The following provisions of this section apply to dividends and other distributions within an insurance holding company system:
(1) A domestic insurer subject to registration shall not pay any extraordinary dividend or make any other extraordinary distribution to its shareholders either until 30 days after the Director of the Department of Consumer and Business Services has received notice of the declaration thereof if the director has not disapproved the payment within the 30-day period, or until the date on which the director approves the payment if approval occurs within the 30-day period.
(2) For purposes of this section, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property whose fair market value, together with that of other dividends or distributions made within the period of 12 consecutive months ending on the date on which the proposed dividend or other distribution is scheduled to be paid or made, exceeds the greater of:
(a) Ten percent of the combined capital and surplus of the insurer as of the 31st day of December immediately preceding; or
(b) The net gain from operations of the insurer after dividends to policyholders and federal income taxes and before realized capital gains or losses, if the insurer is authorized to transact life insurance, or the net income, if the insurer is not authorized to transact life insurance, for the 12-month period ending the 31st day of December immediately preceding.
(3) An extraordinary dividend or distribution does not include pro rata distributions of any class of the insurer’s own securities.
(4) Except as provided in this subsection, a domestic insurer may declare or pay dividends to shareholders only from earned surplus. A domestic insurer may declare a dividend from other than earned surplus only if the director approves the declaration prior to payment of the dividend.
(5) For purposes of this section, earned surplus does not include surplus arising from unrealized capital gains or revaluation of assets.
(6) An insurer may declare an extraordinary dividend or distribution that is conditional upon the director’s approval thereof. Such a declaration confers no rights upon shareholders until the date on which the director approves the payment of such a dividend or distribution or until 30 days after the director received notice of the declaration thereof under subsection (1) of this section if the director does not disapprove the payment within the 30-day period. [1993 c.447 §48]
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