1.1                          A bill for an act 
  1.2             relating to insurance; authorizing the reorganization 
  1.3             of a mutual insurance holding company into a stock 
  1.4             company; modifying accounting provisions for certain 
  1.5             ceding transactions; amending Minnesota Statutes 2000, 
  1.6             sections 60A.075; 60A.09, subdivision 5.  
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2000, section 60A.075, is 
  1.9   amended to read: 
  1.10     60A.075 [MUTUAL COMPANY CONVERSION TO STOCK COMPANY.] 
  1.11     Subdivision 1.  [DEFINITIONS.] (a) For the purposes of this 
  1.12  section, the terms in this subdivision have the meanings given 
  1.13  them. 
  1.14     (a) (b) "Converting mutual insurer" means a Minnesota 
  1.15  domestic mutual insurance company seeking to reorganize 
  1.16  according to this section. 
  1.17     (c) "Converting mutual holding company" means a Minnesota 
  1.18  domestic mutual insurance holding company seeking to reorganize 
  1.19  according to this section. 
  1.20     (d) "Converting mutual company" means a converting mutual 
  1.21  insurer or a converting mutual holding company seeking to 
  1.22  convert according to this section. 
  1.23     (e) "Reorganized company" means a converting mutual insurer 
  1.24  or a converting mutual holding company, as the case may be, that 
  1.25  has reorganized according to this section. 
  1.26     (f) "Eligible member" means: 
  2.1      (1) for converting mutual insurers, a policyholder whose 
  2.2   policy is in force as of the record date, which is the date that 
  2.3   the mutual company's board of directors adopts a plan of 
  2.4   conversion or some other date specified as the record date in 
  2.5   the plan of conversion and approved by the commissioner.  Unless 
  2.6   otherwise provided in the plan, a person insured under a group 
  2.7   policy is not an eligible member, unless on the record date: 
  2.8      (1) (i) the person is insured or covered under a group life 
  2.9   policy or group annuity contract under which funds are 
  2.10  accumulated and allocated to the respective covered persons; 
  2.11     (2) (ii) the person has the right to direct the application 
  2.12  of the funds so allocated; 
  2.13     (3) (iii) the group policyholder makes no contribution to 
  2.14  the premiums or deposits for the policy or contract; and 
  2.15     (4) (iv) the converting mutual company has the names and 
  2.16  addresses of the persons covered under the group life policy or 
  2.17  group annuity contract.; 
  2.18     (b) "Reorganized company" means a Minnesota domestic stock 
  2.19  insurance company that has converted from a Minnesota domestic 
  2.20  mutual insurance company according to this section. 
  2.21     (2) for converting mutual holding companies, a person who 
  2.22  is a member of the converting mutual holding company, as defined 
  2.23  by the converting mutual holding company's articles of 
  2.24  incorporation and bylaws, determined as of the record date. 
  2.25     (c) (g) "Plan of conversion" or "plan" means a plan adopted 
  2.26  by a Minnesota domestic converting mutual insurance company's 
  2.27  board of directors under this section to convert the mutual 
  2.28  company into a Minnesota domestic stock insurance company. 
  2.29     (d) (h) "Policy" means a policy or contract of 
  2.30  insurance issued by a converting mutual company, including an 
  2.31  annuity contract, issued by a converting mutual insurer or 
  2.32  issued by a stock insurance company subsidiary of a mutual 
  2.33  holding company. 
  2.34     (i) "Active participating policy" means an individual 
  2.35  policy of a converting mutual company or its subsidiary that:  
  2.36  (1) is a participating policy; (2) is among a class of similar 
  3.1   policies that have been credited with policy dividends at any 
  3.2   time within the twelve months preceding the effective date of 
  3.3   the conversion or that will, under the then current dividend 
  3.4   scale, be credited with policy dividends if in force on a future 
  3.5   policy anniversary; (3) gives rise to membership interests in 
  3.6   the converting mutual company; and (4) is in force on the 
  3.7   effective date or some other reasonable date identified in the 
  3.8   plan. 
  3.9      (e) (j) "Commissioner" means the commissioner of commerce. 
  3.10     (f) "Converting mutual company" means a Minnesota domestic 
  3.11  mutual insurance company seeking to convert to a Minnesota 
  3.12  domestic stock insurance company according to this section. 
  3.13     (g) (k) "Effective date of a conversion" means the date 
  3.14  determined according to subdivision 6. 
  3.15     (l) "Record date" means the date that the converting mutual 
  3.16  company's board of directors adopts a plan of conversion, unless 
  3.17  another date is specified in the plan of conversion and approved 
  3.18  by the commissioner. 
  3.19     (h) (m) "Membership interests" means all policyholders' 
  3.20  rights as members of the converting mutual company, including, 
  3.21  but not limited to, the rights to vote and to participate in any 
  3.22  distributions of surplus distributable net worth, whether or not 
  3.23  incident to the company's liquidation. 
  3.24     (i) "Equitable surplus" means the converting mutual 
  3.25  company's surplus as regards policyholders as of the record date 
  3.26  of the conversion or other date approved by the commissioner 
  3.27  determined in a manner that is not unfair or inequitable to 
  3.28  policyholders. 
  3.29     (n) "Distributable net worth" means the value of the 
  3.30  converting mutual company as of the record date of the 
  3.31  conversion, or other date approved by the commissioner, 
  3.32  determined as set forth in the plan and approved by the 
  3.33  commissioner.  The commissioner may approve a valuation method 
  3.34  based on any of the following:  (1) the surplus as regards 
  3.35  policyholders of a converting mutual insurer determined 
  3.36  according to statutory accounting principles, which may be 
  4.1   adjusted to reflect the current market values of assets and 
  4.2   liabilities, together with any other adjustments that are 
  4.3   appropriate in the circumstances; (2) the net equity of a 
  4.4   converting mutual holding company or a converting mutual insurer 
  4.5   determined according to generally accepted accounting 
  4.6   principles, which may be adjusted to reflect the current market 
  4.7   values of assets and liabilities, together with any other 
  4.8   adjustments that are appropriate in the circumstances; (3) the 
  4.9   fair market value of the converting mutual company determined by 
  4.10  an independent, qualified person; or (4) any other reasonable 
  4.11  valuation method. 
  4.12     (j) (o) "Permitted issuer" means:  (1) a corporation 
  4.13  organized and owned by the converting mutual company or by any 
  4.14  other insurance company or insurance holding company for the 
  4.15  purpose of purchasing and holding securities representing a 
  4.16  majority of voting control of the reorganized company; (2) a 
  4.17  stock insurance company owned by the converting mutual company 
  4.18  or by any other insurance company or insurance holding company 
  4.19  into which the converting mutual company will be merged; or (3) 
  4.20  any other corporation approved by the commissioner. 
  4.21     Subd. 2.  [AUTHORIZATION.] In accordance with a plan of 
  4.22  conversion established and approved in the manner provided by 
  4.23  this section:  (1) a mutual insurance company may become a stock 
  4.24  insurance company according to a plan of conversion established 
  4.25  and approved in the manner provided by this section.; and (2) a 
  4.26  mutual insurance holding company may:  (i) become a corporation 
  4.27  organized under chapter 302A; (ii) reorganize according to a 
  4.28  plan in which a majority or all of the common stock of the 
  4.29  reorganized company is acquired by another institution, which 
  4.30  may include a subsidiary of the converting mutual holding 
  4.31  company; (iii) reorganize as a part of a liquidation or 
  4.32  dissolution of the converting mutual holding company; or (iv) 
  4.33  undertake any other reorganization or combination of the 
  4.34  foregoing approved by the commissioner. 
  4.35     Subd. 3.  [ADOPTION OF A PLAN OF CONVERSION BY THE BOARD OF 
  4.36  DIRECTORS.] (a) A converting mutual company shall, by the 
  5.1   affirmative vote of a majority of its board of directors, adopt 
  5.2   a plan of conversion consistent with the requirements of this 
  5.3   section. 
  5.4      (b) At any time before approval of a plan by the 
  5.5   commissioner, The converting mutual company, by the affirmative 
  5.6   vote of a majority of its board of directors, may amend or 
  5.7   withdraw the plan at any time before approval of the plan by the 
  5.8   commissioner and may withdraw the plan at any time before the 
  5.9   effective date of the plan. 
  5.10     (c) The duties of the board of directors of a converting 
  5.11  mutual company, in considering or acting upon a proposed plan of 
  5.12  conversion or related transaction, shall be as set forth in 
  5.13  section 302A.251 and, to the extent not inconsistent with that 
  5.14  section, the converting mutual company's articles of 
  5.15  incorporation and bylaws. 
  5.16     Subd. 4.  [APPROVAL FILING OF THE PLAN OF CONVERSION 
  5.17  BY WITH THE COMMISSIONER.] (a)  [DOCUMENTS TO BE FILED.] After 
  5.18  adoption of the plan by the converting mutual company's board of 
  5.19  directors, but before the members' approval of the plan, The 
  5.20  converting mutual company shall file the following documents 
  5.21  with the commissioner for review and approval an application for 
  5.22  approval of, and permission to reorganize according to, the plan 
  5.23  of conversion.  The application must include the following: 
  5.24     (1) the plan of conversion, including an independent 
  5.25  evaluation of the pro forma market value and of the equitable 
  5.26  surplus of the company and of the estimated value of any shares 
  5.27  to be issued and an independent actuarial opinion, if required; 
  5.28     (2) the form of notice of meeting for eligible members to 
  5.29  vote on the plan; 
  5.30     (3) the form of any proxies to be solicited from eligible 
  5.31  members; 
  5.32     (4) the proposed articles of incorporation and bylaws of 
  5.33  the converted stock company; 
  5.34     (5) information required under chapter 60D if the plan 
  5.35  results in a change of control of the converting mutual company; 
  5.36  and 
  6.1      (6) a basis for determining the converting mutual company's 
  6.2   distributable net worth for use in the plan of conversion; 
  6.3      (7) if required by the commissioner, an independent 
  6.4   evaluation of the estimated distributable net worth and of the 
  6.5   estimated value of any shares to be issued; 
  6.6      (8) if required by the commissioner, an independent 
  6.7   actuarial opinion on matters affecting the structure or fairness 
  6.8   of the plan; and 
  6.9      (9) other information or documentation requested by the 
  6.10  commissioner or required by rule. 
  6.11     (b)  [REQUIRED FINDINGS DETERMINATION OF COMPLETENESS.] The 
  6.12  commissioner shall approve or conditionally approve the plan 
  6.13  upon finding that: 
  6.14     (1) the provisions of this section have been fully met; and 
  6.15     (2) the plan will not be unfair or inequitable to 
  6.16  policyholders. 
  6.17     (c)  [TIME.] The plan of conversion shall, by order, be 
  6.18  approved, conditionally approved, or disapproved by the 
  6.19  commissioner within the later of 30 days from the commissioner's 
  6.20  receipt of all required information from the converting mutual 
  6.21  company or 30 days after the conclusion of a public hearing held 
  6.22  according to paragraph (e).  An approval or conditional approval 
  6.23  of a plan expires if the reorganization is not completed within 
  6.24  180 days after the approval or conditional approval unless this 
  6.25  time period is extended by the commissioner for good cause shown 
  6.26  The commissioner shall determine, within 30 days of submission 
  6.27  of the application, whether the application is complete. 
  6.28     (d) (c)  [CONSULTANTS.] The commissioner may retain, at the 
  6.29  converting mutual company's expense, qualified experts not 
  6.30  otherwise a part of the commissioner's staff to assist in 
  6.31  reviewing the plan and supplemental materials and valuations. 
  6.32     (e) (d)  [HEARING.] The commissioner may, but need not, 
  6.33  conduct a public hearing regarding the proposed plan of 
  6.34  conversion.  The hearing must begin no later than 30 days after 
  6.35  submission to the commissioner of a plan of conversion and all 
  6.36  required information.  The commissioner shall give the 
  7.1   converting mutual company at least 20 days' notice of the 
  7.2   hearing.  At the hearing, the converting mutual company, its 
  7.3   policyholders, and any other person whose interest may be 
  7.4   affected by the proposed conversion may present evidence, 
  7.5   examine and cross-examine witnesses, and offer oral and written 
  7.6   arguments or comments according to the procedure for contested 
  7.7   cases under chapter 14.  The persons participating may conduct 
  7.8   discovery proceedings in the same manner as prescribed for the 
  7.9   district courts of this state.  All discovery proceedings must 
  7.10  be concluded no later than three days before the scheduled 
  7.11  commencement date of the public hearing. If a hearing is to be 
  7.12  held, the commissioner shall designate a date for the public 
  7.13  hearing promptly upon determining that the application is 
  7.14  complete and that the forms of notice are adequate.  The public 
  7.15  hearing must be held on one or more days, the first beginning 
  7.16  within 90 days after the date on which the commissioner 
  7.17  determines the application is complete, unless the converting 
  7.18  mutual company requests, and the commissioner agrees to, a 
  7.19  longer period for the purpose of preparing and distributing the 
  7.20  notices required by this paragraph and by subdivision 5, 
  7.21  paragraph (b).  The hearing must be in the nature of a 
  7.22  legislative hearing and must not constitute or be considered a 
  7.23  contested case under chapter 14.  The hearing may be conducted 
  7.24  by the commissioner or by a person designated by the 
  7.25  commissioner, which designee may be an administrative law 
  7.26  judge.  The converting mutual company shall provide its eligible 
  7.27  members with at least 45 days' notice of the hearing, the notice 
  7.28  to be in the form, and provided in a manner, approved by the 
  7.29  commissioner.  The purpose of the hearing is to receive comments 
  7.30  and information for the purpose of aiding the commissioner in 
  7.31  making a decision on the plan of conversion.  Persons wishing to 
  7.32  make comments and submit information may submit written 
  7.33  statements before the public hearing and may appear and be heard 
  7.34  at the hearing.  The commissioner's order or determination must 
  7.35  be issued within 45 days after the closing of the record of the 
  7.36  hearing by the commissioner or the hearing officer, as 
  8.1   applicable, which record must not be closed until the record 
  8.2   includes certification of the vote on the plan of reorganization 
  8.3   by the eligible members by the converting mutual company.  The 
  8.4   commissioner shall issue a written decision detailing the 
  8.5   reasons why the converting mutual company's plan of conversion 
  8.6   is approved or disapproved. 
  8.7      (e) The commissioner shall approve the application and 
  8.8   permit the reorganization according to the plan of conversion if 
  8.9   the commissioner finds that:  (1) the provisions of this section 
  8.10  have been fully met; and (2) the plan is not unfair or 
  8.11  inequitable to the members of the converting mutual company.  
  8.12  The commissioner's order approving or disapproving a plan of 
  8.13  conversion is a final agency decision subject to appeal 
  8.14  according to sections 14.63 to 14.68. 
  8.15     Subd. 5.  [APPROVAL OF THE PLAN BY THE ELIGIBLE MEMBERS.] 
  8.16  (a)  [NOTICE.] Following approval or conditional approval of the 
  8.17  plan by the commissioner, Within 90 days following the date of 
  8.18  the public hearing, if any, or the date the commissioner 
  8.19  determines the application is complete if no hearing is held, 
  8.20  the converting mutual company shall give all eligible members 
  8.21  shall be given notice of a regular or special meeting of the 
  8.22  policyholders members called for the purpose of considering the 
  8.23  plan and any corporate actions that are a part of, or are 
  8.24  reasonably attendant to, the accomplishment of the plan. 
  8.25     (b)  [NOTICE REQUIRED REQUIREMENTS.] A copy of the plan or 
  8.26  a summary of the plan must accompany the notice.  The notice 
  8.27  must be mailed to each eligible member's last known address, as 
  8.28  shown on the converting mutual company's records, within not 
  8.29  less than 45 days of before the commissioner's approval of the 
  8.30  plan date of the meeting, unless the commissioner directs an 
  8.31  earlier a later date for mailing.  The meeting to vote upon the 
  8.32  plan must be set for a date no less than 45 days after the date 
  8.33  when the notice of the meeting is mailed by the converting 
  8.34  mutual company unless the commissioner directs an earlier date 
  8.35  for the meeting.  If the meeting to vote upon the plan is held 
  8.36  coincident with the converting mutual company's annual meeting 
  9.1   of policyholders members, only one combined notice of meeting is 
  9.2   required.  The notice of the meeting of eligible members may be 
  9.3   combined with the notice of hearing described in subdivision 4, 
  9.4   paragraph (d). 
  9.5      (c)  [FAILURE TO GIVE NOTICE.] If the converting mutual 
  9.6   company complies substantially and in good faith with the notice 
  9.7   requirements of this section, the converting mutual company's 
  9.8   failure to give any member or members any required notice does 
  9.9   not impair the validity of any action taken under this section. 
  9.10     (d)  [VOTING.] (1) The plan must be adopted upon receiving 
  9.11  the affirmative vote of a majority of the votes cast by eligible 
  9.12  members. 
  9.13     (2) Eligible members may vote in person or by proxy.  The 
  9.14  form of any proxy must be filed with and approved by the 
  9.15  commissioner. 
  9.16     (3) The number of votes each eligible member may cast shall 
  9.17  be determined by the converting mutual company's bylaws.  If the 
  9.18  bylaws are silent, or if the commissioner determines that the 
  9.19  voting requirements under the bylaws would be unfair or would 
  9.20  prejudice the rights of the eligible members, each eligible 
  9.21  member may cast one vote. 
  9.22     Subd. 6.  [CONVERSION.] (a)  [FILING.] Following approval 
  9.23  by the eligible members, the converting mutual company shall 
  9.24  file a copy of the company's amended or restated articles of 
  9.25  incorporation with the commissioner, together with a certified 
  9.26  copy of the minutes of the meeting at which the plan was adopted 
  9.27  and a certified copy of the plan.  The commissioner shall review 
  9.28  and, if appropriate, approve the amended or restated articles.  
  9.29  After approval by the commissioner, the a converting mutual 
  9.30  company insurer shall file the articles with the secretary of 
  9.31  state as provided by chapter 300, or a converting mutual holding 
  9.32  company shall file the articles with the secretary of state as 
  9.33  provided by chapter 302A. 
  9.34     (b)  [EFFECTIVE DATE.] Effective The reorganization of a 
  9.35  converting mutual company is effective on the date of filing an 
  9.36  amendment or restatement of the articles of incorporation with 
 10.1   the secretary of state as provided by chapter 300, or on a later 
 10.2   date if the plan so specifies, the converting mutual corporation 
 10.3   shall become a stock corporation and shall no longer be a mutual 
 10.4   corporation. 
 10.5      Subd. 7.  [PLAN NOT UNFAIR OR INEQUITABLE.] A plan of 
 10.6   conversion shall not be unfair or inequitable to 
 10.7   policyholders members.  A plan of conversion is not unfair or 
 10.8   inequitable if it satisfies the conditions of subdivision 8, or 
 10.9   9, or 10.  The commissioner may determine that a plan proposed 
 10.10  under subdivision 10 or that any other plan proposed by a 
 10.11  converting mutual company under subdivision 12 is not unfair or 
 10.12  inequitable to policyholders members. 
 10.13     Subd. 8.  [SHARE CONVERSION.] A plan of conversion under 
 10.14  this subdivision shall provide for exchange of policyholders' 
 10.15  membership interests in return for shares in the reorganized 
 10.16  company or a permitted issuer, according to paragraphs (a) to 
 10.17  (c), and shall provide for the reasonable dividend expectations 
 10.18  of policyholders of active participating policies as set forth 
 10.19  in subdivision 16a. 
 10.20     (a) The policyholders' membership interests of the eligible 
 10.21  members shall be exchanged, in a manner that takes into account 
 10.22  the estimated proportionate contribution of equitable surplus of 
 10.23  each class of participating policies and contracts, for all of 
 10.24  the common shares of the reorganized company or common shares of 
 10.25  its parent company or a permitted issuer, or for a combination 
 10.26  of the common shares of the reorganized company or a permitted 
 10.27  issuer, or for a combination of:  (1) common shares of its 
 10.28  parent the reorganized company or a permitted issuer; and (2) 
 10.29  consideration equal to the proceeds of the public sale in the 
 10.30  market of the common shares by the issuer or by a trust 
 10.31  established according to subdivision 11.  The consideration must 
 10.32  be allocated among the eligible members in a manner that takes 
 10.33  into account the estimated proportionate contribution of each 
 10.34  class of eligible members to the aggregate consideration being 
 10.35  given. 
 10.36     (b) Unless the anticipated issuance within a shorter period 
 11.1   is disclosed in the plan of conversion, the issuer of common 
 11.2   shares shall not, within two years after the effective date of 
 11.3   reorganization, issue either of the following: 
 11.4      (1) any of its common shares or any securities convertible 
 11.5   with or without consideration into the common shares or carrying 
 11.6   any warrant to subscribe to or purchase common shares; and 
 11.7      (2) any warrant, right, or option to subscribe to or 
 11.8   purchase the common shares or other securities described in 
 11.9   paragraph (a), except for the issue of common shares to or for 
 11.10  the benefit of policyholders eligible members according to the 
 11.11  plan of conversion and the issue of nontransferable subscription 
 11.12  rights for the purchase of common shares being granted to 
 11.13  officers, directors, or a tax qualified employee benefit plan of 
 11.14  the reorganized company or its parent company, if any, or a 
 11.15  permitted issuer, according to subdivision 11. 
 11.16     (c) Unless the common shares have a public market when 
 11.17  issued, the issuer shall use its best efforts to encourage and 
 11.18  assist in the establishment of a public market for the common 
 11.19  shares within two years of the effective date of the conversion 
 11.20  or a longer period as disclosed in the plan of conversion.  
 11.21  Within one year after any offering of stock other than the 
 11.22  initial distribution, but no later than six years after the 
 11.23  effective date of the conversion, the reorganized company shall 
 11.24  offer to make available to policyholders eligible members who 
 11.25  received and retained shares of common stock or securities 
 11.26  described in paragraph (b), clause (1), a procedure to dispose 
 11.27  of those shares of stock at market value without brokerage 
 11.28  commissions or similar fees. 
 11.29     Subd. 9.  [SURPLUS DISTRIBUTION OF DISTRIBUTABLE NET 
 11.30  WORTH.] A plan of conversion under this subdivision shall 
 11.31  provide for the exchange of the policyholders' membership 
 11.32  interests of the eligible members in return for the operation a 
 11.33  distribution of the converting mutual company's participating 
 11.34  policies as a closed block of business and for the distribution 
 11.35  of the company's equitable surplus to 
 11.36  policyholders, distributable net worth and shall provide for the 
 12.1   issuance of new shares of the reorganized company or its parent 
 12.2   corporation, each according to paragraphs (a) to (i) or a 
 12.3   permitted issuer, and shall provide for the reasonable 
 12.4   expectations of policyholders of active participating policies 
 12.5   as set forth in subdivision 16a. 
 12.6      (a) The converting mutual company's participating business, 
 12.7   comprised of its participating policies and contracts in force 
 12.8   on the effective date of the conversion or other reasonable date 
 12.9   as provided in the plan, shall be operated by the reorganized 
 12.10  company as a closed block of participating business.  However, 
 12.11  at the option of the converting mutual company, group policies 
 12.12  and group contracts may be omitted from the closed block. 
 12.13     (b) Assets of the converting mutual company must be 
 12.14  allocated to the closed block of participating business in an 
 12.15  amount equal to the reserves and liabilities for the converting 
 12.16  mutual life insurer's participating policies and contracts in 
 12.17  force on the effective date of the conversion.  The plan must be 
 12.18  accompanied by an opinion of an independent qualified actuary 
 12.19  who meets the standards set forth in the insurance laws or 
 12.20  regulations for the submission of actuarial opinions as to the 
 12.21  adequacy of reserves or assets.  The opinion must relate to the 
 12.22  adequacy of the assets allocated to support the closed block of 
 12.23  business.  The actuarial opinion must be based on methods of 
 12.24  analysis considered appropriate for those purposes by the 
 12.25  Actuarial Standards Board. 
 12.26     (c) The reorganized company shall keep a separate 
 12.27  accounting for the closed block and shall make and include in 
 12.28  the annual statement to be filed with the commissioner each year 
 12.29  a separate statement showing the gains, losses, and expenses 
 12.30  properly attributable to the closed block. 
 12.31     (d) Notwithstanding the establishment of a closed block, 
 12.32  the entire assets of the reorganized company shall be available 
 12.33  for the payment of benefits to policyholders.  Payment must 
 12.34  first be made from the assets supporting the closed block until 
 12.35  exhausted, and then from the general assets of the reorganized 
 12.36  company. 
 13.1      (e) (a) Distributions by the converting mutual company's 
 13.2   equitable surplus company under this subdivision shall be 
 13.3   distributed to eligible participating policyholders members in a 
 13.4   form or forms selected by the converting mutual company.  The 
 13.5   form of distribution may consist of cash, securities of the 
 13.6   reorganized company, securities of another institution, a 
 13.7   certificate of contribution, additional life insurance, annuity 
 13.8   benefits, increased dividends, reduced premiums, or other 
 13.9   equitable consideration or any combination of forms of 
 13.10  consideration.  The consideration, if any, given to a class or 
 13.11  category of policyholders eligible members may differ from the 
 13.12  consideration given to another class or category 
 13.13  of policyholders eligible members.  A certificate of 
 13.14  contribution must be repayable in ten years, be equal to 100 
 13.15  percent of the value of the policyholders' eligible members' 
 13.16  membership interest, and bear interest at the highest rate 
 13.17  charged by the reorganized company or its insurance company 
 13.18  subsidiary for policy loans on the effective date of the 
 13.19  conversion. 
 13.20     (f) (b) The consideration must be allocated among the 
 13.21  policyholders eligible members in a manner that is fair and 
 13.22  equitable to the policyholders and that takes into account the 
 13.23  estimated proportionate contribution of each class of eligible 
 13.24  members to the aggregate consideration being given. 
 13.25     (g) (c) The reorganized company or its parent corporation 
 13.26  shall issue and sell shares of one or more classes having a 
 13.27  total price equal to the estimated value in the market of the 
 13.28  shares on the initial offering date.  The estimated value must 
 13.29  take into account all of the following: 
 13.30     (1) the pro forma fair market value of the reorganized 
 13.31  company; 
 13.32     (2) the consideration to be given to policyholders 
 13.33  according to paragraph (e) (a); 
 13.34     (3) the proceeds of the sale of the shares; and 
 13.35     (4) any additional value attributable to the shares as a 
 13.36  result of a purchaser or a group of purchasers who acted in 
 14.1   concert to obtain shares in the initial offering, attaining, 
 14.2   through such purchase, control of the reorganized company or its 
 14.3   parent corporation. 
 14.4      (h) (d) If a purchaser or a group of purchasers acting in 
 14.5   concert is to attain control in the initial offering, 
 14.6   the converting mutual company shall not, directly or indirectly, 
 14.7   pay for any of the costs or expenses of conversion of 
 14.8   the converting mutual company, whether or not the conversion is 
 14.9   effected, except with permission of the commissioner. 
 14.10     (i) Periodically, with the commissioner's approval, the 
 14.11  reorganized company may share in the profits of the closed block 
 14.12  of participating business for the benefit of stockholders if the 
 14.13  assets allocated to the closed block are in excess of those 
 14.14  necessary to support the closed block. 
 14.15     Subd. 10.  [SUBSCRIPTION RIGHTS.] A plan of conversion 
 14.16  under this subdivision shall provide for exchange of the 
 14.17  policyholders' eligible members' membership interests in return 
 14.18  for the operation of the converting mutual company's 
 14.19  participating policies as a closed block of business protection 
 14.20  of the reasonable dividend expectations of the policyholders of 
 14.21  active participating policies, for the creation of a liquidation 
 14.22  account to protect the interests of policyholders, and eligible 
 14.23  members, for the issuance of subscription rights to 
 14.24  eligible policyholders members, and shall provide for the 
 14.25  issuance of shares by the reorganized company, each according to 
 14.26  paragraphs (a) to (j). 
 14.27     (a) The converting mutual company's participating business, 
 14.28  comprised of its participating policies and contracts in force 
 14.29  on the effective date of the conversion, or such other 
 14.30  reasonable date specified in the plan, and excluding at the 
 14.31  converting mutual company's option any group policies or group 
 14.32  contracts, shall be operated by the reorganized company as a 
 14.33  closed block of participating business according to subdivision 
 14.34  9, paragraphs (a) to (d) plan of conversion shall provide for 
 14.35  the protection of the reasonable dividend expectations of 
 14.36  policyholders of active participating policies as provided in 
 15.1   subdivision 16a. 
 15.2      (b) The reorganized company or its parent corporation or a 
 15.3   permitted issuer shall issue and sell shares of one or more 
 15.4   classes having a total price equal to the estimated value of the 
 15.5   shares in the market on the initial offering date taking into 
 15.6   account the proceeds of the sale of shares and the consideration 
 15.7   given to policyholders eligible members. 
 15.8      (c) The policyholders eligible members shall receive 
 15.9   nontransferable preemptive subscription rights to purchase all 
 15.10  of the common shares of the issuer according to paragraph (b). 
 15.11     (d) The preemptive subscription rights to purchase the 
 15.12  common shares must be allocated among the participating 
 15.13  policyholders eligible members in whole shares in a fair and 
 15.14  equitable manner and as provided in the plan that takes, taking 
 15.15  into account the estimated proportionate contribution of each 
 15.16  class of participating policies and contracts eligible members 
 15.17  to the total amount of the policyholders' eligible members' 
 15.18  consideration.  The plan must provide a fair and equitable means 
 15.19  for the allocation of shares in the event of an 
 15.20  oversubscription.  The plan must further provide that any shares 
 15.21  of capital stock not subscribed by eligible members must may be 
 15.22  sold in a public offering through an underwriter, unless the 
 15.23  number of shares unsubscribed is so small in number so as not to 
 15.24  warrant the expense of a public offering, in which case the plan 
 15.25  may provide for the purchase of the unsubscribed shares by 
 15.26  private placement or through any fair and equitable alternative 
 15.27  means approved by the commissioner. 
 15.28     (e) The number of the common shares that a person, together 
 15.29  with any affiliates or group of persons acting in concert, may 
 15.30  subscribe or purchase in the reorganization, must be limited to 
 15.31  not more than five percent of the common shares.  For this 
 15.32  purpose, neither the members of the board of directors of the 
 15.33  reorganized company nor its parent corporation, if any, is are 
 15.34  considered to be affiliates or a group of persons acting in 
 15.35  concert solely by reason of their board membership. 
 15.36     (f) Unless the common shares have a public market when 
 16.1   issued, officers and directors of the issuer and their 
 16.2   affiliates shall not, for at least three years after the date of 
 16.3   conversion, purchase common shares of the issuer, except with 
 16.4   the approval of the commissioner. 
 16.5      (g) Unless the common shares have a public market when 
 16.6   issued, the issuer shall use its best efforts to encourage and 
 16.7   assist in the establishment of a public market for the common 
 16.8   shares. 
 16.9      (h) The issuer shall not, for at least three years 
 16.10  following the conversion, repurchase any of its common shares 
 16.11  except according to a pro rata tender offer to all shareholders, 
 16.12  or with the approval of the commissioner. 
 16.13     (i) A liquidation account must be established for the 
 16.14  benefit of policyholders eligible members in the event of a 
 16.15  complete liquidation of the reorganized company.  The 
 16.16  liquidation account must be equal to the equitable surplus 
 16.17  distributable net worth of the converting mutual company as of 
 16.18  the effective date of the conversion.  The function of the 
 16.19  liquidation account is solely to establish a priority on 
 16.20  liquidation and its existence does not restrict the use or 
 16.21  application of the surplus distributable net worth of the 
 16.22  reorganized company except as specified in paragraph (j).  The 
 16.23  liquidation account must be allocated equitably as of the 
 16.24  effective date of conversion among the then participating 
 16.25  policyholders eligible members.  The amount allocated to a 
 16.26  policy or contract an eligible member must not increase and must 
 16.27  be reduced to zero when the policy or contract giving rise to 
 16.28  the membership interests of the owner terminates.  In the event 
 16.29  of a complete liquidation of the reorganized company, the 
 16.30  policyholders eligible members among which the liquidation 
 16.31  account is allocated are entitled to receive a liquidation 
 16.32  distribution in the amount of the liquidation account before any 
 16.33  liquidation distribution is made with respect to shares. 
 16.34     (j) Until the liquidation account has been reduced to zero, 
 16.35  the issuer reorganized company shall not declare or pay a cash 
 16.36  dividend on, or repurchase any of, its common shares in (i) in 
 17.1   case of a converting mutual insurer, in an amount in excess of 
 17.2   its cumulative earned surplus generated after the conversion 
 17.3   determined according to statutory accounting principles, or (ii) 
 17.4   in the case of a converting mutual holding company, in an amount 
 17.5   in excess of its retained earnings, if the effect would be to 
 17.6   cause the amount of the statutory surplus distributable net 
 17.7   worth of the reorganized company to be reduced below the then 
 17.8   amount of the liquidation account. 
 17.9      Subd. 11.  [OPTIONAL PROVISIONS.] A plan under subdivision 
 17.10  8, 9, or 10 may include, with the approval of the commissioner, 
 17.11  any of the provisions in paragraphs (a) and (b). 
 17.12     (a) A plan may provide that any shares of the stock of the 
 17.13  reorganized company or its parent corporation or a permitted 
 17.14  issuer included in the policyholders' eligible members' 
 17.15  consideration must be placed on the effective date of the 
 17.16  conversion in a trust or other entity existing for the exclusive 
 17.17  benefit of the participating policyholders eligible members and 
 17.18  established solely for the purposes of effecting the 
 17.19  reorganization.  Under this option, the shares placed in trust 
 17.20  must be sold over a period of not more than ten 40 years and the 
 17.21  proceeds of the shares must be distributed using the 
 17.22  distribution priorities prescribed in the plan.  Eligible 
 17.23  members shall have the option to sell their shares at any time 
 17.24  following the date specified in the plan, which date may not be 
 17.25  later than two years following the effective date of the plan. 
 17.26     (b) A plan may provide that the directors and officers of 
 17.27  the converting mutual company shall receive, without payment, 
 17.28  nontransferable subscription rights to purchase capital stock of 
 17.29  the reorganized company, its parent, or a permitted issuer.  
 17.30  Those subscription rights must be allocated among the directors 
 17.31  and officers by a fair and equitable formula. 
 17.32     (1) The total number of shares that may be purchased under 
 17.33  this clause, may not exceed 35 percent of the total number of 
 17.34  shares to be issued in the case of a converting mutual company 
 17.35  with total assets of less than $50,000,000 or 25 percent of the 
 17.36  total shares to be issued in the case of a converting mutual 
 18.1   company with total assets of more than $500,000,000.  For 
 18.2   converting mutual companies with total assets between 
 18.3   $50,000,000 and $500,000,000, the total number of shares that 
 18.4   may be purchased may not exceed an interpolated percentage 
 18.5   between 25 and 35 percent. 
 18.6      (2) Stock purchased by a director or officer under clause 
 18.7   (1) may not be sold within one year following the effective date 
 18.8   of the conversion. 
 18.9      (3) The plan may also provide that a director or officer, 
 18.10  or person acting in concert with a director or officer of the 
 18.11  converting mutual company, may not acquire any capital stock of 
 18.12  the reorganized company for three years after the effective date 
 18.13  of the conversion, except through a licensed securities broker 
 18.14  or dealer, without the permission of the commissioner.  That 
 18.15  provision may not apply to prohibit the directors and officers 
 18.16  from purchasing stock through subscription rights received in 
 18.17  the plan under clause (1). 
 18.18     (c) A plan may allocate to a tax-qualified employee benefit 
 18.19  plan nontransferable subscription rights to purchase up to ten 
 18.20  percent of the capital stock of the reorganized company, its 
 18.21  parent, or a permitted issuer.  The employee benefit plan must 
 18.22  be entitled to exercise its subscription rights regardless of 
 18.23  the amount of shares purchased by other persons A plan may 
 18.24  provide that the directors and officers of the converting mutual 
 18.25  company may receive warrants, options, or nontransferable 
 18.26  subscription rights to purchase capital stock of the reorganized 
 18.27  company or its parent or a permitted issuer. 
 18.28     (c) A plan may provide that only eligible members whose 
 18.29  policies were in force as of a specified date are eligible to 
 18.30  receive compensation under the plan, which date must be no 
 18.31  earlier than one year before the effective date of the plan. 
 18.32     Subd. 12.  [ALTERNATIVE PLAN OF CONVERSION.] In lieu of 
 18.33  selecting a plan of conversion provided for in this 
 18.34  section subdivision 8, 9, or 10, the converting mutual company 
 18.35  may convert according to a plan approved by the commissioner if 
 18.36  the commissioner finds that the plan does not prejudice the 
 19.1   interests of the eligible members, is fair and equitable, and is 
 19.2   based upon an independent appraisal of the market value of the 
 19.3   mutual company by a qualified person the fair market value of 
 19.4   the converting mutual company, and is a fair and equitable 
 19.5   allocation of any consideration to be given eligible members.  
 19.6   The commissioner may retain, at the converting mutual company's 
 19.7   expense, any qualified expert not otherwise a part of the 
 19.8   commissioner's staff to assist in reviewing the fair market 
 19.9   value of the company and in determining whether the alternative 
 19.10  plan may be approved and the valuation of the company. 
 19.11     Subd. 13.  [EFFECT OF CONVERSION.] (a) Upon the conversion 
 19.12  of a converting mutual company to a reorganized company 
 19.13  according to this section, the corporate existence of the 
 19.14  converting mutual company must be is continued in the 
 19.15  reorganized company.  All the rights, franchises, and interests 
 19.16  of the converting mutual company in and to all property and 
 19.17  things in action belonging to this property, is considered 
 19.18  transferred to and vested in the reorganized company without any 
 19.19  deed or transfer.  Simultaneously, the reorganized company is 
 19.20  considered to have assumed all the obligations and liabilities 
 19.21  of the converting mutual company. 
 19.22     (b) The directors and officers of the converting mutual 
 19.23  company, unless otherwise specified in the plan of conversion, 
 19.24  shall serve as directors and officers of the reorganized company 
 19.25  until new directors and officers of the reorganized company are 
 19.26  duly elected according to the articles of incorporation and 
 19.27  bylaws of the reorganized company. 
 19.28     (c) All policies in force on the effective date of the 
 19.29  conversion continue to remain in force under the terms of those 
 19.30  policies, except that any voting rights of the policyholders 
 19.31  members provided for under the policies are extinguished on the 
 19.32  effective date of the conversion. 
 19.33     (d) All membership interests in the converting mutual 
 19.34  company are extinguished on the effective date of a conversion. 
 19.35     Subd. 14.  [CONFLICT OF INTEREST.] No director, officer, 
 19.36  agent, employee of the converting mutual company, or any other 
 20.1   person shall receive a fee, commission, or other valuable 
 20.2   consideration, other than the person's usual regular salary and 
 20.3   compensation, for in any manner aiding, promoting, or assisting 
 20.4   in the conversion except as set forth in the plan approved by 
 20.5   the commissioner.  This provision does not prohibit the payment 
 20.6   of reasonable fees and compensation to attorneys, accountants, 
 20.7   investment bankers, and actuaries for services performed in the 
 20.8   independent practice of their professions. 
 20.9      Subd. 15.  [COSTS AND EXPENSES.] All the costs and expenses 
 20.10  connected with a plan of conversion must be paid for or 
 20.11  reimbursed by the converting mutual company or the reorganized 
 20.12  company except where the plan provides otherwise. 
 20.13     Subd. 16.  [LIMITATION OF ACTIONS.] (a) An action 
 20.14  challenging the validity of or arising out of acts taken or 
 20.15  proposed to be taken according to this section must be commenced 
 20.16  within 180 days after the effective date of the conversion. 
 20.17     (b) The converting mutual company, the reorganized company, 
 20.18  or any defendant in an action described in paragraph (a), may 
 20.19  petition the court in the action to order a party to give 
 20.20  security for the reasonable attorney fees that may be incurred 
 20.21  by a party to the action.  The amount of security may be 
 20.22  increased or decreased in the discretion of the court having 
 20.23  jurisdiction if a showing is made that the security provided is 
 20.24  or may become inadequate or excessive. 
 20.25     Subd. 16a.  [CONTINUANCE OF PARTICIPATING POLICY 
 20.26  DIVIDENDS.] (a) To the extent required by this section, the plan 
 20.27  of reorganization of a converting mutual insurer that is a 
 20.28  mutual life insurance company or of a converting mutual holding 
 20.29  company that has a life insurance company subsidiary shall make 
 20.30  adequate provision for the protection of the reasonable dividend 
 20.31  expectations of the policyholders of active participating 
 20.32  policies, either through the establishment of a closed block or 
 20.33  other method acceptable by the commissioner. 
 20.34     (b) A closed block must be operated as follows: 
 20.35     (1) The converting mutual company's active participating 
 20.36  policies may be operated by the reorganized company as a closed 
 21.1   block of participating business. 
 21.2      (2) Assets must be allocated to the closed block of 
 21.3   participating business in an amount that ensures that the 
 21.4   assets, together with the anticipated revenue from the closed 
 21.5   block, are reasonably expected to be sufficient to permit the 
 21.6   closed block to pay all policy benefits, including dividends 
 21.7   according to the current dividend scale, and other items as 
 21.8   appropriate.  The plan must be accompanied by an opinion of an 
 21.9   independent qualified actuary who meets the standards set forth 
 21.10  in the insurance laws or rules for the submission of actuarial 
 21.11  opinions as to the adequacy of reserves or assets.  The opinion 
 21.12  must relate to the adequacy of the assets allocated to support 
 21.13  the closed block of business.  The actuarial opinion must be 
 21.14  based on methods of analysis considered appropriate for those 
 21.15  purposes by the actuarial standards board. 
 21.16     (3) The reorganized company shall keep a separate 
 21.17  accounting for the closed block and shall make and include in 
 21.18  the annual statement to be filed with the commissioner each year 
 21.19  a separate statement showing the gains, losses, and expenses 
 21.20  properly attributable to the closed block. 
 21.21     (4) The closed block must be reviewed periodically by an 
 21.22  independent, qualified actuary for compliance with the 
 21.23  requirements of the plan and this subdivision and a copy of the 
 21.24  report must be provided to the commissioner and the reorganized 
 21.25  company. 
 21.26     (5) Notwithstanding the establishment of a closed block, 
 21.27  the entire assets of the company that issued the policies must 
 21.28  be available for the payment of benefits to policyholders.  
 21.29  Payment must first be made from the assets supporting the closed 
 21.30  block until exhausted, and then from the general assets of the 
 21.31  company which issued the policies. 
 21.32     Subd. 17.  [SUPERVISORY CONVERSIONS.] The commissioner may 
 21.33  waive or alter any of the requirements of this section to 
 21.34  protect the interests of policyholders or members if the 
 21.35  converting mutual company is subject to the commissioner's 
 21.36  administrative supervision under chapter 60G or rehabilitation 
 22.1   under chapter 60B. 
 22.2      Subd. 18.  [POSTCONVERSION ACQUISITION.] Prior to and for a 
 22.3   period of five three years following the date when the 
 22.4   distribution of consideration to the eligible members in 
 22.5   exchange for their membership interests is completed under a 
 22.6   plan of conversion according to this section, no person other 
 22.7   than the reorganized company shall directly or indirectly 
 22.8   acquire or offer to acquire in any manner ownership or 
 22.9   beneficial ownership of ten percent or more of any class of 
 22.10  voting security of the reorganized company, or of any affiliate 
 22.11  of the reorganized company which controls, directly or 
 22.12  indirectly, a majority of the voting power of the reorganized 
 22.13  company, without the prior approval of the commissioner.  For 
 22.14  the purposes of this subdivision, the terms "affiliate" and 
 22.15  "person" have the meanings given in section 60D.15, and the term 
 22.16  "reorganized company" includes any successor of the reorganized 
 22.17  company. 
 22.18     Sec. 2.  Minnesota Statutes 2000, section 60A.09, 
 22.19  subdivision 5, is amended to read: 
 22.20     Subd. 5.  [REINSURANCE.] (1)  [DEFINITIONS.] For the 
 22.21  purposes of this subdivision, the word "insurer" shall be deemed 
 22.22  to include the word "reinsurer," and the words "issue policies 
 22.23  of insurance" shall be deemed to include the words "make 
 22.24  contracts of reinsurance." 
 22.25     (2)  [REINSURANCE OF MORE THAN 50 PERCENT OF INSURANCE 
 22.26  LIABILITIES.] Any contract of reinsurance whereby an insurer 
 22.27  cedes more than 50 percent of the total of its outstanding 
 22.28  insurance liabilities shall, if such insurer is incorporated by 
 22.29  or, if an insurer of a foreign country, has its principal office 
 22.30  in this state, be subject to the approval, in writing, by the 
 22.31  commissioner. 
 22.32     (3) [ACTUAL UNEARNED PREMIUM RESERVE TO BE CARRIED AS 
 22.33  LIABILITY.] Nothing in this subdivision shall be deemed to 
 22.34  permit the ceding insurer to receive, through the cession of the 
 22.35  whole of any risk or risks, any advantage in respect to its 
 22.36  unearned premium reserve that would reduce the same below the 
 23.1   actual amount thereof. 
 23.2      (4) [AIRCRAFT RISKS.] An insurer authorized to transact the 
 23.3   business specified in section 60A.06, subdivision 1, clauses (4) 
 23.4   and (5)(a), may through reinsurance assume any risk arising 
 23.5   from, related to, or incident to the manufacture, ownership, or 
 23.6   operation of aircraft and may retrocede any portion thereof; 
 23.7   provided, however, that no insurer may undertake any such 
 23.8   reinsurance business without the prior approval of the 
 23.9   commissioner and such reinsurance business shall be subject to 
 23.10  any regulations which may be promulgated by the commissioner.  
 23.11  Any such reinsurance business may be provided through pooling 
 23.12  arrangements with other insurers for purposes of spreading the 
 23.13  insurance risk.