Chapter 611

611.75(3) (3) Approval requirement. No conversion may be effected unless the plan of conversion is approved by the commissioner. The corporation shall file with the plan so much of the information under s. 611.13 (2) for the new mutual as the commissioner reasonably requires.

611.75(4) (4) Condition for approval. The commissioner shall approve the conversion unless he or she finds, after a hearing, that:

611.75(4)(a) (a) The conversion would violate the law; or

611.75(4)(b) (b) Its terms are not fair to the shareholders or the policyholders; or

611.75(4)(c) (c) The resulting mutual would not meet the requirements for a certificate of authority under s. 611.20.

611.75(5) (5) Approval by shareholders. After the commissioner approves the plan of conversion, it shall be submitted to the shareholders for approval by the affirmative vote of a majority of each class of shares entitled to vote. Only shareholders of record on the date of the adoption under sub. (1) may vote.

611.75(6) (6) Conversion.

611.75(6)(a) (a) Continuation of corporation. If the shareholders approve the plan of conversion under sub. (5), the commissioner shall issue a new certificate of authority. The issuance of the certificate is the act of conversion, the corporation at once becomes a mutual and is no longer a stock corporation. The mutual shall be deemed to have been organized at the time the converted stock corporation was organized. The board shall thereupon implement the plan of conversion.

611.75(6)(b) (b) Termination of contract rights. Any contractual obligation inconsistent with the nature of a mutual, including any obligation to issue or to redeem stock options, shall terminate upon the act of conversion under par. (a), without compensation unless the obligation was legally binding before April 30, 1972.

611.75(7) (7) Expenses. The corporation may not pay compensation of any kind to any person other than regular salaries to existing personnel, in connection with the proposed conversion, other than for clerical and mailing expenses, except that with the commissioner’s approval payment may be made at reasonable rates for printing costs and for legal and other professional fees for services actually rendered. All expenses of the conversion, including the expenses incurred by the commissioner and the prorated salaries of any insurance office staff members involved, shall be borne by the corporation being converted.

611.75 History History: 1971 c. 260; 1979 c. 102 s. 236 (5).

611.76 611.76 Conversion of a domestic mutual into a stock corporation.

611.76(1) (1) Conversion permitted.

611.76(1)(a) (a) General. Except under par. (b), a domestic mutual may be converted into a domestic stock corporation under subs. (2) to (11).

611.76(1)(b) (b) Conversion of related insurers. No domestic mutual that is affiliated with other mutuals may be converted into a stock corporation, unless all such affiliated mutuals are also converted at the same time, or the commissioner finds that the interests of the policyholders of the remaining mutuals can be permanently protected by limitations on the corporate powers of the new stock corporation or on its authority to do business, or otherwise.

611.76(1)(c) (c) Conversion and merger. A domestic mutual may adopt a plan of acquisition or merger as part of a plan of conversion under this section. The commissioner shall approve the plan of acquisition or merger as part of the plan of conversion unless grounds for disapproval exist under s. 611.72 (3) (am).

611.76(2) (2) Resolution by the board. The board shall pass a resolution to the effect that such conversion is in the best interests of the policyholders. The resolution shall specify the reasons for and the purposes of the proposed conversion, and the manner in which the conversion is expected to benefit policyholders.

611.76(3) (3) Investigation by commissioner.

611.76(3)(a) (a) Application. The board shall file with the commissioner the resolution and any additional documents and information he or she reasonably requires, whereupon the commissioner shall order examination and appraisal of the corporation, unless he or she finds that:

611.76(3)(a)1. 1. The resolution is defective upon its face; or

611.76(3)(a)2. 2. The reason for or the purposes of the proposed conversion are contrary to law or to the interests of the policyholders or the public.

611.76(3)(b) (b) Examination. The commissioner shall cause to be made an examination of the company under s. 601.43 to determine its financial condition and whether it is operated in accordance with the law.

611.76(3)(c) (c) Appraisal. The commissioner shall appoint an appraisal committee, consisting of at least 3 qualified and disinterested persons with differing kinds of training, to determine the value of the corporation as of the date of the resolution in sub. (2) or, if sub. (4m) applies, as of the date of conversion. Members of the committee shall receive reasonable compensation and shall be reimbursed for reasonable expenses in discharging their duties. They may, as reasonably necessary, employ consultants to advise them on technical problems of the appraisal. The appraisal committee shall consider the assets and liabilities of the corporation, adjusting liabilities to take account of the amounts of any reserves in excess of or below realistic estimates, the value of the marketing organization, the value of goodwill, the going-concern value and any other factor having an influence on the value of the corporation, including, in the case of a mutual life insurance company, the estimated amount needed to continue to maintain dividend scales on policies under s. 632.62 (4) (b) at the same level after conversion as before conversion.

611.76(3)(d) (d) Presumption. In a proceeding under this section, any report adopted by an appraisal committee under par. (c) or examination report concerning the domestic mutual or its affiliate is admissible as evidence and the facts asserted in the reports are presumed to be true.

611.76(4) (4) Plan of conversion. The board may adopt a plan of conversion, which, unless sub. (4m) applies, shall specify:

611.76(4)(a) (a) The number of shares proposed to be authorized for the new stock corporation, their par value and the price at which they will be offered to policyholders, which price may not exceed one-half of the median equitable share of all policyholders under par. (b);

611.76(4)(b) (b) That each person who has been a policyholder and has paid premiums within 5 years prior to the resolution under sub. (2) shall be entitled without additional payment to so much common stock of the new stock corporation as his or her equitable share of the value of the converting corporation will purchase; that the equitable share shall be determined by the ratio which the net premium (gross premium less return premium and dividends paid) he or she has paid to the corporation during the 5 years immediately preceding the resolution under sub. (2) bears to the total net premiums received by the corporation during the same period; and that, if the equitable share is sufficient only for the purchase of a fraction of a share of stock, the policyholder shall have the option either to receive the value of the fractional share in cash or to purchase a full share by paying the balance in cash;

611.76(4)(bm) (bm) Notwithstanding par. (b), that each person who was a policyholder of a mutual life insurance company on the date of the resolution under sub. (2) or within 5 years prior to that date shall be entitled to an equitable share based on a formula which fairly reflects the policyholder’s interest in the company and the policies and contracts issued by the company to the policyholder, and which takes into account premiums paid, cash surrender values, policy loans, reserves, surplus, benefits payable and other relevant factors; and that the equitable share shall be provided to the policyholders on a uniform basis approved by the commissioner in the form of common stock, cash, increased benefits, lower premiums or a combination of those forms;

611.76(4)(c) (c) The procedure for stock subscriptions which shall include a written offer to each such policyholder indicating his or her individual equitable share and the terms of subscription;

611.76(4)(d) (d) That no common stock under par. (b) or (dm) may be issued to persons other than the policyholders under par. (b) or the corporation under par. (dm) until all subscriptions by the policyholders and corporation, respectively, have been filled and that thereafter any new issue of stock for 5 years after the conversion shall first be offered to the persons who have become shareholders under par. (b) or (dm) in proportion to their interests under par. (b) or (dm);

611.76(4)(dm) (dm) Notwithstanding par. (b), whether the shares of common stock representing the equitable shares of the policyholders of a mutual life insurance company may, with the approval of the commissioner, be issued to a corporation organized under ch. 180 with the policyholders to be stockholders of the corporation and, if so issued, that each policyholder is entitled to his or her equitable share calculated under par. (bm) in shares of common stock of the corporation;

611.76(4)(e) (e) That no policyholder, other than a policyholder of a mutual life insurance company, may receive a distribution of shares valued in excess of the amount to which he or she is entitled under s. 645.72 (4). Any excess over that amount shall be distributed in shares to the state treasury for the benefit of the common school fund. After 5 years the shares may be sold by the secretary of administration at his or her discretion and the proceeds credited to the common school fund; and

611.76(4)(f) (f) Except with the approval of the commissioner, that during the first 5 years after the conversion the directors and officers of a mutual life insurance company and persons acting in concert with them may not, in the aggregate, acquire control over more than 5 percent of the common stock of the converted stock life insurance company, the corporation formed under par. (dm) or any other corporation which acquires control of more than 5 percent of the common stock of either the converted stock life insurance company or the corporation formed under par. (dm).

611.76(4m) (4m) Insurers in financially hazardous condition; plan of conversion. If grounds exist under s. 645.41 (2) or (4) for rehabilitation or liquidation of a domestic mutual or are reasonably expected to exist within one year, the board may adopt a plan of conversion which shall specify all of the following:

611.76(4m)(a) (a) That each person who has been a policyholder and has paid premiums within 5 years prior to the date the resolution is adopted under sub. (2) is entitled to receive his or her equitable share of the value of the domestic mutual, adjusted to reflect the condition of the domestic mutual immediately prior to the date of conversion; that the equitable share shall be determined by the ratio that the net premium paid by the policyholder during the 5 years immediately preceding the date of the adoption of the resolution under sub. (2) bears to the total net premium received by the domestic mutual during that period, unless the commissioner approves another method of determining equitable shares with the net premium to be calculated as gross premium less premium returned and dividends paid to policyholders; that each policyholder’s equitable share may be distributed in any form including securities of the insurer or another person, debt instruments, property or cash; and that the value of the domestic mutual will be finally determined immediately prior to the date of conversion and with the approval of the commissioner.

611.76(4m)(b) (b) Any person who will, under the plan of conversion, acquire control of the domestic stock corporation and the manner in which this will occur.

611.76(4m)(c) (c) That sufficient capital will be contributed or other measures taken to remove any grounds for liquidation under s. 645.41 (2) or (4) and to reasonably assure that those grounds will not exist within the 5 years immediately following the date of conversion.

611.76(5) (5) Application for approval. The plan of conversion shall be submitted to the commissioner for approval, together with:

611.76(5)(a) (a) The proposed articles and bylaws of the new stock corporation which shall comply with s. 611.12;

611.76(5)(b) (b) So much of the information specified in s. 611.13 (2) as the commissioner reasonably requires;

611.76(5)(c) (c) A projection of the planned or anticipated financial situation of the new corporation for 5 years after the conversion.

611.76(6) (6) Hearing.

611.76(6)(a) (a) The commissioner shall hold a hearing after receipt of a plan of conversion, notice of which shall be mailed to the last-known address of each person who was a policyholder of the corporation on the date of the resolution under sub. (2), together with a copy of the plan of conversion or a copy of a summary of the plan, if the commissioner approves the summary, and any comment the commissioner considers necessary for the adequate information of policyholders. If the plan of conversion is submitted under sub. (4m), the hearing shall be held not less than 10 days nor more than 30 days after notice is mailed. Failure to mail notice to a policyholder does not invalidate a proceeding under this section if the commissioner determines the domestic mutual has substantially complied with this subsection and has attempted in good faith to mail notice to all policyholders entitled to notice.

611.76(6)(b) (b) With regard to a mutual life insurance company, the notice, the plan or a summary of the plan, and any comments under par. (a) shall also be mailed to the commissioner of every jurisdiction in which the mutual life insurance company is authorized to do any business.

611.76(6)(c) (c) Any policyholder under par. (a) and any commissioner under par. (b) may present written or oral statements at the hearing and may present written statements within a period after the hearing specified by the commissioner. The commissioner shall take statements presented under this paragraph into consideration in making the determination under sub. (7).

611.76(7) (7) Approval by commissioner.

611.76(7)(a) (a) The commissioner shall approve the plan of conversion unless he or she finds that the plan violates the law or is contrary to the interests of policyholders or the public.

611.76(7)(b) (b) In determining the interests of the policyholders and the public, the commissioner shall consider whether the reorganization would be detrimental to the safety and soundness of the insurer or the contractual rights and reasonable expectations of the persons who are policyholders on or before the effective date of the reorganization. The commissioner shall also take into consideration any conclusions and recommendations on the subject of such reorganizations published by recognized organizations of professional life insurance actuaries. The commissioner may by rule establish standards applicable to such reorganizations.

611.76(8) (8) Approval by policyholders. After approval under sub. (7), the conversion plan shall be submitted to a vote of the persons who were policyholders of the mutual on the date of the resolution under sub. (2).

611.76(9) (9) Conversion. If the policyholders approve the conversion under sub. (8), the commissioner shall issue a new certificate of authority. The issuance of the certificate is the act of conversion, the mutual at once becomes a stock corporation and is no longer a mutual. The stock corporation shall be deemed to have been organized at the time the converted mutual was organized. The directors, officers, agents and employees of the mutual shall continue in like capacity with the stock corporation.

611.76(10) (10) Expenses. The corporation may not pay compensation of any kind to any person other than regular salaries to existing personnel, in connection with the proposed conversion, other than for clerical and mailing expenses, except that with the commissioner’s approval payment may be made at reasonable rates for printing costs and for legal and other professional fees for services actually rendered. All expenses of the conversion, including the expenses incurred by the commissioner and the prorated salaries of any insurance office staff members involved, shall be borne by the corporation being converted.

611.76(11) (11) Security regulation. The filing with the division of securities of a certified copy of the plan of conversion as approved by the commissioner constitutes registration under s. 551.305 of the securities authorized to be issued thereunder.

611.76 History History: 1971 c. 260; 1979 c. 102 ss. 107, 236 (5), (13); 1981 c. 314; 1983 a. 192, 215; 1985 a. 29, 215; 1995 a. 27; 1997 a. 79; 1999 a. 85; 2003 a. 33; 2007 a. 196; 2013 a. 279.

611.77 611.77 Conversion of assessable to nonassessable and nonassessable to assessable mutuals.

611.77(1) (1) Assessable to nonassessable. Whenever an assessable mutual accumulates enough surplus to satisfy the financial requirements for the operation of a nonassessable mutual under like conditions, it may apply for a certificate of authority authorizing it to sell nonassessable policies. The commissioner shall issue a certificate of authority designating it a nonassessable mutual if he or she finds that the applicant satisfies the requirements of the law and that the issuance of nonassessable policies will not endanger the interests of its insureds or the public. Policies issued thereafter shall be nonassessable; existing policies shall continue in effect and shall also become nonassessable.

611.77(2) (2) Nonassessable to assessable. A nonassessable mutual may apply to the commissioner for a certificate of authority designating it an assessable mutual. The commissioner shall issue the certificate if the law permits such a corporation to issue assessable policies and if he or she finds that the conversion will not endanger the interests of present or future insureds or of the public. All policies issued after conversion shall be assessable, and all policies in effect on the date of conversion shall be assessable except to the extent that there is a contract right then existing not to be assessed.

611.77 History History: 1971 c. 260; 1979 c. 102 s. 236 (5).

611.78 611.78 Transfer of business or assets.

611.78(1) (1) Sale, lease, exchange or mortgage of a stock corporation’s assets. Except as modified by subs. (2) and (3), ss. 180.1202, 180.1706 and 180.1708 (6) apply to stock corporations.

611.78(1m) (1m) Sale, lease, exchange or mortgage of a mutual’s assets.

611.78(1m)(a) (a) Except as modified by subs. (2) and (3), a sale, lease, exchange or other disposition of less than substantially all of the property and assets of a mutual, and the mortgage or pledge of any or all property and assets of a mutual, whether or not made in the usual and regular course of its affairs, may be made upon the terms and conditions authorized by the mutual’s board of directors. Unless otherwise provided by the articles of incorporation, consent of the members is not required for a sale, lease, exchange or other disposition of property, or for a mortgage or pledge of property, authorized under this paragraph.

611.78(1m)(b) (b) A sale, lease, exchange or other disposition of all or substantially all of the property and assets of a mutual may be made upon such terms and conditions as may be authorized in the following manner:

611.78(1m)(b)1. 1. If the articles of incorporation give members the right to vote on the sale, lease, exchange or other disposition of all or substantially all of the mutual’s property and assets, the board of directors shall adopt a resolution recommending the sale, lease, exchange or other disposition and directing that it be submitted to a vote at an annual or special meeting of the members. Written notice stating that the purpose, or one of the purposes, of the meeting is to consider the sale, lease, exchange or other disposition of all, or substantially all, of the property and assets of the mutual shall be given to each member entitled to vote at the meeting, within the time and in the manner provided by this chapter for providing notice of member meetings. At the meeting, the members may authorize the sale, lease, exchange or other disposition and may authorize the board of directors to fix any or all of the terms and conditions of the sale, lease, exchange or other disposition. The authorization shall be by the affirmative vote of at least two-thirds of the members present or represented by proxy at the meeting. After the authorization by a vote of the members, the board of directors, nevertheless, in its discretion, may abandon the sale, lease, exchange or other disposition, subject to the rights of 3rd parties under any contracts relating thereto, without further action or approval by the members.

611.78(1m)(b)2. 2. If the articles of incorporation do not give members the right to vote on the sale, lease, exchange or other disposition of all or substantially all of a mutual’s property and assets, the sale, lease, exchange or other disposition may be authorized by the vote of the majority of the directors in office.

611.78(2) (2) Report to commissioner. Any action by which an insurance corporation proposes to transfer to another person or to reinsure any part of its insurance business, other than in the normal and usual course of business, or to sell, lease, exchange, mortgage, pledge or otherwise dispose of or encumber more than one-fourth of its assets, shall be reported to the commissioner not less than 30 days in advance of the proposed effective date. The commissioner may defer the effective date for an additional period not exceeding 30 days by written notice to the corporation before expiration of the initial 30-day period.

611.78(3) (3) Disapproval. The commissioner may, within the 30-day period or its extension, prohibit the proposed action if it is contrary to law or to the interests of insureds or the public or if it will make possible the circumvention of any of the requirements of ss. 611.71 to 611.77.

611.78 History History: 1971 c. 260; 1979 c. 102; 1989 a. 303; 1997 a. 79; 1999 a. 30.

611.785 611.785 Dissenters’ rights. Sections 180.1301 to 180.1331 apply to stock corporations, except as provided in s. 611.71 (5) (b) with respect to a shareholder’s right to dissent from a share exchange consummated under s. 611.71.

611.785 History History: 1989 a. 303.

611.79 611.79 Conversion of a domestic mutual life insurance company into a fraternal. A domestic mutual life insurance company may be converted into a fraternal under ch. 614, as follows:

611.79(1) (1) Conversion plan. The board of directors of the company shall adopt a plan of conversion stating:

611.79(1)(a) (a) The reasons for and the purposes of the proposed action;

611.79(1)(b) (b) The proposed articles and bylaws for the new fraternal; and

611.79(1)(c) (c) The proposed procedure and estimated expenses for implementing the conversion.

611.79(2) (2) Approval by commissioner. The plan shall be filed with the commissioner for approval, together with so much of the information under s. 614.13 (2) as the commissioner reasonably requires. The commissioner shall approve the plan unless finding, after a hearing, that it would be contrary to the law, that the new fraternal would not satisfy the requirements for a certificate of authority under s. 611.20 as incorporated by s. 614.20, or that the plan would be contrary to the interests of policyholders or the public.

611.79(3) (3) Approval by members. After being approved by the commissioner, the plan shall be submitted to the policyholders for their approval.

611.79(4) (4) Report to commissioner. A copy of the resolution adopted by the members shall be filed with the commissioner, indicating the number of policyholders voting, the method of voting and the number of votes cast in favor of the plan.

611.79(5) (5) Certificate of authority. If all requirements of the law are met, the commissioner shall issue a certificate of authority for the new fraternal. Thereupon the mutual shall cease its legal existence and the corporate existence of the new fraternal shall begin, but it shall be deemed to have been incorporated as of the date the converted mutual was incorporated. The new fraternal shall have all the assets and be liable for all of the obligations of the converted mutual. The commissioner may grant a period not exceeding one year for adjustment to the requirements of ch. 614, specifying the extent to which particular provisions of ch. 614 do not apply.

611.79 History History: 1975 c. 373, 421.

611.79 Note Legislative Council Note, 1975: This provision is not likely to be used often but it is desirable in order to enlarge the options open to legitimate organizations. If members of a mutual wish to accept the additional restrictions imposed by fraternal law in return for its benefits, they should be free to do so. [Bill 643-S]

subch. VI of ch. 611 SUBCHAPTER VI

MISCELLANEOUS PROVISIONS

611.94 611.94 Trustee of proceeds. Section 632.42 applies to insurers doing a life insurance business.

611.94 History History: 1979 c. 102.