Current through Register Vol. 41, No. 3, September 23, 2024
A. Each registered insurer shall report to
the commission as required under § 38.2-1329 of the Act, all dividends and
other distributions to shareholders within five business days following
declaration. An insurer shall not pay a dividend or other distribution until 30
days after the commission has received written notice of the declaration
thereof and has not within such period disapproved such payment. The commission
may approve the payment of such dividend or other distribution prior to the 30
days. Such dividends and other distributions are to be paid out of earned
surplus unless the commission has provided prior written approval for such
dividends or other distributions to be paid from another source. Except as
provided in subsection B of this section, the report shall be filed in the
format prescribed by Form F and shall include at least the following:
1. A statement stating whether the dividend
or distribution is extraordinary. If the dividend or distribution is
extraordinary, the insurer also shall state the date of approval, if any,
obtained pursuant to § 38.2-1330.1A of the Act, or the earliest date on
which approval may be deemed;
2.
Earned surplus as of the immediately preceding December 31;
3. The amount of the proposed
dividend;
4. The date of
declaration, date of record and date established for payment of the
dividend;
5. A statement as to
whether the dividend 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;
6. The amounts, dates and form of payment of
all dividends or distributions (including regular dividends but excluding
distributions of the insurer's own securities) paid within the period of 12
consecutive months ending on the date fixed for payment of the proposed
dividend for which approval is sought and commencing on the day after the same
day of the same month in the last preceding year;
7. A brief statement as to the effect of the
proposed dividend 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; and
8. A statement identifying any and all
revaluations of assets.
B. If payment of an extraordinary dividend or
distribution has been approved prior to its declaration, the insurer may comply
with the requirements of § 38.2-1329E of the Act by filing written
confirmation under oath or affirmation that the extraordinary dividend or
distribution, as approved by the commission, has been declared. Confirmation
shall be filed within five business days following declaration.
C. An insurer may obtain prior approval of an
extraordinary dividend or distribution, as required by § 38.2-1330.1A of
the Act, by filing a request for approval with the commission. The request for
approval shall be filed in the format prescribed by Form F and shall include at
least the following:
1. All the information
required in subsection A of this section;
2. Statements of financial condition and
earnings for the period intervening from the last annual statement filed with
the commission and the end of the month preceding the month in which the
request for dividend approval is submitted; and, if the date of payment or
distribution is more than 60 days removed from the date of the most current
financial statement submitted by the insurer, the insurer shall include also a
pro forma statement as of the day after the distribution or payment of the
dividend showing its effect and other known and reasonably projected
adjustments to the financial condition and earnings of the insurer;
and
3. A copy of the calculations
determining that the proposed dividend is extraordinary. The work paper shall
include the following information:
a. The
amounts, dates and form of payment of all dividends or distributions (including
regular dividends but excluding distributions of the insurer's own securities)
paid within the period of 12 consecutive months ending on the date fixed for
payment of the proposed dividend for which approval is sought, and commencing
on the day after the same day of the same month in the last preceding
year;
b. Surplus as regards to
policyholders (total capital and surplus) as of the immediately preceding
December 31;
c. If the insurer is a
life insurer, the net gain from operations for the 12-month period ending the
immediately preceding December 31; and
d. If the insurer is not a life insurer, the
net income less realized capital gains for the 12-month period ending the
immediately preceding December 31, but shall not include pro rata distributions
of any class of the insurer's own securities.
4. Statements on each factor set forth in
§ 38.2-1330B of the Act must be submitted in support of the request for
approval of an extraordinary dividend or distribution, although these factors
are not intended to be an exhaustive list. In determining the adequacy and
reasonableness of an insurer's surplus no single factor is controlling. The
commission, instead, will consider the net effect of all of these factors plus
other factors bearing on the financial condition of the insurer. In comparing
the surplus maintained by other insurers, the commission will consider the
extent to which each of these factors varies from company to company and in
determining the quality and liquidity of investments in subsidiaries, the
commission will consider the individual subsidiary and may discount or disallow
its valuation to the extent that the individual investments so
warrant.
5. In addition, in order
to determine the possibility of any financial effect on the insurer, the
commission may request the means of funding and the purpose of the
extraordinary dividend or distribution.
D. No declaration of an extraordinary
dividend or distribution shall confer any rights on shareholders without the
prior approval thereof pursuant to § 38.2-1330.1C of the Act. However, an
insurer may declare an extraordinary dividend or distribution which is
conditioned upon the commission's approval, and the declaration shall confer no
rights upon shareholders until (i) the commission has approved the payment of
the dividend or distribution or (ii) the commission has not disapproved the
payment within the 30-day period provided by § 38.2-1330.1A of the
Act.
Statutory Authority
§§ 12.1-13 and 38.2-223 of the Code of Virginia.
