Chapter 644

644.14   Member rights.

644.15   Sale of voting stock; subscription rights; dividends.

644.16   Board of directors, committees and records.

644.17   Removal of officers.

644.18   Directors’ and officers’ liability and indemnification.

644.19   Executive compensation.

644.20   Management contract services.

644.21   Annual report of domestic mutual holding company.

644.22   Securities regulation.

644.23   Authority to issue mutual bonds and contribution notes.

644.24   Subsequent restructuring.

644.25   Conversion of domestic mutual holding company into a stock corporation.

644.26   Transfer of business or assets of mutual holding companies.

644.27   Merger and consolidation of mutual holding companies.

644.28   Voluntary dissolution of domestic mutual holding companies.

644.29   Involuntary dissolution of domestic mutual holding companies.

Ch. 644 Cross-reference Cross-reference: See definitions in ss. 600.03, 610.01 and 628.02.

Ch. 644 Cross-reference Cross-reference: See also ch. Ins 40, Wis. adm. code.

subch. I of ch. 644 SUBCHAPTER I

GENERAL PROVISIONS

644.02 644.02 Definitions.

644.02(1) (1) In this chapter, unless the context otherwise requires:

644.02(1)(a) (a) “Board” means the board of directors or board of trustees, as the case may be, of the converting insurance company.

644.02(1)(b) (b) “Converted insurance company” means an insurance company that converted under this chapter from a mutual insurance company to a stock insurance company, or from a service insurance corporation to a mutual insurance company and then to a stock insurance company, and formed a mutual holding company.

644.02(1)(c) (c) “Converted life insurance company” means a life insurance company that converted under this chapter from a mutual life insurance company to a stock insurance company and formed a mutual holding company.

644.02(1)(d) (d) “Converting insurance company” means a domestic mutual insurance company or a domestic service insurance corporation undergoing restructuring under this chapter.

644.02(1)(e) (e) “Dividend plan” means a plan to provide reasonable assurances as to the policyholder dividend scales of the participating individual policies and contracts of a converted insurance company in the life insurance business in force on the date specified in the dividend plan for which the insurer had an experience-based dividend scale payable in the year of the plan by creating any of the following:

644.02(1)(e)1. 1. Covenants of the converted insurance company or the mutual holding company, or both.

644.02(1)(e)2. 2. One or more closed blocks. Assets of the converted insurance company shall be allocated to the closed block in an amount that produces cash flows, together with anticipated revenues from the closed block business, expected to be sufficient to support the closed block business, including provision for payment of claims and those expenses and taxes specified in the dividend plan, and provision for continuation of the dividend scales in effect on the effective date of the restructuring under this chapter if the experience underlying such dividend scales continues. Any plan under this subdivision may provide for conditions under which the converted insurance company may cease to maintain any closed block and for the allocation of assets to that closed block.

644.02(1)(e)3. 3. A combination of subds. 1. and 2. or any other means of providing reasonable assurances that the commissioner approves.

644.02(1)(f) (f) “Dividend scales” means the equitable apportionment of divisible surplus by the board.

644.02(1)(g) (g) “Divisible surplus” means the annual distribution described in s. 632.62 (4) (b) as a payment made to policyholders as determined by the board.

644.02(1)(h) (h) “Intermediate stock holding company” means a corporation that satisfies all of the following:

644.02(1)(h)1. 1. The corporation was incorporated under ch. 180.

644.02(1)(h)2. 2. At least 51 percent of the corporation’s voting stock is held directly or indirectly by a mutual holding company.

644.02(1)(h)3. 3. The corporation holds directly or indirectly at least 51 percent of the voting stock of a converted insurance company.

644.02(1)(i) (i) “Member” means any of the following:

644.02(1)(i)1. 1. For a converting mutual insurance company, a policyholder who, by the records of the converting insurance company and by its articles of incorporation and bylaws, is a holder of a membership interest in the converting insurance company.

644.02(1)(i)2. 2. For a converting service insurance corporation, a policyholder shown on the books and records of the converting insurance company on the effective date of the restructuring.

644.02(1)(j) (j) “Membership interests” means the voting rights of a member arising under the statutes and the articles of incorporation and bylaws of the converting insurance company, including the right to vote for the board and the right to vote on any plan of conversion, voluntary dissolution or amendment of the articles of incorporation. On and after the effective date of the restructuring, “membership interests” means the voting rights of a member arising under the statutes and the articles of incorporation and bylaws of the mutual holding company, including the right to vote for the board and the right to vote on any plan of conversion, voluntary dissolution or amendment of the articles of incorporation. “Membership interests” does not include members’ rights in surplus, if any.

644.02(1)(k) (k) “Mutual holding company” means a mutual insurance holding company.

644.02(1)(L) (L) “Policyholder” means the person identified in the records of the converting insurance company or the converted insurance company under s. 611.51 (9) (c).

644.02(1)(m) (m) “Rights in surplus” means any rights of a member arising under the converting insurance company’s articles of incorporation or ch. 611 to a return of the surplus in respect of policies or contracts of the converting insurance company that may exist with regard to the surplus not apportioned or declared by its board as divisible surplus, including rights of members to a distribution of such surplus in dissolution or conversion proceedings under ch. 611. On and after the effective date of the restructuring, “rights in surplus” means any rights of a member of the mutual holding company arising under its articles of incorporation or this chapter to the net worth of the mutual holding company, including rights of members of the mutual holding company to a distribution of any portion of the net worth of the mutual holding company in conversion proceedings under s. 644.25 or dissolution proceedings under s. 644.28 or 644.29. “Rights in surplus” shall not include any right to divisible surplus expressly conferred solely by the terms of an insurance policy or annuity contract.

644.02(1)(n) (n) “Voting stock” means stock of any class or any ownership interest having voting power for the election of directors, trustees or management. All references to a specified percentage of voting stock shall mean stock having the specified percentage of the voting power for the election of directors, trustees or management, including stock having such power only by reason of the happening of a contingency.

644.02(2) (2) Except when inconsistent with the definitions given in this chapter, the definitions of ss. 600.03 and 610.01 apply to this chapter. In the provisions of chs. 181 and 611 that are made applicable to this chapter or incorporated into this chapter by reference, all of the following apply:

644.02(2)(a) (a) “Corporation” includes a mutual holding company formed under this chapter.

644.02(2)(b) (b) “Department” means the commissioner.

644.02(2)(c) (c) “Mutual” includes a mutual holding company.

644.02(2)(d) (d) “Nonassessable mutual” includes a mutual holding company.

644.02(2)(e) (e) “Policyholder” includes a member.

644.02(2)(f) (f) “This chapter” includes this chapter.

644.02 History History: 1997 a. 227.

644.03 644.03 Scope and purposes.

644.03(1) (1) Scope. This chapter applies to all mutual insurance holding companies organized under the laws of this state.

644.03(2) (2) Purposes.

644.03(2)(a) (a) The purposes of this chapter are to provide complete, self-contained procedures for the formation of mutual insurance holding companies. Subject to par. (b), a corporation organized as a mutual insurance holding company under this chapter may be organized for any lawful purpose and shall hold directly or indirectly as a subsidiary at least one stock insurance company converted from a mutual insurance company or from a service insurance corporation that converted to a mutual insurance company. A mutual holding company is not an insurer.

644.03(2)(b) (b) A corporation organized as a mutual insurance holding company under this chapter may engage, directly or indirectly, in a business that is subject to regulation under another statute of this state only if not prohibited by, and subject to all limitations of, the other statute.

644.03 History History: 1997 a. 227.

644.04 644.04 Restructuring.

644.04(1) (1) On the effective date of a restructuring under this chapter, all of the following shall occur:

644.04(1)(a) (a) The converting insurance company shall become a domestic stock insurance company.

644.04(1)(b) (b) All membership interests and rights in surplus of the converting insurance company shall be extinguished and the members of the converting insurance company shall become members of the mutual holding company in accordance with this chapter and the articles of incorporation and bylaws of the mutual holding company.

644.04(1)(c) (c) All shares of the voting stock of the converting insurance company shall be acquired and retained by the mutual holding company or, if created, an intermediate stock holding company.

644.04(1)(d) (d) All of the shares of voting stock of any intermediate stock holding company shall be acquired and retained by the mutual holding company.

644.04(2) (2) Any intermediate stock holding company created at the time of the restructuring to hold the stock of the converting insurance company shall be incorporated under ch. 180 and may engage in any business or activity permitted by ch. 180.

644.04(3) (3) The converted insurance company, subject to s. 611.33, and any intermediate stock holding company may thereafter issue to 3rd parties debt securities, stock other than voting stock and, subject to s. 644.15, voting stock, so long as all of the following are true:

644.04(3)(a) (a) No shares of stock representing more than 49 percent of the voting power of all issued and outstanding voting stock of either the converted insurance company or the intermediate stock holding company, if any, are issued to 3rd parties.

644.04(3)(b) (b) At least 51 percent of the voting stock of the converted insurance company is at all times owned by the mutual holding company or by the intermediate stock holding company, at least 51 percent of whose voting stock is held by the mutual holding company, and such 51 percent interests in the converted insurance company and any intermediate stock holding company are not conveyed, transferred, assigned, pledged, subjected to a security interest or lien, placed in a voting trust, encumbered or otherwise hypothecated or alienated by the mutual holding company or by the intermediate stock holding company. Any conveyance, transfer, assignment, pledge, security interest, lien, placement in a voting trust, encumbrance, or hypothecation or alienation of, in or on the 51 percent of the voting shares of the converted insurance company or the intermediate stock holding company in violation of this paragraph shall be void in inverse chronological order of the date of such conveyance, transfer, assignment, pledge, security interest, lien, placement in a voting trust, encumbrance, hypothecation or alienation as to the shares necessary to constitute 51 percent of such voting stock.

644.04(4) (4) For purposes of the calculations under this section and under s. 644.13, any issued and outstanding securities of the converted insurance company or any intermediate stock holding company that are convertible into voting stock are considered to be issued and outstanding voting stock.

644.04 History History: 1997 a. 227; 1999 a. 30.

644.05 644.05 General corporate powers and procedures.

644.05(1) (1) Powers. Subject to s. 644.19 (2) and (3), s. 181.0302 (intro.), (1) to (15), (18) and (19) applies to mutual holding companies.

644.05(2) (2) Effect of unauthorized corporate acts. Section 181.0304 applies to mutual holding companies, except that, for purposes of this subsection, “attorney general” used in s. 181.0304 (3) means “commissioner”.

644.05(4) (4) Waiver of notice and informal action by members or directors. Sections 181.0704, 181.0706, 181.0821 and 181.0823 apply to mutual holding companies. For purposes of this subsection, “board” used in s. 181.0821 includes “committee of the board of a mutual holding company”.

644.05 History History: 1997 a. 227; 1999 a. 30.

644.06 644.06 Registered agent for service of process. Sections 601.715, 601.72 (1) (a), (2) and (3) to (5) and 601.73 apply to mutual holding companies, except that, for purposes of this chapter, “authorized insurer” used in s. 601.715 means mutual holding company and “insurer” used in s. 601.72 (1) (a) and (2) means mutual holding company.

644.06 History History: 1997 a. 227.

subch. II of ch. 644 SUBCHAPTER II

MUTUAL INSURANCE HOLDING COMPANIES

644.07 644.07 Restructuring procedures.

644.07(1) (1) Formation of mutual holding company.

644.07(1)(a) (a)

644.07(1)(a)1. 1. A domestic mutual insurance company organized under ch. 611 may restructure by forming a mutual holding company in accordance with this section.

644.07(1)(a)2. 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.

644.07(1)(b) (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”.

644.07(2) (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.

644.07(3) (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.

644.07(4) (4) Submission of plan. The board shall submit the mutual holding company plan to the commissioner for approval, together with all of the following: