Section 644.07. Restructuring procedures.

 

(1)   Formation of mutual holding company.

(a)

1. A domestic mutual insurance company organized under ch. 611 may restructure by forming a mutual holding company in accordance with this section.

2. A domestic service insurance corporation organized under ch. 613 may restructure by simultaneously converting to a mutual insurance company that is subject to ch. 611 and forming a mutual holding company in accordance with this section.

(b) The mutual holding company may use the word “mutual" in its name. The restructuring shall continue the corporate existence of the converting insurance company as a stock insurance company subsidiary of the mutual holding company or as a stock insurance company subsidiary of an intermediate stock holding company that is a subsidiary of the mutual holding company. The converted insurance company may continue to use the word “mutual" in its name if the name includes the abbreviation “SI" for stock insurer, or the words “stock insurer".

(2)   Resolution of the board. The board shall pass a resolution to the effect that restructuring is fair and equitable to policyholders. The resolution shall specify the reasons for and the purposes of the proposed restructuring, and explain the manner in which the restructuring is expected to benefit policyholders.

(3)   Adoption of plan. The board shall adopt a mutual holding company plan. The mutual holding company plan shall set forth the reasons for and the purposes of the proposed restructuring, explain how the restructuring is expected to benefit policyholders and provide for amending the converting insurance company's articles of incorporation to give effect to the restructuring from a mutual, nonstock corporation into a stock corporation.

(4)   Submission of plan. The board shall submit the mutual holding company plan to the commissioner for approval, together with all of the following:

(a) The proposed articles and bylaws of the mutual holding company, which shall comply with s. 644.09 , of the converted insurance company, which shall comply with s. 611.12 , and of any intermediate stock holding company.

(b) So much of the following information pertaining to the mutual holding company as the commissioner reasonably requires:

1. The names and, for the preceding 10 years, all addresses and all occupations of all proposed directors and officers.

2. All agreements relating to the mutual holding company to which any proposed director or officer is a party.

3. The amount and sources of the funds available for organization expenses and initial operating expenses.

4. The proposed compensation of directors and officers.

5. The proposed capital.

6. A business plan of the mutual holding company for the first 5 years of operation.

(c) Such other relevant documents or information as the commissioner reasonably requires.

(5)   Plan contents.

(a) The plan shall include all of the following:

1. A description of any plans for the initial sale of voting stock to 3rd parties by the converted insurance company or any intermediate stock holding company, or a statement that the converted insurance company or intermediate stock holding company has no current plans for the sale of voting stock.

2. A description of any plans for the transfer of assets and assumption of obligations, including any one or more subsidiaries of the converting insurance company, to the mutual holding company or to the intermediate stock holding company.

(b)

1. A plan for the initial sale of voting stock shall be adequately described under par. (a) 1. if it contains all of the following:

a. A statement of intent to conduct an initial sale of voting stock of the converted insurance company or of any intermediate stock holding company within a specified time after the effective date of the restructuring.

b. A description of the maximum percentage of the stock to be sold.

c. A description of the process to be used in offering the stock and setting the initial sale price for the stock.

d. A description of the rights of members to subscribe to the stock offering if the initial sale of voting stock by the converted insurance company or any intermediate stock holding company involves an initial public offering.

e. Such other information as may be prescribed by the commissioner.

2. No plan for the initial sale of voting stock that is approved by policyholders as part of the approval of a mutual holding company conversion plan under sub. (8) or by members as part of an approval under s. 644.15 shall be effective for more than the specified time under subd. 1. a. after the effective date of the restructuring or the date on which the plan is approved by members under s. 644.15 (1) , whichever is applicable.

(5m)   Additional plan contents for service insurance corporations. If the converting insurance company is a service insurance corporation, in addition to satisfying the requirements under sub. (5) , the plan shall state all of the following:

(a) That those persons who are policyholders of the converting service insurance corporation on the date of the resolution under sub. (2) and who remain policyholders on the record date established by the board for the vote under sub. (8) shall have the right to vote on the plan under sub. (8) .

(b) That the members of the mutual holding company shall be those persons who are policyholders of the converting service insurance corporation on the effective date of the restructuring, and that thereafter membership shall be as provided in sub. (10) (d) .

(c) Any other conditions that the commissioner may require relating to the company's conversion from a service insurance corporation to a mutual holding company.

(6)   Hearing.

(a) The commissioner or a hearing examiner designated by the commissioner shall hold a hearing after receipt of a mutual holding company plan.

(b)

1. Notice of the hearing shall be mailed by the converting insurance company not more than 60 days and not less than 10 days before the scheduled date of the hearing to the last-known address of each person who was a policyholder of the converting insurance company on the date of the resolution under sub. (2) , together with a copy of the mutual holding company plan, or a copy of a summary of the plan if the commissioner approves the summary, and any comment that the commissioner considers necessary for the adequate information of policyholders. Failure to mail notice to a policyholder does not invalidate a proceeding under this subsection if the commissioner determines that the converting insurance company has substantially complied with this subdivision and has attempted in good faith to mail notice to all policyholders entitled to notice.

2. The notice, the plan or a summary of the plan and any comments under subd. 1. shall also be mailed by the converting insurance company not more than 60 days and not less than 10 days before the scheduled date of the hearing to the commissioner of every jurisdiction in which the converting insurance company is authorized to do any business.

(c) In accordance with such hearing procedures as the commissioner or the designated hearing examiner may prescribe, any policyholder under par. (b) 1. and any commissioner under par. (b) 2. may present written or oral statements at the hearing and may present written statements within a period after the hearing specified by the commissioner or the hearing examiner. The commissioner shall take statements presented under this paragraph into consideration in making the determination under sub. (7) .

(7)   Approval by commissioner.

(a) The commissioner shall approve the mutual holding company plan unless he or she finds that the plan violates the law, is not fair and equitable to policyholders or is contrary to the interests of policyholders or the public.

(b) In considering the plan, the commissioner shall consider whether the restructuring would be detrimental to the safety and soundness of the converting insurance company or the contractual rights and reasonable expectations of the persons who are policyholders on the effective date of the restructuring. The commissioner may take into consideration any conclusions and recommendations on the subject of restructuring published by recognized organizations of professional insurance actuaries. The commissioner may by rule establish standards applicable to a restructuring under this chapter.

(8)   Approval by policyholders. After approval under sub. (7) , the mutual holding company plan shall be submitted at any regular or special meeting of policyholders to a vote of the persons who were policyholders of the converting insurance company on the date of the resolution under sub. (2) , and who remain policyholders on the record date established for the vote by the board. Voting shall be in accordance with the articles or bylaws of the converting insurance company, but in no event shall there be less than 20 days' advance notice of any meeting for a vote on approval of a mutual holding company plan, and in no event shall the required vote to approve the plan be less than a majority of those policyholders voting. Notice of such meeting shall be sent to the last-known address of each such policyholder and may be included with any notice sent under sub. (6) (b) 1. Only proxies specifically related to the mutual holding company plan may be used for a vote on approval under this subsection.

(9)   Amendment or withdrawal. At any time before the effective date of the restructuring, the converting insurance company may, by resolution of its board, amend the mutual holding company plan or withdraw the mutual holding company plan. The commissioner shall determine whether any amendment made after the public hearing under sub. (6) changes the mutual holding company plan in a manner that is materially disadvantageous to any of the policyholders of the converting insurance company and, in such case, may require a further public hearing on the plan as amended. If an amendment that the commissioner determines is materially disadvantageous to any of the policyholders is made after the plan has been approved by the policyholders, the plan as amended shall be submitted for reconsideration by the policyholders.

(10)   Effect of restructuring.

(a) Continuation of insurance corporation and commencement of existence of mutual holding company. If the policyholders approve the mutual holding company plan under sub. (8) , the commissioner shall issue a new certificate of authority to the converting insurance company and a certificate of incorporation to the mutual holding company. Upon issuance of the certificate of incorporation, the legal existence of the mutual holding company shall begin, its articles and bylaws shall become effective and its proposed directors and officers shall take office. The issuance of the certificate of incorporation shall be conclusive evidence of compliance with this section. On the effective date of the restructuring, the converting insurance company shall at once become a stock corporation and is no longer a mutual. The converted insurance company shall be considered to have been organized at the time that the converting insurance company was organized. Except as otherwise provided in the plan, the trustees, directors, officers, agents and employees of the converting insurance company shall continue in like capacity with the converted insurance company.

(b) Continuation of rights and obligations. The restructuring of the converting insurance company into a stock insurance company subsidiary of a mutual holding company or an intermediate stock holding company shall in no way annul, modify or change any of such insurer's existing suits, rights, contracts or liabilities, except with respect to the membership interests and rights in surplus, if any, in such insurer that are extinguished as provided in s. 644.04 , and the corporate existence of the converting insurance company shall be continued in all respects. The converted insurance company, after restructuring, shall exercise all of the rights and powers and perform all of the duties conferred or imposed by law upon insurers writing the classes of insurance written by the converting insurance company before the effective date of the restructuring, and shall retain the rights and contracts existing prior to restructuring, except with respect to the membership interests and rights in surplus that were extinguished.

(c) Effective date. The date upon which the commissioner issues the certificate of authority to the converted insurance company shall be the effective date of the restructuring unless a later time is designated in the mutual holding company plan.

(d) Effect on policyholders. A policyholder who has a membership interest in the converting insurance company on the effective date of the restructuring shall become a member of the mutual holding company. Policyholders of policies or contracts that are issued by a converted insurance company after the effective date of its conversion under this section shall become members of the mutual holding company in accordance with the articles of incorporation and bylaws of the mutual holding company and the applicable provisions of this chapter immediately upon issuance of the policy. The articles and bylaws of the mutual holding company may provide that a policyholder of any other insurance company that is or becomes a subsidiary of the mutual holding company may become a member of the mutual holding company. In no event shall a person remain a member after he or she ceases to be a policyholder.

(e) Nontransferability of membership interests. No member of a mutual holding company may transfer such member's membership interests in the mutual holding company or any right arising from such membership interests apart from the policy that gives rise to the membership interest.

(f) Liability of member. A member of a mutual holding company is not, by virtue of being a member, personally liable for the acts, debts, liabilities or obligations of the mutual holding company.

(10m)   Effect on service insurance corporation of disapproval of plan. Notwithstanding sub. (1) (a) 2. and s. 644.02 (1) (b) , if the converting insurance company is a service insurance corporation, and the commissioner disapproves the mutual holding company plan under sub. (7) or the policyholders disapprove the mutual holding company plan under sub. (8) , the converting insurance company shall remain a service insurance corporation subject to ch. 613 .

(11)   Expenses. The converting insurance company may not pay compensation of any kind to any person in connection with the mutual holding company plan other than regular salaries to the company's personnel. This subsection does not prohibit the payment of reasonable fees and compensation to attorneys at law, accountants, financial advisers, actuaries or other consultants for services performed in the independent practice of their professions. All expenses of the restructuring, including the expenses incurred by the commissioner and the prorated salaries of any involved office staff members of the office of the commissioner of insurance, shall be borne by the converting insurance company.

1997 a. 227 .