuant to the articles of incorporation and bylaws of the converted company.
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(11) Regulation and authority of mutual holding company.
(a) A mutual holding company shall have the same
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| powers granted to domestic mutual companies and be subject to the same requirements and provisions of Article III and any other provisions of this Code applicable to mutual companies that are not inconsistent with the provisions of this Section, provided however that a mutual holding company shall not have the authority to transact insurance pursuant to Section 39(1).
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(b) Neither the mutual holding company nor any
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| intermediate holding company shall issue or reinsure policies of insurance.
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|
(c) A mutual holding company may enter into an
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| affiliation agreement or a merger agreement either at the time of conversion, or at some later time with the approval of the Director, with any mutual insurance company authorized to do business in this State or another mutual holding company. Any such merger agreement may authorize members of the mutual insurance company or other mutual holding company to become members of the mutual holding company. Any such affiliation agreement or merger agreement shall be subject to the insurance laws of this State relating to such transactions entered into by a domestic mutual company.
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(d) The assets of the MHC shall be held in trust,
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| under such arrangements and on such terms as the Director may approve, for the benefit of the policyholders of the converted company. Any residual rights of the MHC in such assets or any assets of the MHC determined not to be held in trust shall be subject to a lien in favor of the policyholders of the converted company under such terms as the Director may approve. Upon conversion of the mutual holding company as provided for in subsection (13) of this Section, such assets shall be released from trust in accordance with the plan of conversion approved by the Director.
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(12) Diversion of business to affiliates. Without prior approval of the
Director, neither the converted company nor any other person affiliated with or
controlling the converted company shall divert business from the converted
company to any insurance company affiliate if the purpose or effect would be to
significantly reduce the number of members of the mutual holding company.
(13) Conversion of mutual holding company. A mutual holding company created
pursuant to this Section may reorganize by complying with the applicable
provisions of Section 59. For purposes of effecting a conversion under that
Section, the mutual holding company shall be deemed a "mutual company" and
the converted mutual holding company shall be deemed a "converted stock
company," as such terms are defined in Section 59.1.
(14) Conflict of interest. No director, officer, agent, or employee of the
mutual company or any other person shall receive any fee, commission, or other
valuable consideration, other than his or her usual regular salary and
compensation, for in any manner aiding, promoting, or assisting in the
conversion except as set forth in the plan of MHC conversion approved by the
Director. This provision does not prohibit the payment of reasonable fees and
compensation to attorneys, accountants, and actuaries for services performed in
the independent practice of their professions, even if the attorney,
accountant, or actuary is also a director of the mutual company.
(15) Costs and expenses. All the costs and expenses connected with a plan
of MHC conversion shall be paid for or reimbursed by the mutual company or the
converted company.
(16) Failure to give notice. If the mutual company complies substantially
and in good faith with the notice requirements of this Section, the mutual
company's failure to give any member or members any required notice does not
impair the validity of any action taken under this Section.
(17) Limitation of actions. Any action challenging the validity of or
arising out of acts taken or proposed to be taken under this Section shall be
commenced within 30 days after the effective date of the plan of MHC
conversion.
(Source: P.A. 90-810, eff. 1-6-99 .)
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