Title 31--INSURANCE INSURANCE DEPARTMENT [31 PA. CODE CH. 25] Insurance Holding Company Systems [31 Pa.B. 4406] The Insurance Department (Department) by this order amends Chapter 25 (relating to rules and procedural requirements for insurance holding company systems) to read as set forth in Annex A. This final-form rulemaking sets forth rules, procedural requirements and reporting forms relating to acquisitions of control of, or mergers with, insurers and transactions within insurance holding company systems.
Purpose
The purpose of this final-form rulemaking is to update the chapter to be consistent with current Commonwealth law and financial reporting standards established by the National Association of Insurance Commissioners (NAIC) and to improve upon the clarity and efficiency of standards and reporting requirements for insurance holding company systems.
In 1994, Article XIV of The Insurance Company Law of 1921 (act) (40 P. S. §§ 991.1401--991.1413) was amended to: (1) bring health maintenance organizations within the scope of the act; and (2) update provisions relating to dividends and other material transactions to meet minimum financial regulation standards adopted by NAIC. See the act of February 17, 1994, (P. L. 92, No. 9). This final-form rulemaking includes revisions needed to update the chapter to reflect the 1994 amendments to the act.1
This final-form rulemaking also includes a prescribed form for providing notice of the potential competitive impact of a proposed merger or acquisition under section 1403 of the act (40 P. S. § 991.1403). The new form (Form E) is consistent with a model form adopted by the NAIC and will provide the Department with information needed to determine whether a proposed merger or acquisition would violate the competitive standard of section 1403(d) of the act.
In addition, this final-form rulemaking includes amendments to clarify a number of existing procedural and reporting requirements and eliminate other requirements deemed to be unnecessary or duplicative.
Statutory Authority
This final-form rulemaking is adopted under the authority of section 337.8 of the act (40 P. S. § 459.8) and Article XIV of the act.
Comments
Notice of proposed rulemaking was published at 29 Pa.B. 5392 (October 16, 1999) with a 30-day public comment period.
No comments were received from the standing committees. Comments were received during the 30-day public comment period from the American Insurance Association (AIA); The Harleysville Insurance Companies (Harleysville); the Insurance Federation of Pennsylvania, Inc. (IFP); the Pennsylvania Association of Mutual Insurance Companies (PAMIC); and PHICO Insurance Company (PHICO). The Independent Regulatory Review Commission (IRRC) submitted its comments and recommendations to the Department on December 16, 1999. The Department has responded to all comments in this final-form rulemaking.
In addition, the Department has revised the final-form rulemaking to reflect amendments to the act of December 20, 2000 (P. L. 967, No. 132) (Act 132), effective February 17, 2001. These changes reflect: (1) the addition of limited liability companies to the definition of ''person''; and (2) the addition of pledges of assets to the types of material transactions involving affiliates in insurance holding company systems that must be reported to the Department before the transactions occur.
The following is a discussion of comments and summary of changes in the final-form rulemaking.
Section 25.1. Definitions.
Definition of ''NAIC''
IRRC commented that the reference to a successor organization in the definition of ''NAIC'' was inconsistent with the definition in section 1401 of the act (40 P. S. § 991.1401). In response to IRRC's comment, the Department has deleted the reference to a successor organization.
Definition of ''surplus''
The proposed rulemaking included a new definition of ''surplus.'' The definition was added to provide a common meaning of the term for purposes of compliance with this chapter. IRRC requested the Department clarify the reference to ''accounting practices and procedures manuals adopted by NAIC as required by the Commissioner'' in the definition. Specifically, IRRC commented that the definition was unclear as to how many and which specific NAIC manuals were encompassed by the definition and that the phrase ''as required by the Commissioner'' was confusing. IRRC also asked why the accounting practices and procedures were not included in the proposed rulemaking.
Under section 320 of the act (40 P. S. § 443), section 11 of the Health Maintenance Organization Act (40 P. S. § 1561) and § 152.21 (relating to financial statements and examinations), the various types of insurers subject to this chapter (life/health, property/casualty, health maintenance organizations and, as of February 17, 2001, preferred provider organizations) are required to file annual financial statements with the Department in the form required by the Commissioner. Each year the Commissioner provides all insurers with specific financial statement filing instructions. The instructions identify the NAIC forms, instructions and manual to be used in the preparation of annual and quarterly financial statements and include information about any Commonwealth specific laws, regulations or orders that apply to financial statements filed with the Department for that year. The form, instructions and accounting rules used by insurers to prepare financial statements for State insurance regulators encompass a large body of very detailed material that is updated continually to address changing business practices and solvency regulation concerns. The NAIC's process for development and maintenance of statutory accounting principles is comparable to the process followed by the American Institute of Certified Public Accountants for generally accepted accounting principles.
Although as of 2001, all insurers are using a single accounting practices and procedures manual, the various types of insurers continue to use different NAIC financial statement forms and instructions. Those forms and instructions continue to use terms specific to the type of insurer or the purpose of a particular accounting entry, such as ''surplus,'' ''unassigned funds (surplus)'' and ''surplus as regards policyholders.'' Therefore, the Department has included the definition of ''surplus'' not to provide accounting guidance but to establish a common meaning of the term for the specific purpose of compliance with this chapter.
In response to IRRC's comments and in recognition of the implementation of the new codified manual in 2001, the Department has clarified and expanded the definition of ''surplus'' in this final-form rulemaking to reference ''the annual statement instructions and accounting practices and procedures manual prescribed by the NAIC or as otherwise required by the Commissioner for annual financial statements filed with the Department.''
Definition of ''ultimate controlling person''
IRRC suggested the Department define the term ''registrant'' used in the definition of ''ultimate controlling person.'' In response to IRRC's comment, the Department has clarified the definition by replacing ''registrant'' with ''another person'' consistent with the first sentence of the definition.
IRRC also commented that the Department should explain the distinction between ''direct'' and ''indirect'' control for purposes of the definition. Section 1401 of the act defines ''control'' for purposes of the act and this chapter. In general, control means the direct or indirect possession of the power to direct or cause the direction of the management and policies of another person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote or holds proxies representing 10% or more of the voting securities of another person. However, control also may exist by contract or otherwise, unless the power is the result of an official position or corporate office. Control is determined on a case-by-case basis for purposes of the act. Whether control is direct or indirect may be determined by the relative positions of persons within a holding company structure. In general, indirect control exists when power is exerted or ownership attained through a business relationship or interest in an intermediary. Because the definition of ''control'' in section 1401 of the act applies to this chapter and establishes that control may exist directly or indirectly, the Department has clarified the definition of ''ultimate controlling person'' by eliminating the unnecessary reference to direct or indirect control.
The Department also has clarified the definition by replacing the term ''limited liability corporation'' with the term ''limited liability company'' consistent with 15 Pa.C.S. § 8903 (relating to definitions) and the use of the term in Act 132.
Section 25.2. Purpose.
The Department further clarifies that § 25.2 is being deleted solely because it does not provide information that is necessary to understand the meaning and intent of the provisions of the chapter. The deletion does not affect the purpose of or the Department's responsibilities under the act.
Section 25.11. Expenses.
Purpose and title
Section 25.11 is being amended to include standards relating to costs of outside experts or consultants retained to assist the Department in the evaluation of filings made under this chapter. The standards are consistent with Chapter 12 (relating to costs of Insurance Department examinations) and the Commonwealth's procedures for retaining the services of outside parties. IRRC commented the Department should add a reference to experts and consultants to the title of the section. In response to IRRC's comment, the Department has expanded the title of the section to read ''Expenses of experts and consultants'' in the final-form rulemaking.
Advance notice of retention of outside experts
Harleysville suggested § 25.11(a) be amended to add provisions for written notice to the person filing the statement, including the name of the outside expert, the terms of the engagement and an estimate of the fees. Harleysville commented the notice would allow the person filing to estimate future costs and suggest possible cost-saving alternatives to the Department. IRRC commented the Department should explain the process for questioning the costs of an outside expert.
When the Department identifies the need to retain an outside expert from its list of prequalified vendors, the Department negotiates the scope and cost of the specific assignment with the vendor, and the terms are established in a written engagement letter. The engagement letter is then sent to the person filing the statement. Upon receipt of the engagement letter, the person filing may contact the Department to express concerns about the scope or cost of the engagement. Therefore, consistent with current practice and in response to comments by Harleysville and IRRC, the Department has added language as suggested by Harleysville to § 25.11(a) in this final-form rulemaking.
Costs of engagement of outside experts
Under sections 1402(f)(3) and 1405(a)(4) of the act (40 P. S. §§ 991.1402(f)(3) and 991.1405(a)(4)), § 25.11(b) states that the costs of outside experts will be charged to and paid by the person filing or a designee of the person acceptable to the Department. Section 25.11(c) states the Department will require per diem charges for outside experts to be ''comparable'' to prevailing rates for the services. IFP recommended that § 25.11(b) be amended to provide that the ''reasonable'' cost of experts be charged to and paid by the person filing, and that § 25.11(c) refer to ''reasonable'' rather than ''comparable'' and prevailing rates. IRRC asked how the Department determines prevailing rates.
The Department uses the Commonwealth's request for qualifications (RFQ) procurement process established under 62 Pa.C.S. (relating to Commonwealth Procurement Code) (Act 57) to determine which vendors qualify to provide consulting services. The RFQ procurement process is the method by which services are retained in a fair and reasonable manner. The process also enables the Department to determine prevailing rates in the industry. The specific cost and scope of each engagement is then determined by negotiations between the Department and the qualified vendor and disclosed to the person filing in the engagement letter. Therefore, the Department determines prevailing rates in the RFQ evaluation process, and the cost of each engagement is then negotiated considering the nature and scope of the particular services being retained. The Department believes the term ''comparable'' provides a stronger, more objective standard than ''reasonable'' for purposes of the procurement and engagement process, and therefore has retained the term ''comparable'' in this final-form rulemaking.
Harleysville further recommended § 25.11(b) provide that costs billed by an outside expert be assessed against the person filing within a reasonable time of the completion of the engagement and that billings provide adequate itemization to enable the person filing to conclude that the services being billed were reasonable and accomplished within the terms of the engagement. Harleysville also recommended that a new subsection (e) be added to provide that, within 30 days of receipt of a billing, the person filing may object in writing to the charges ''based on an assertion that a charge is excessive or unreasonable, not directly related to the evaluation of the filing, or outside the provisions set forth in the letter of engagement.'' A Department representative would then meet with the person filing to consider the basis for the objection and render a determination that reflects ''those assertions which are adequately substantiated.''
Consistent with the RFQ process and current practice in retaining outside experts, and as now stated in § 25.11(a), the person filing may contact the Department upon receipt of an advance copy of an engagement letter to discuss any concerns about the scope and cost of a specific engagement. The Department considers any possible cost-saving alternatives offered by the person filing at that time, as well as any objections raised by the person upon receipt of the billing for services rendered. Of course, the persons filing can, and do, contact the Department at any point in the review of filings to request information or express concerns relating to the Department's review. However, an outside expert is retained by the Department to provide expertise independent of the influence or interests of the person filing. The person filing is not a party to the engagement and should not be in a position to delay or otherwise obstruct the Department's ability to meet its responsibilities in evaluating filings made under the act. The Department believes the regulations, as clarified in this final-form rulemaking, allow for appropriate cost objections by the person filing while preserving the independence of the Department's review of the filing for compliance with the act and this chapter. Therefore, the Department has not included the additional language suggested by Harleysville in this final-form rulemaking.
IRRC, IFP and Harleysville questioned whether the reference to ''per diem'' charges in § 25.11(c) is appropriate for the engagement of outside experts. The Department agrees with the commentators and has replaced ''per diem'' with ''hourly'' charges in this final-form rulemaking.
Section 25.11(d) provides for travel, lodging and food expenses of outside experts to be made in accordance with provisions set forth in letters of engagement. IFP commented § 25.11(d) should provide that travel, lodging and food expenses of outside experts be limited to the same expenses that apply to Department employees. Harleysville commented that the Department should certify or confirm to the person filing that charges are reasonable and in accordance with the terms of the letter of engagement. IRRC commented that it appeared obvious that charges of these expenses must be made according to the letter of engagement and asked why the subsection is necessary.
The Department added § 25.11(d) to clarify that the cost of retaining outside experts includes travel, lodging and food expenses in addition to the hourly rate. In negotiating letters of engagement, the Department requires these charges to be comparable to prevailing rates for similar services provided in the marketplace, not to rates for the services provided by Department employees. As previously explained, the services of outside experts are retained in accordance with Act 57. The services are retained independent of the person filing. Therefore, the certification recommended by Harleysville is unnecessary and inconsistent with the purpose and intent of the Department's statutory authority to retain independent outside experts to assist in the Department's independent review of filings under the act. However, in response to these comments, the Department has clarified § 25.11(d) and included a statement that the Department will require travel, lodging and food expenses of outside experts to be comparable to prevailing rates for similar services.
Section 25.12. Forms--general requirements.
Allowance for electronic filings
Section 25.12(b) is being amended to require one rather than two copies of Forms B, C and D, permit filings by facsimile or other form of electronic transmission acceptable to the Department and eliminate the reference to manual signatures. These amendments are intended to provide the Department with the flexibility to accept electronic filings. PAMIC commented that the changes are helpful. IRRC recommended the Department further amend the section to specifically permit electronic signatures if Senate Bill 555 (relating to Uniform Electronic Transactions) were enacted prior to submission of this final-form rulemaking. Senate Bill 555, now Act 69-1999, was enacted December 16, 1999. The Department is currently reviewing all forms and filing requirements to formulate a policy for implementation of electronic commerce with proper safeguards. As a result of this review and in response to IRRC's comment, the Department has further amended the section by deleting the notary requirement for biographical affidavits in Item 3 of Form A and Item 4 of Form B. The Department believes these amendments will permit electronic signatures at the point the required technology and procedures are in place.
Confidentiality of filings
Section 25.12(c) provides persons filing with instructions for making assertions that information included or referenced within filings relating to acquisitions or mergers of insurers (Forms A and E) is confidential, proprietary or privileged. IRRC questioned the Department's statutory authority to apply these instructions to Form E filings. The Department agrees that Form E filings are strictly confidential under section 1403(c)(1) of the act and has deleted the reference to Form E in § 25.12(c) in this final-form rulemaking.
IFP recommended that § 25.12(c) be amended to provide for the confidentiality of biographical statements and financial statements of ultimate controlling persons who are not public companies. While certain information in biographical statements would be confidential, for example, the social security number and home address of the person filing the statement, other information in the statement may be public. Therefore, the Department believes that the process in § 25.12(c) for asserting confidentiality is appropriate for biographical statements. However, the Department agrees that the section should provide for the confidentiality of personal financial statements of nonpublicly held ultimate controlling persons and has so amended § 25.12(c) in this final-form rulemaking.
Sections 25.13--25.16 and Form B. Clarity.
The last sentence of § 25.13(a) (relating to forms--incorporation by reference, summaries and omissions) begins with the term ''Matter.'' IRRC commented the term is vague and confusing and suggested the Department use a more descriptive term. In response to IRRC's comment, the Department has clarified the subsection by deleting the last sentence and adding an introductory sentence stating that information required in forms may be incorporated by reference as provided in the subsection unless the incorporation would make the form incomplete, unclear or confusing.
Section 25.15(a) (relating to forms--additional information and exhibits) requires the person filing to provide further material information, if any, as necessary to make the information expressly required in the form not misleading. IRRC commented the phrase ''not misleading'' is vague and recommended the Department clarify what type of additional information the Department may require to verify information contained in the form. Filings under the act often relate to complex corporate and financial transactions involving diverse affiliated entities. Because transactions within holding company systems are unique to the structure and financial dealings of the various affiliated entities, the forms are developed as standard guides to be used in the submission of filings under the act, not lists of all of the information that may be material to a particular transaction. Therefore, § 25.12(a) states that Forms A--E are guides in the preparation of the statements required by the act and are not intended to be blank forms that are to be filled in. Section 25.15(a) is intended to clarify further that persons filing may not withhold information material to a filing on the basis that the form may not expressly name that particular information, especially when the absence of the information would misinform or serve to lead the reviewer to an erroneous conclusion. In response to IRRC's comment, the Department has replaced ''not misleading'' with a statement that ''the person filing shall provide further material information, if any, as necessary for the completion or clarity of the information expressly required in the form.''
Subsection 25.16(b) (relating to acquisition of control--statement filings) provides that Form A is not required when filing a request for an exemption from section 1402 of the act. IRRC recommended the Department break § 25.16(b) into subparagraphs to improve readability and clarity. IRRC also recommended the Department clarify what information is required to determine that a transaction will not change or influence the control of a domestic insurer and therefore should not be subject to Form A filing requirements. In response to IRRC's comments, the Department has divided § 25.16(b) into subparagraphs in this final-form rulemaking. As discussed in the Department's response to comments relating to the definition of ''ultimate controlling person,'' section 1401 of the act defines ''control'' for purposes of the act and this chapter. Control is determined on a case-by-case basis and involves consideration of the relative positions of persons within a holding company structure and how ownership or power to direct or cause the direction of the management and policies of another person is attained or exerted. Because acquisition filings may be complicated business transactions, the information required to determine whether a transaction changes or influences control would depend on the unique circumstances and business relationships of the entities involved in the transaction. Therefore, the Department has not added language to specify what information is required to make that determination.
The Department also made an editorial change to the amendment of Form B, Item 8.B. to clarify the statement that financial statements are required whether an ultimate controlling person is an individual, corporation or other type of business organization.
Section 25.16(e). Notice of changes in acquisition filings.
Section 25.16(e) requires a person filing to submit a material change in the facts in Form A or E to the Department within 2 business days after learning of the change. Section 25.16(e) is being added to clarify that, if the acquiring person is not an individual, a material change includes changes in directors, executive officers or owners of 10% or more of the voting securities of the acquiring person. IFP recommended that 5 rather than 2 days be allowed for notice of changes in officers or directors.
Section 1402(f)(1) of the act sets forth conditions under which the Department may not approve a merger or other acquisition of control. One of the conditions relates to the competence, experience and integrity of the persons who would control the operation of the insurer. See section 1402(f)(1)(v) of the act. An assessment of the key individuals involved in a merger or acquisition is crucial to the Department's review of a Form A filing. Therefore, the Department believes that changes in directors, executive officers or owners may have a material effect on the disposition of a filing and should be disclosed within 2 business days as required under section 1402(d) of the act.
Section 25.18. Filings in other jurisdictions.
Section 25.18 (relating to summary of registration--statement filing) of the proposed rulemaking included an amendment requiring an insurer to file a copy of Form C with another jurisdiction within 15 days from receipt of a written request from the chief insurance regulatory official of the jurisdiction. IRRC questioned the Department's statutory authority to establish filing requirements for another jurisdiction. IRRC recommended the Department amend § 25.18 to correspond with section 1404(a)(1) and (2) of the act (40 P. S. § 991.1404(a)(1) and (2)) and to be consistent with section 4B of the NAIC model regulations.
Section 25.18 currently refers to an insurer's duty to file a copy of Form C in each state in which the insurer is authorized to do business, if requested by the Commissioner of that state. The current language is consistent with section 4B of the NAIC model regulations. In response to IRRC's concerns, the Department has deleted its proposed revision to establish a specific time frame for filings requested by another jurisdiction.
Section 25.21. Changes in reported transactions.
Under section 1405(a)(2) of the act, an insurer may not enter into certain material transactions unless the insurer has provided at least 30 days notice to the Department of its intention to enter into the transactions and the Department has not disapproved the transactions. Section 25.21 (relating to transactions subject to prior notice--notice filing.) requires notice of these transactions to be furnished on Form D as prescribed by the chapter. IRRC commented on provisions in § 25.21(c) of the proposed rulemaking relating to the Department's ability to withdraw prior approval of a transaction or take other regulatory action as a result of a material change in the information furnished on Form D. IRRC asked what other regulatory action was contemplated and stated the Department should amend this provision to reflect clearly its intent that an insurer may not deviate materially from an approved transaction without notifying the Department and receiving approval.
The Department's approval of a material transaction, or any other filing made under the act, constitutes an approval of a specific transaction based on the facts as presented by the person filing. If the facts change either before or after the transaction is approved, the Department must be made aware of the change so it may consider whether the change is material and, if so, whether the transaction continues to meet the standards and conditions for approval under the act and this chapter. In response to IRRC's comments, the Department has revised § 25.21(b) to provide that any changes in information furnished on Form D, including a change in the effective date of the transaction, must be reported as an amendment to Form B within 15 days after the end of a month in which the transaction is effectuated. Further, § 25.21(c) has been revised to replace the statement relating to withdrawal of prior approval as a result of a material change with a statement prohibiting an insurer from entering into a reported transaction if a material change occurs unless the insurer has filed an amended Form D and the Department has not disapproved the amended transaction within the prescribed time period.
Section 25.22. Dividends and other distributions.
Section 25.22 (relating to all dividends and other distributions) is being amended to broaden its application to all types of dividends and all other distributions reported under the act. IRRC commented the Department should explain the need to apply this section to all dividends. The amendments to this section will establish consistent reporting standards for all types of dividends required to be reported under the act. The information is needed to determine the impact of a dividend on the insurer's financial condition and whether or not a dividend has triggered the filing requirements for extraordinary dividends or dividends and other distributions to be paid from other than unassigned or surplus funds. The consistent, comprehensive instructions prescribed in this chapter will make it easier for insurers to identify and comply with reporting requirements for all dividends. A consistent reporting format also will facilitate the Department's efforts to identify and act quickly on these important, time-sensitive filings.
Section 25.22(a) of the proposed rulemaking required insurers to include interim balance sheets and statements of income with reports of all dividends and other distributions to shareholders unless the Commissioner granted a waiver from providing the information for ordinary dividends. AIA, IFP, PHICO and IRRC questioned the need for interim balance sheets and statements of income for reports of ordinary dividends and recommended the provision for obtaining a waiver be replaced with a provision excluding the information from reports of all ordinary dividends. In response to the recommendations, the Department has amended § 25.22(a) to limit the requirement to include interim balance sheets and statements of income to reports of extraordinary dividends, dividends and other distributions to be paid from other than unassigned funds. Section 25.22(b) provides instructions for requesting the Department's approval to pay dividends and other distributions from other than unassigned funds (surplus) under section 337.8 of the act. IRRC commented that the phrase ''unassigned funds (surplus)'' is unclear and recommended the Department explain the difference between that term and the term ''surplus'' as defined in § 25.1. In response to IRRC's comment, the Department has amended § 25.22(b) to delete the term ''surplus'' and refer to the definition in section 337.8(e) of the act.
AIA, IRRC and PAMIC commented on the provisions in § 25.22(f) relating to the Department's ability to withdraw its prior approval of a dividend or other distribution and require the transaction to be reversed or take other regulatory action as a result of a material change in information reported under the section. PAMIC commented the provisions seemed to state the obvious. IRRC asked what other regulatory action was contemplated and stated the Department should amend this provision to reflect clearly its intent that an insurer may not deviate materially from an approved transaction without notifying the Department and receiving approval. In response to these comments and consistent with the revisions to § 25.21(c), the Department has revised § 25.22(f) to replace the statement relating to withdrawal of prior approval as a result of a material change with a statement prohibiting an insurer from paying an extraordinary dividend or other dividend or distribution from other than surplus funds if a material change occurs unless the insurer has filed an amended report and the Department has not disapproved the amended report within the prescribed time period.
Forms A and B. Biographical affidavits.
The proposed rulemaking included amendments to Form A, Item 3 and Form B, Item 4 (relating to identity and background of individuals associated with the applicant; biographical information) to eliminate the need to include a biographical affidavit with the forms if an affidavit furnished within the immediately preceding 3 years is currently on file with the Commissioner. IFP recommended revisions to allow copies of biographical affidavits to be filed with the forms and to eliminate the need for updated affidavits every 3 years. IRRC asked why copies of biographical affidavits would not be acceptable. IRRC also asked the Department to consider requiring an annual affidavit attesting to the accuracy of a biographical affidavit on file instead of requiring updated biographical affidavits every 3 years.
The Department relies on biographical affidavits for information relative to the financial condition, competence, experience and integrity of an applicant or controlling person. Biographical information also is critical in determining whether persons may be required to obtain specific written consent to engage or participate in the business under The Violent Crime Control and Law Enforcement Act of 1994 (18 U.S.C.A. § 1033(e)). In response to comments, the Department has revised Form A, Item 3 and Form B, Item 4 to allow applicants to file copies of original, signed biographical affidavits filed with another jurisdiction within the immediately preceding 3 years if the applicant provides the identity of the official holding the original affidavit and the date of the original filing. The Department also has considered IRRC's suggestion for annual filings attesting to the accuracy of biographical affidavits on file. However, the Department has concluded that requiring updated biographical affidavits every 3 years is a more efficient, effective approach to assuring that the Department has the information it needs to meet its responsibilities under the act and Federal law relating to persons engaged in the business of insurance.
Form C. Description of changes from prior year's statement.
Form C--Summary Registration Statement is being amended to require descriptions of items that have changed from the prior year's annual registration statement to include the date and dollar amount of the change and to identify any previous filings made as a result of the change. This information is needed to permit the Department to properly identify and evaluate related filings under the act. IFP recommended the Department allow for a good faith approximation of the dollar amount of a change. PAMIC commented the requirement is somewhat cumbersome, but probably describes the Department's view of what is to be included in filings under the current regulations. Since Form C is used to report on transactions that have already occurred, the dollar amount of the change for statutory financial statement reporting purposes will have been determined before the form is required to be filed. Therefore, the Department does not see a need to revise the form to allow for approximation.
Form D. Effect of material transactions, confidentiality and clarity.
Form D, Item 2.B. (relating to description of the transaction) is being amended to better define what is required in a description of the nature of a proposed material transaction. The amendment provides for the description to include the purpose of the transaction and its anticipated immediate and long-term effect on the financial condition of the insurer. IFP recommended the Department replace the terms ''immediate and long-term'' with ''anticipated'' effect. The description of the effect of a transaction is needed to determine whether the transaction meets the standards under section 1405 of the act including whether the insurer's surplus after the transaction will be reasonable in relation to its outstanding liabilities and adequate to its financial needs. Because the distinction between the immediate and long-term effect of a transaction may be material, the Department needs to understand both effects to determine whether to approve or disapprove a proposed transaction. Therefore, the Department has not included the revision recommended by IFP in its final-form rulemaking.
IFP also recommended Form D filings be kept confidential consistent with protections in the Private Securities Litigation Reform Act of 1995 (15 U.S.C.A. 78a note). Section 1407 of the act (40 P. S. § 991.1407) provides for strict confidentiality of information reported under section 1405 of the act. Section 25.21 requires insurers to use Form D to file information reported under section 1405(a)(2) of the act. Therefore, because the authorizing statute establishes the confidentiality of Form D filings, the Department has not revised the regulations in response to IFP's comments.
Form D, Items 3--5 (relating to sales, purchases, exchanges, loans, extensions of credit, guarantees, investments or contributions to surplus; loans or extensions of credit to a non-affiliate; and reinsurance) are being amended to update these items consistent with language in the 1994 amendments to Title XIV of the act. Harleysville questioned the changes in the percentage thresholds for required filings. The percentage changes update the regulations to reflect the percentage thresholds already established in the act. See the act of February 17, 1994, (P. L. 92, No. 9). Therefore, the amendments to the regulations will not change the thresholds in effect since 1994.
In addition, the Department has amended Item 3 to include pledges of assets as a type of transaction subject to Form D filing requirements consistent with Act 132.
Form E. Clarity and need for information.
A new Form E is being added to prescribe the form required under section 1403 of the act for providing notice of the potential competitive impact of a proposed merger or acquisition. Form E requires information relating to the competitive impact of the transaction on the insurance market in this Commonwealth. The form is consistent with the model form adopted by the NAIC. Harleysville requested clarification of terms used in Form E relating to the applicant and other persons involved in an acquisition or merger. In response to Harleysville's comments, the Department has revised Form E to clarify the terms and be consistent with terms used in Form A. Harleysville also requested clarification on the need for requiring the information in Item 3 relating to the nature and purpose of a proposed merger or acquisition. The Department needs a statement of the nature and purpose of a proposed merger or acquisition to gain a basic understanding of the proposed transaction, the resulting change in control and its impact on competition in any insurance market in this Commonwealth.
PAMIC commented that it may be difficult for small insurers to show market share statistics for certain lines of business. The direct written insurance premium data required in Form E filings are reported in annual statutory financial statements filed by insurers with the Department and the NAIC. The financial statements are public documents. Market share statistics also are available in annual statistical reports published by the Department and the NAIC.
Fiscal Impact
State Government
Department costs associated with the review of applications and statements filed under Chapter 25 will not increase as a result of this final-form rulemaking.
General Public
While this final-form rulemaking has no immediate fiscal impact on the general public, the general public will benefit to the extent that adoption of this final-form rulemaking enhances the efficiency and effectiveness of the Commonwealth's regulation of domestic insurers in insurance holding company systems under the act.
Political Subdivisions
This final-form rulemaking has no impact on costs to political subdivisions.
Private Sector
The updated reporting requirements in this final-form rulemaking will impose no significant costs on persons filing applications to merge with or acquire control of insurers transacting business in this Commonwealth or on domestic insurance companies in insurance holding company systems. This final-form rulemaking will reduce current costs imposed on regulated parties to the extent that it eliminates duplicative filing requirements.
Paperwork
Because this final-form rulemaking updates the chapter consistent with requirements already imposed and implemented under the 1994 and 2000 amendments to the act, this final-form rulemaking will impose no new paperwork requirements on domestic insurers or other persons subject to the act. This final-form rulemaking reduces paperwork by eliminating duplicative filings relating to biographical information, reporting forms and notices of proposed material transactions. The disclosure and review requirements in this final-form rulemaking are necessary for the Department to evaluate whether proposed mergers, acquisitions and material transactions within an insurance holding company system are fair and reasonable and do not have an adverse impact on the interests of policyholders or the financial stability of a domestic insurer.
Persons Regulated
This final-form rulemaking applies to persons filing applications to merge with or acquire control of an insurer transacting business in this Commonwealth, domestic insurers (including health maintenance organizations and preferred provider organizations) in insurance holding company systems and other domestic insurers filing reports of dividends and other distributions with the Department.
Contact Person
Questions or comments regarding this final-form rulemaking may be addressed in writing to Peter J. Salvatore, Regulatory Coordinator, Office of Special Projects, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429. Questions or comments also may be e-mailed to psalvatore@state.pa.us or faxed to (717) 705-3873.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on October 5, 1999, the Department submitted a copy of the proposed rulemaking, published at 29 Pa.B. 5392, to IRRC and to the Chairpersons of the Senate Committee on Banking and Insurance and the House Insurance Committee for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the Committees were provided with copies of the comments received during the public comment period, as well as other documents when requests. The Department also provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.''
Under section 5.1(d) of the Regulatory Review Act (71 P. S. § 745.5a(d)), on July 16, 2001, this final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on July 26, 2001, and approved this final-form rulemaking.
Findings
The Commissioner finds that:
(1) Public notice of intention to adopt this rulemaking as amended by this order has been given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202), and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The adoption of this final-form rulemaking in the manner provided in this order is necessary and appropriate for the administration and enforcement of the authorizing statutes.
Order
The Commissioner, acting under the authorizing statutes, orders that:
(1) The regulations of the Department, 31 Pa. Code Chapter 25, are amended by amending §§ 25.1, 25.11--25.23 and Forms A--D; adding Form E and deleting § 25.2 to read as set forth in Annex A.
(2) The Commissioner shall submit this order and Annex A to the Office of General Counsel and Office of Attorney General for approval as to form and legality as required by law.
(3) The Commissioner shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(4) This order shall take effect upon final publication in the Pennsylvania Bulletin.
M. DIANE KOKEN,
Insurance CommissionerFiscal Note: Fiscal Note 11-182 remains valid for the final adoption of the subject regulation.
(Editor's Note: For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 31 Pa.B. 4503 (August 11, 2001).)
Annex A TITLE 31. INSURANCE PART I. GENERAL PROVISIONS Subpart B. SECURITIES AND STOCK TRANSACTIONS CHAPTER 25. RULES AND PROCEDURAL REQUIREMENTS FOR INSURANCE HOLDING COMPANY SYSTEMS § 25.1. Definitions.
(a) The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
Act--The Insurance Company Law of 1921 (40 P. S. §§ 341--991.1718).
Commissioner--The Insurance Commissioner of the Commonwealth.
Corporation--A corporation organized under a law of the Commonwealth or under the laws of another state, or having an office or transacting business in this Commonwealth.
Department--The Insurance Department of the Commonwealth.
Executive officer--A chief executive officer, chief operating officer, chief financial officer, president, treasurer, secretary, controller and other individual performing functions corresponding to those performed by the foregoing officers under whatever title.
NAIC--The National Association of Insurance Commissioners.
Surplus--Total assets less total liabilities as calculated and reported in accordance with the annual statement instructions and accounting practices and procedures manual prescribed by the NAIC or as otherwise required by the Commissioner for annual financial statements filed with the Department.
Ultimate controlling person--A person which is not controlled by another person. An ultimate controlling person may be one or more of the following: individual, corporation, limited liability company, partnership, association, joint stock company, trust, unincorporated organization, or any similar entity or combination of the foregoing who controls another person.
(b) Unless the context otherwise requires, other terms found in this chapter are used as defined in Article XIV of the act (40 P. S. §§ 991.1401--991.1413).
§ 25.2. (Reserved).
§ 25.11. Expenses of experts and consultants.
(a) Under sections 1402(f)(3) and 1405(a)(4) of the act (40 P. S. §§ 991.1402(f)(3) and 991.1405(a)(4)), the Department may retain attorneys, actuaries, accountants and other experts not otherwise a part of the Department's staff as may be reasonably necessary to assist the Department in the evaluation of a filing under this chapter. The Department will provide the person filing with written notice of the engagement of an outside expert, including the expert's name, the terms of engagement and a cost estimate, and will consider any possible cost-saving alternatives suggested by the person filing.
(b) The cost of experts retained by the Department will be charged to and paid by the person filing the statements or a designee of the person acceptable to the Department.
(c) The Department will require hourly charges for experts retained by the Department be comparable to prevailing rates for the services.
(d) In addition to hourly charges, the Department will require that charges for travel, lodging and food expenses of experts retained by the Department be comparable to prevailing rates for similar services and made in accordance with provisions set forth in letters of engagement.
§ 25.12. Forms--general requirements.
(a) Forms A--E are intended to be guides in the preparation of the statements required by sections 1402--1405 of the act (40 P. S. §§ 991.1402--991.1405). They are not intended to be blank forms which are to be filled in. The forms filed shall contain the numbers and captions of all items, but the text of the items may be omitted if the answers are prepared in a manner that indicates clearly the scope and coverage of the items. Instructions, whether appearing under the items of the form or elsewhere therein, shall be omitted. Unless expressly provided otherwise, if an item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.
(b) Two copies of Forms A and E and one copy of Forms B--D, including exhibits and other papers and documents filed as a part thereof, shall be filed with the Commissioner by personal delivery, mail, facsimile or other form of electronic transmission acceptable to the Department. At least one copy shall be signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of a person is affixed under a power of attorney or other similar authority, a copy of the power of attorney or other authority shall also be filed with the form.
(c) One of the filed copies of Form A shall be available for public inspection as of the date the initial filing is made; except that copies of personal financial statements of nonpublicly held ultimate controlling persons shall be given confidential treatment. Form A filings also may contain or reference other materials that are confidential, proprietary or privileged under statute, regulation, case law, administrative or court order, or other authority. If a person filing a Form A wishes to assert that materials included or referenced within the filing are confidential, proprietary or privileged and should not be available for public inspection, the person shall notify the Department at the time the initial filing is made as follows:
(1) Identify the specific information, document, report or other material that is asserted to be confidential, proprietary or privileged.
(2) State the basis upon which the assertion of confidentiality, proprietary or privilege is premised.
(3) Identify the person to whom inquiries regarding the issue of confidential treatment should be directed.
(4) Submit one copy of the filing with the materials asserted to be confidential, proprietary or privileged physically separate from the remainder of the filing, or as otherwise instructed by the Department.
(d) Forms shall be prepared on 8 1/2" x 11" paper and preferably bound at the top or the top left-hand corner. Exhibits and financial statements, unless specifically prepared for the filing, may be submitted in their original size. Copies of forms, financial statements or exhibits shall be clear, easily readable and suitable for photocopying. Debits in credit categories and credits in debit categories shall be designated so that they are clearly distinguishable on photocopies.
(e) Forms shall be completed in the English language and monetary values shall be stated in United States currency. If a financial statement, exhibit or other paper or document filed with the form is in a foreign language, it shall be accompanied by a translation into the English language and monetary value shown in a foreign currency normally shall be converted into United States currency utilizing the conversion rate in effect as of the financial statement date.
§ 25.13. Forms--incorporation by reference, summaries and omissions.
(a) Information required in Form A, B, D or E may be incorporated by reference as provided in this subsection if the incorporation would not make the information provided in the form incomplete, unclear or confusing. Information required by an item in Form A, B, D or E may be incorporated by reference in answer or partial answer to another item. Information contained in a financial statement, annual report, proxy statement, statement filed with a governmental authority or another document may be incorporated by reference in answer or partial answer to an item in Form A, B, D or E if the document or paper is filed as an exhibit to the form. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the Commissioner which were filed within the immediately preceding 3 years need not be attached as exhibits if there has been no change in the information already on file. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that the material is to be incorporated by reference in answer to the item.
(b) If an item requires a summary or outline of the provisions of a document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to the brief statement, the summary or outline may incorporate by reference particular parts of an exhibit or document currently on file with the Commissioner which was filed within the immediately preceding 3 years and may be qualified in its entirety by that reference. When two or more documents required to be filed as exhibits are substantially identical in all material respects, except as to the parties thereto, the dates of execution or other details, a copy of only one of the documents needs be filed with a schedule identifying the omitted documents and setting forth the material details in which the omitted documents differ from the document which is filed.
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1 The final-form rulemaking also includes technical changes to reflect amendments to the act in Act 132, effective February 17, 2001.
[Continued from previous Web Page] § 25.14. Forms--information unknown or unavailable and extension of time to furnish.
(a) Information required need be given only insofar as it is known or reasonably available to the person filing the form. If required information is unknown and not reasonably available to the person filing, either because the obtaining thereof would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the person filing, the information may be omitted, subject to the following conditions. The person filing shall:
(1) Give information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof.
(2) Include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of an affiliation with the person within whose knowledge the information rests and stating the result of a request made to that person for the information.
(b) If it is impractical to furnish required information, document or report at the time it is required to be filed, there may be filed with the Commissioner a separate document:
(1) Identifying the information, document or report in question.
(2) Stating why the filing thereof at the time required is impractical.
(3) Requesting an extension of time for filing the information, document or report to a specified date. The request for extension shall be deemed granted unless the Commissioner within 30 days after receipt thereof denies the request.
§ 25.15. Forms--additional information and exhibits.
(a) In addition to the information expressly required to be included in Forms A--E, the person filing shall provide further material information, if any, as necessary for the completion or clarity of the information expressly required in the form. The person filing may also file exhibits as desired in addition to those expressly required by the form. The exhibits shall be marked to indicate clearly the subject matters to which they refer. The Commissioner may require the person filing the form to provide additional information as may be necessary to determine compliance with the act.
(b) Changes to Form A, B, C, D or E shall include on the top of the first page the phrase: ''Change No. (insert number) to'' and shall indicate the date of the change and not the date of the original filing.
§ 25.16. Acquisition of control--statement filings.
(a) A person required to file a statement under section 1402 of the act (40 P. S. § 991.1402) shall furnish the required information on Form A as prescribed by this chapter. If the information requirements in section 1403(c)(2) and the criteria in section 1403(d)(2) of the act (40 P. S. §§ 991.1403(c)(2) and 991.1403(d)(2)) (relating to the competitive impact of an acquisition in this Commonwealth) apply to a Form A filing, the person shall also furnish the required information on Form E as prescribed by this chapter.
(b) A person filing a request under section 1402(g) of the act for an exemption from section 1402 of the act is not required to file a form as prescribed by this chapter but shall provide information deemed by the Commissioner as necessary to determine that an offer, request, invitation, agreement or acquisition does either of the following:
(1) Has not been made or entered into for the purpose and will not have the effect of changing or influencing the control of a domestic insurer.
(2) Otherwise is not comprehended within the purposes of section 1402 of the act.
(c) A person required to file a preacquisition notification under section 1403(b) of the act for an acquisition not subject to a Form A filing under section 1402 of the act shall file Form E as prescribed by this chapter.
(d) Under section 1403(c)(2) of the act the Department may require material and information in addition to the information required by Form E as reasonably necessary to determine whether the proposed acquisition, if consummated, would exceed the competitive standard of section 1403(d) of the act. The additional information required may include an opinion of an economist as to the competitive impact in this Commonwealth of an acquisition that would exceed the competitive standard of section 1403(d) of the act. The opinion shall be obtained by the person filing the form and shall be accompanied by a summary of the economist's education and experience indicating the economist's ability to render an informed opinion.
(e) Under section 1402(d) of the act, a person shall file with the Department and send to the insurer an amendment disclosing a material change in the information furnished on Forms A and E within 2 business days after the person learns of the change. If the acquiring person is not an individual, a material change includes changes in directors, executive officers or owners of 10% or more of the voting securities of the acquiring person. In addition, the person shall file with the Department and send to the insurer within 5 business days an amendment disclosing a change other than a material change in the information furnished on Forms A and E arising after the date on which the form was filed but before a determination is made on the filing.
(f) If the person being acquired is deemed to be a ''domestic insurer'' under section 1402(a)(2) of the act, the name of the domestic insurer on the first page of Forms A and E shall be indicated as follows: ''ABC Insurance Company, a subsidiary of XYZ Holding Company.''
(g) If a person deemed to be a ''domestic insurer'' under section 1402(a)(2) of the act is being acquired, references to ''the insurer'' in Forms A and E shall refer to both the domestic subsidiary insurer and the person being acquired.
§ 25.17. Annual registration of insurers--statement filing.
(a) An insurer required to file an annual registration statement under section 1404 of the act (40 P. S. § 991.1404) shall furnish the required information on Form B as prescribed by this chapter.
(b) Under section 1404(a) of the act, an insurer shall file a Form B within 15 days after becoming subject to registration and annually thereafter by March 31 of each year. If the Commissioner approves a merger or acquisition of control, the domestic insurer being acquired shall file a properly completed Form B within 15 days of the end of the month in which the merger or acquisition is consummated.
(c) An amendment to Form B shall be filed within 15 days after the end of a month in which there is a material change to the information provided in the annual registration statement, including changes in officers or directors listed in Item 4 of Form B. An amendment to Form B is not required if a material change has been reported as a dividend, other distribution to shareholders, or other transaction under §§ 25.21 and 25.22 (relating to transactions subject to prior notice--notice filing; and all dividends and other distributions), and there has been no change in the reported information.
(d) Amendments shall be filed in the Form B format with only items which are being amended reported. Each amendment shall include at the top of the first page ''Amendment No. (insert number) to Form B for (insert year of most recent filing)'' and shall indicate the date of the amendment and not the date of the original filing.
§ 25.18. Summary of registration--statement filing.
An annual registration statement filed under section 1404 of the act (40 P. S. § 991.1404) shall include the information required on Form C as prescribed by this chapter. A copy of Form C shall be filed in any jurisdiction in which an insurer is authorized to do business, if requested by the chief insurance regulatory official of the jurisdiction.
§ 25.19. Alternative and consolidated registrations.
(a) Under section 1404(i) of the act (40 P. S. § 991.1404(i)) an insurer authorized to do business in this Commonwealth may file a registration statement on behalf of an affiliated insurer which is required to register under section 1404 of the act. A registration statement may include information regarding an insurer in the insurance holding company system even if the insurer is not authorized to do business in this Commonwealth. In lieu of filing a registration statement on Form B, an insurer authorized to do business in this Commonwealth may file a copy of the registration statement or similar report which it is required to file in its state of domicile, if:
(1) The statement or report contains substantially similar information required to be furnished on Form B.
(2) The filing insurer is the principal insurance company in the insurance holding company system.
(b) The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact. An insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer shall set forth a brief statement of facts to substantiate the filing insurer's claim that it, in fact, is the principal insurer in the insurance holding company system.
(c) With the prior approval of the Commissioner, an unauthorized insurer may follow any of the procedures which could be done by an authorized insurer under subsection (a).
(d) An insurer may take advantage of the provisions of section 1404(h) or (i) of the act without obtaining the prior approval of the Commissioner. The Commissioner reserves the right to require individual filings if the Commissioner deems that the filings are necessary in the interest of clarity, ease of administration or the public good.
§ 25.20. Disclaimers and termination of registration.
(a) A disclaimer of affiliation or a request for termination of registration under section 1404(g) and (k) of the act (40 P. S. § 991.1404(g) and (k)) claiming that a person does not, or will not upon the taking of some proposed action, control another person, referred to as the ''subject,'' within this chapter, shall contain the following information:
(1) The number of authorized, issued and outstanding voting securities of the subject.
(2) With respect to the person whose control is denied and the affiliates of that person, the number and percentage of shares of the subject's voting securities which are held of record or known to be beneficially owned, and the number of the shares concerning which there is a right to acquire, directly or indirectly.
(3) The material relationships and bases for affiliation between the subject and the person whose control is denied and the affiliates of that person.
(4) A statement explaining why the person should not be considered to control the subject.
(b) A request for termination of registration shall be deemed to have been granted unless the Department, within 30 days after receipt of the request, notifies the registrant otherwise.
§ 25.21. Transactions subject to prior notice--notice filing.
(a) An insurer required to give notice of a proposed transaction under section 1405(a)(2) of the act (40 P. S. § 991.1405(a)(2)) shall furnish the required information on Form D as prescribed by this chapter.
(b) The insurer shall file an amendment to Form B reporting changes in the information furnished on Form D, including a change in the effective date of the transaction, within 15 days after the end of a month in which the transaction is effectuated.
(c) An insurer may not enter into a proposed transaction if a material change occurs in the information furnished on Form D unless the insurer has filed an amended Form D with the Department at least 30 days prior to entering into the transaction, or a shorter period the Department may permit, and the Department has not disapproved the amended transaction within that time period.
§ 25.22. All dividends and other distributions.
(a) Under section 1404(e) of the act (40 P. S. § 991.1404(e)) a registered insurer is required to report to the Department all dividends and other distributions to shareholders within 5 business days following the declaration thereof and at least 10 days, commencing from the date of receipt by the Department, prior to payment thereof. The report shall include the information set forth in section 1404(e) of the act and subsection (c)(1)--(5). The information set forth in subsection (c)(5) is not required for dividends other than dividends reported under section 1405(b) of the act (40 P. S. § 991.1405(b)) and dividends and other distributions filed under section 337.8 of the act (40 P. S. § 459.8).
(b) Under section 337.8 of the act a domestic insurance company, association or exchange may pay dividends and other distributions to shareholders only out of unassigned funds as defined in section 337.8(e) of the act or upon approval of the Commissioner. Information filed with the Commissioner under section 337.8 of the act shall include the information set forth in subsection (c)(1)--(5).
(c) Requests for approval of extraordinary dividends or another extraordinary distribution to shareholders under section 1405(b) of the act shall include the following:
(1) The amount of the proposed dividend or other distribution.
(2) The date established for payment of the dividend or other distribution.
(3) A statement as to whether the dividend or other distribution is to be in cash or other property and, if in property, a description thereof, its cost and its fair market value together with an explanation of the basis for valuation.
(4) A copy of the calculations determining that the proposed dividend or other distribution is or is not extraordinary. The work paper shall include the following information with respect to the domestic insurer:
(i) The amounts, dates and form of payment of all dividends and other distributions made within the previous 12 consecutive months ending on the date fixed for payment of the proposed dividend and commencing on the day after the same day of the same month in the last preceding year.
(ii) Surplus, total capital and surplus, as of the 31st day of December next preceding.
(iii) The net income for the 12-month period ending the 31st of December next preceding.
(5) A balance sheet and statement of income for the period intervening from the last annual statement filed with the Commissioner and the end of the month preceding the month in which the request for dividend or other distribution approval is submitted.
(6) A statement demonstrating the transaction's compliance with section 1405(d) of the act by describing the effect of the proposed dividend or other distribution upon the insurer's surplus and the reasonableness of surplus in relation to the insurer's outstanding liabilities and the adequacy of surplus relative to the insurer's financial needs.
(d) Reports of dividends and other distributions under this section shall include on the top of the first page the phrase: ''Notice of Dividend or Other Distribution'' and the name of the insurer.
(e) The insurer shall report changes in information furnished under subsection (c) within 15 days after the end of a month in which the dividend or other distribution is paid. If the dividend or other distribution is required to be reported on Form B, the insurer shall report the changes as an amendment to Form B. If the dividend or other distribution is not subject to a Form B filing, the report of changes shall state on the top of the first page the phrase: ''Change No. (insert number) to,'' and shall include the date of the change, date of declaration, amount paid, payment date, form of payment and the nature of and reason for the change.
(f) An insurer may not pay a dividend or other distribution under sections 337.8 or 1405(b) of the act (40 P. S. §§ 459.8 and 991.1405(b)) if a material change occurs in the information reported under this section unless the insurer has filed an amended report with the Department at least 30 days prior to paying the dividend or other distribution, or a shorter period the Department may permit, and the Department has not disapproved the amended report within that time period.
§ 25.23. Adequacy of surplus.
The factors in section 1405(d) of the act (40 P. S. § 991.1405(d)) to be considered in determining whether an insurer's surplus is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer's surplus, no single factor is necessarily controlling. The Commissioner will consider the net effect of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the Commissioner will consider the extent to which each of these factors varies from company to company. In determining the quality and liquidity of investments in subsidiaries, the Commissioner will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.
FORM A STATEMENT REGARDING THE ACQUISITION OF CONTROL OF OR MERGER WITH A DOMESTIC INSURER (Name of Domestic Insurer)
BY: (Name of Acquiring Person (Applicant))
Filed with the Insurance Department of the Commonwealth of Pennsylvania
Dated:
Name, title, address and telephone number of individual to whom notices and correspondence concerning this form should be addressed:
Item 1. Insurer and Method of Acquisition
State the name, NAIC code number and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired.
Item 2. Identity and Background of the Applicant
A. State the name and address of the applicant seeking to acquire control over the insurer.
B. If the applicant is not an individual, state the nature of its business operations for the past five (5) years or for such lesser period as the person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicant's subsidiaries.
C. Furnish a chart or listing clearly presenting the identities and the interrelationships among the applicant and all affiliates of the applicant. No affiliate need be identified if its total assets are equal to less than 1/2 of 1% of the total assets of an ultimate controlling person affiliated with the applicant. Indicate in the chart or listing the percentage of voting securities of each person which is owned or controlled by the applicant or by any other person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of control. As to each person specified in the chart or listing indicate the type of organization (e.g. corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings and the date when commenced.
Item 3. Identity and Background of Individuals Associated with the Applicant
Furnish a biographical affidavit for (1) the applicant if the applicant is an individual or (2) all persons who are directors, executive officers or owners of 10% or more of the voting securities of the applicant if the applicant is not an individual. Biographical affidavits filed with the Department within the immediately preceding 3 years need not be included if there has been no change in the information already on file.
Biographical affidavits shall be signed in the original and shall include the following:
A. Name and business address.
B. Present principal business activity, occupation or employment including position and office held and the name, principal business and address of any corporation or other organization in which employment is carried on.
C. Material occupations, positions, offices or employment during the last five (5) years, giving the starting and ending date of each and the name, principal business and address of any business corporation or other organization in which each occupation, position, office or employment was carried on. If any occupation, position, office or employment required licensing by or registration with any Federal, state or municipal governmental agency, indicate that fact, the current status of the licensing or registration, and an explanation of any surrender, revocation, suspension or disciplinary proceedings in connection therewith.
D. Whether or not the person has ever been convicted in a criminal proceeding (excluding minor traffic violations) during the last ten (10) years and, if so, give the date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case.
The Department will accept copies of original, signed biographical affidavits filed with the chief insurance regulatory official of another jurisdiction if the following conditions are met:
(1) The identity of the chief insurance regulatory official holding the original affidavit and the date of the original filing are provided in this statement.
(2) The original affidavit was filed within the immediately preceding three years.
(3) There has been no change in the information required in the affidavit.
Item 4. Nature, Source and Amount of Consideration
A. Describe the nature, source and amount of funds or other considerations used or to be used in effecting the merger or other acquisition of control. If any part of the same is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any, between the borrower, and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes and security arrangements relating thereto.
B. Explain the criteria used in determining the nature and amount of the consideration.
C. If the source of the consideration is a loan made in the lender's ordinary course of business and if the applicant wishes the identity of the lender to remain confidential, the applicant must specifically request that the identity be kept confidential.
Item 5. Future Plans of Insurer
Describe any plans or proposals which the applicant may have to declare an extraordinary dividend, to liquidate the insurer, to sell its assets to or merge it with any person or persons or to make any other material change in its business operations or corporate structure or management.
Item 6. Voting Securities to be Acquired
State the number of shares of the insurer's voting securities which the applicant, its affiliates and any person listed in Item 3 plan to acquire, and the terms of the offer, request, invitation, agreement or acquisition, and a statement as to the method by which the fairness of the proposal was arrived at.
Item 7. Ownership of Voting Securities
State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates or any person listed in Item 3.
Item 8. Contracts, Arrangements, or Understandings with Respect to Voting Securities of the Insurer
Give a full description of any contracts, arrangements or understandings with respect to any voting security of the insurer in which the applicant, its affiliates or any person listed in Item 3 is involved, including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description shall identify the person with whom such contracts, arrangements or understandings have been entered into.
Item 9. Recent Purchases of Voting Securities
Describe any purchases of any voting securities of the insurer by the applicant, its affiliates or any person listed in Item 3 during the twelve (12) calendar months preceding the filing of this statement.
Include in the description the dates of purchase, the name of the purchasers, and the consideration paid or agreed to be paid therefor.
State whether any shares so purchased are hypothecated.
Item 10. Recent Recommendations to Purchase
Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates or any person listed in Item 3 during the twelve (12) calendar months preceding the filing of this statement.
Item 11. Agreements with Broker-Dealers
Describe the terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto.
Item 12. Financial Statements and Exhibits
A. Financial statements and exhibits shall be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.
B. The financial statements shall include the annual financial statements of the persons identified in Item 2(c) for the preceding five (5) fiscal years (or for such lesser period as the applicant and its affiliates and any predecessors thereof shall have been in existence), and similar information covering the period from the end of the person's last fiscal year, if that information is available. Statements may be prepared on either an individual basis, or, unless the Commissioner otherwise requires, on a consolidated basis if consolidated statements are prepared in the usual course of business.
The annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that the statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements need not be certified, provided they are based on the Annual Statement of that person filed with the insurance department of the person's domiciliary state and are in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of that state.
C. If the acquiring person is an individual, the Department may require the filing of Federal income tax returns in lieu of audited financial statements. Any returns filed shall be given confidential treatment and shall not be subject to subpoena and shall not be made public by the Department or any other person.
D. File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material relating thereto, any proposed employment, consultation, advisory or management contracts concerning the insurer, annual reports to the stockholders of the insurer and the applicant for the last two fiscal years, and any additional documents or papers required by this chapter.
Item 13. Signature and Certification
Signature and certification required as follows:
SIGNATURE
Pursuant to the requirements of Section 1402 of the act ______ has caused this application to be duly signed on its behalf in the City of ______ and State of _____ on the ____ day of ______ , ____ .
(SEAL)
Name of Applicant
BY (Name) (Title)
Attest:
(Signature of Officer)
(Title)
CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached application dated _____ , ____ , for and on behalf of ______ (Name of Applicant); that (s)he is the ____ (Title of Officer) ____ of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.
(Signature)
(Type or print name beneath)
FORM B INSURANCE HOLDING COMPANY SYSTEM ANNUAL REGISTRATION STATEMENT Filed with the Insurance Department of the Commonwealth of Pennsylvania by (Name of Registrant) on behalf of the following insurance companies:
Name Address
NAIC Code Number State of Domicile
Date: ____ , ____
Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:
Item 1. Identity and Control of Registrant
Furnish the exact name of each insurer registering or being registered (hereinafter called ''the Registrant''), the home office address and principal executive offices of each; the date on which each Registrant became part of the insurance holding company system; and the method(s) by which control of each Registrant was acquired and is maintained.
Item 2. Organizational Chart
Furnish a chart or listing clearly presenting the identities of and interrelationships among all affiliated persons within the insurance holding company system. No affiliate need be shown if its total assets are equal to less than 1/2 of 1% of the total assets of an ultimate controlling person within the insurance holding company system unless it has assets valued at or exceeding $5,000,000. The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate.
If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in the chart or listing indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile.
Item 3. Ultimate Controlling Person
As to an ultimate controlling person in the insurance holding company system furnish the following information:
A. Name.
B. Home office address.
C. Principal executive office address.
D. The organizational structure of the person, i.e., corporation, partnership, individual, trust, etc.
E. The principal business of the person.
F. The name and address of any person who holds or owns 10% or more of any class of voting security, the class of the security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned.
G. If court proceedings involving a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings and the date when commenced.
Item 4. Biographical Information
Furnish the following information for the directors and executive officers of an ultimate controlling person in the form of biographical affidavits signed in the original: the individual's name and address, his or her principal occupation and all offices and positions held during the past five (5) years, and any conviction of crimes other than minor traffic violations during the past ten years. Biographical affidavits filed with the Department within the immediately preceding 3 years need not be included if there has been no change in the information already on file. The Department will accept copies of original, signed biographical affidavits filed with the chief insurance regulatory official of another jurisdiction if the following conditions are met:
(1) The identity of the chief insurance regulatory official holding the original affidavit and the date of the original filing are provided in this statement.
(2) The original affidavit was filed within the immediately preceding 3 years.
(3) There has been no change in the information required in the affidavit.
Item 5. Transactions and Agreements
Briefly describe the following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year, including extraordinary dividends and other material transactions reported under §§ 25.21 and 25.22 of this chapter, between the Registrant and its affiliates:
A. Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the Registrant or of the Registrant by its affiliates;
B. Purchases, sales or exchanges of assets;
C. Transactions not in the ordinary course of business, including contributions of assets to Registrant;
D. Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the Registrant's assets to liability, other than insurance contracts entered into in the ordinary course of the Registrant's business;
E. All management agreements, service contracts and all cost-sharing arrangements;
F. Reinsurance agreements;
G. Dividends and other distributions to shareholders;
H. Consolidated tax allocation agreements; and
I. Any pledge of the Registrant's stock and/or of the stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system.
Sales, purchases, exchanges, loans or extensions of credit, investments or guarantees involving one-half of 1% or less of the Registrant's admitted assets as of the 31st day of December next preceding shall not be deemed material and need not be disclosed.
The description shall be in a manner as to permit the proper evaluation thereof by the Commissioner, and shall include at least the following: the effective date, nature and purpose of the transaction, the nature and amounts of any payments or transfers of assets between the parties, the identity of all parties to the transaction, and relationship of the affiliated parties to the Registrant.
Item 6. Litigation or Administrative Proceedings
A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which an ultimate controlling person or any of its directors or executive officers was a party or of which the property of an ultimate controlling person or any of its directors or executive officers is or was the subject; give the names of the parties and the court or agency in which the litigation or proceeding is or was pending:
A. Criminal prosecutions or administrative proceedings by any government agency or authority which may be relevant to the trustworthiness of any party thereto; and
B. Proceedings which may have a material effect upon the solvency or capital structure of an ultimate controlling person including, but not necessarily limited to, bankruptcy, receivership or other corporate reorganizations.
Item 7. Statement Regarding Plan or Series of Transactions
The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions, the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur.
Item 8. Financial Statements and Exhibits
A. Financial statements and exhibits should be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached.
B. The financial statements shall include the annual financial statements of any ultimate controlling person in the insurance holding company system as of the end of the person's latest fiscal year. Financial statements are required for an ultimate controlling person who is an individual as well as for a corporation or other type of business organization.
If a holding company system includes more than one ultimate controlling person, annual financial statements are required for each ultimate controlling person unless the Commissioner, in the Commissioner's discretion, finds that annual financial statements for one or more of the ultimate controlling persons are not necessary to carry out the act.
If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent that information is available. Financial statements may be prepared on either an individual basis, or unless the Commissioner otherwise requires, on a consolidated basis if the consolidated statements are prepared in the usual course of business.
Unless the Commissioner otherwise permits, the annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that the statements present fairly the financial position of an ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If an ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the Annual Statement of the insurer filed with the chief insurance regulatory official of the insurer's domiciliary jurisdiction and are in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of that jurisdiction. Any ultimate controlling person who is an individual may file personal financial statements that are reviewed rather than audited by an independent public accountant. The review shall be conducted in accordance with standards for review of personal financial statements published in the Personal Financial Statements Guide by the American Institute of Certified Public Accountants. Personal financial statements shall be accompanied by the independent public accountant's Standard Review Report stating that the accountant is not aware of any material modifications that should be made to the financial statements in order for the statements to be in conformity with generally accepted accounting principles.
C. Exhibits shall include copies of the latest annual reports to shareholders of an ultimate controlling person and proxy material used by an ultimate controlling person; and any additional documents or papers required by this chapter.
Item 9. Form C Required
A Form C, Summary of Registration Statement, must be prepared and filed with this Form B.
Item 10. Signature and Certification
Signature and certification required as follows:
SIGNATURE
Pursuant to the requirements of Section 1404 of the act, the Registrant has caused this annual registration statement to be duly signed on its behalf in the City of ______ and State of ______ on the ____ day of ______ , ____ .
(SEAL)
Name of Registrant
BY (Name) (Title)
Attest:
(Signature of Officer)
(Title)
CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached annual registration statement dated ____ , ____ , for and on behalf of ______ (Name of Company) ____ ; that (s)he is the ____ (Title of Officer) ______ of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.
(Signature)
(Type or print name beneath)
FORM C SUMMARY OF REGISTRATION STATEMENT Filed with the Insurance Department of the Commonwealth of Pennsylvania by (Name of Registrant) on behalf of the following insurance companies:
Name Address
NAIC Code Number State of Domicile
Date: ____ ,____
Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:
Furnish a brief description, including a reference to any amendments filed in the intervening year, of all items in the current annual registration statement which represent changes from the prior year's annual registration statement. The description shall include the date and dollar amount of each change, identify any previous filings as a result of the change by amendment number or by type and date of filing, be in a manner as to permit the proper evaluation thereof by the Commissioner, and shall include specific references to Item numbers in the annual registration statement and to the terms contained therein.
Changes occurring under Item 2 of Form B, insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where the changes are ones which result in ownership or holdings of ten (10) percent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.
Changes occurring under Item 4 of Form B need only be included where: an individual is, for the first time, made a director or executive officer of an ultimate controlling person; a director or executive officer terminates his or her responsibilities with an ultimate controlling person; or in the event an individual is named president of an ultimate controlling person.
If a transaction disclosed on the prior year's annual registration statement has been changed, the nature of the change shall be included.
If a transaction disclosed on the prior year's annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.
The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions whose purpose it is to avoid statutory threshold amounts and the review that might otherwise occur.
SIGNATURE AND CERTIFICATION Signature and certification required as follows:
SIGNATURE
Pursuant to the requirements of Section 1404 of the act, the Registrant has caused this summary of registration statement to be duly signed on its behalf in the City of ______ and State of ______ on the ____ day of ____ , ____ .
(SEAL)
Name of Registrant
By (Name) (Title)
Attest:
(Signature of Officer)
(Title)
CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached summary of registration statement dated _____ , ____ , for and on behalf of _____ (Name of Company) ______ ; that (s)he is the ______ (Title of Officer) ______ of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.
(Signature)
(Type or print name beneath)
FORM D PRIOR NOTICE OF A TRANSACTION Filed with the Insurance Department of the Commonwealth of Pennsylvania by (Name of Registrant) on behalf of the following insurance companies:
Name Address
NAIC Code Number State of Domicile
Date: ____ ,____
Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed:
Item 1. Identity of Parties to Transaction
Furnish the following information for each of the parties to the transaction:
A. Name.
B. Home office address.
C. Principal executive office address.
D. The organizational structure, i.e. corporation, partnership, individual, trust, etc.
E. A description of the nature of the parties' business operations.
F. Relationship, if any, of other parties to the transaction to the insurer filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer seeking approval, or by the insurer filing the notice in the affiliated parties.
G. If the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction.
Item 2. Description of the Transaction
Furnish the following information for each transaction for which notice is being given:
A. A statement as to whether notice is being given under Section 1405(a)(2)(i), (ii), (iii), or (iv) of the act.
B. A description of the nature and purpose of the transaction, including the anticipated immediate and long-term effect of the transaction on the financial condition of the insurer.
C. The proposed effective date of the transaction.
Item 3. Sales, Purchases, Exchanges, Loans, Extensions of Credit, Guarantees, Investments, Pledges of Assets or Contributions to Surplus
Furnish a brief description of the amount and source of funds, securities, property or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, investment, or pledge of assets, including assets to be received by the domestic insurer as a contribution to its surplus; whether any provision exists for purchase by the insurer filing notice, by any party to the transaction, or by any affiliate of the insurer filing notice; a description of the terms of any securities being received, if any; and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost and its fair market value, together with an explanation and supporting documentation of the basis for valuation.
If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under the loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest.
If the transaction involves an investment, guarantee or other arrangement, state the time period during which the investment, guarantee or other arrangement will remain in effect, together with any provisions for extensions or renewals of the investments, guarantees or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus and the insurer's accounting treatment.
No notice need be given if the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the loan, extension of credit or guarantee is less than 5% of the insurer's admitted assets or 25% of its surplus as of the 31st day of December next preceding.
Item 4. Loans or Extensions of Credit to a Non-Affiliate
If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of or make investments in any affiliate. Describe the amount and source of funds, securities, property or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of and supporting documentation for the basis of valuation. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.
No notice need be given if the loan or extension of credit is one which equals less than 5% of the insurer's admitted assets or 25% of its surplus as of the 31st day of December next preceding.
Item 5. Reinsurance
If the transaction is a reinsurance agreement or modification thereto, as described by Section 1405(a)(2)(iii) of the act, furnish a description of the known and/or estimated amount of liability to be ceded and/or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and non-affiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer's affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer's surplus.
No notice need be given for reinsurance agreements or modifications thereto if the reinsurance premium is less than 5% of the insurer's surplus as of the 31st day of December next preceding; or the change in the insurer's liabilities or any transfer of assets required to fund the transaction equals or exceeds 25% of the insurer's surplus as of the 31st day of December next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer.
Item 6. Signature and Certification
Signature and certification required as follows:
SIGNATURE
Pursuant to the requirements of Section 1405 of the act, ______ has caused this notice to be duly signed on its behalf in the City of ______ and State of ______on the ____ day of ____ , ____ .
(SEAL)
Name of Applicant
By (Name) (Title)
Attest:
(Signature of Officer)
(Title)
CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached notice dated ____ , ____ , for and on behalf of _____ (Name of Applicant) _____ ; that (s)he is the ____ (Title of Officer) ____ of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.
(Signature)
(Type or print name beneath)
FORM E PRE-ACQUISITION NOTIFICATION STATEMENT OF THE POTENTIAL COMPETITIVE IMPACT OF A PROPOSED MERGER OR ACQUISITION (Name of Insurer)
BY: (Name of Acquiring Persons)
Filed with the Insurance Department of the Commonwealth of Pennsylvania
Date:
Name, title, address and telephone number of person completing this statement:
Item 1. Name and Address
State the names and addresses of acquiring persons.
Item 2. Name and Addresses of Affiliated Persons
State the names and addresses of the persons affiliated with those listed in Item 1. Describe their affiliations.
Item 3. Nature and Purpose of Proposed Merger or Acquisition
State the nature and purpose of the proposed merger or acquisition.
Item 4. Nature of Business
State the nature of the business performed by each of the persons identified in response to Item 1 and Item 2.
Item 5. Market and Market Share
State specifically what market and market share the persons identified in Item 1 and Item 2 currently enjoy in this Commonwealth in each insurance market which, under section 1403(b)(2)(v) of the act (40 P. S. § 1403(b)(2)(v)), causes the proposed merger or acquisition not to be exempted from Article XIV of the act. Provide historical market and market share data for each person identified in Item 1 and Item 2 for the past 5 years, or for the number of years the person and any predecessors thereof have been transacting business if less than 5 years, and identify the source of the data.
For purposes of this item, market means direct written insurance premium in this Commonwealth for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this Commonwealth.
Item 6. Signature and Certification
Signature and certification required as follows:
SIGNATURE
Pursuant to the requirements of Section 1402 of the act ______ has caused this application to be duly signed on its behalf in the City of ______ and State of ____ on the ____ day of ____ , ____ .
(SEAL)
Name of Applicant
BY (Name) (Title)
Attest:
(Signature of Officer)
(Title)
CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached application dated ____ , ____ , for and on behalf of ____ (Name of Applicant) ____ ; that (s)he is the ____ (Title of Officer) ____ of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief.
(Signature)
(Type or print name beneath)
[Pa.B. Doc. No. 01-1455. Filed for public inspection August 10, 2001, 9:00 a.m.]
