H.F. 2416 Section 1. NEW SECTION . 512.1 Declarations and purpose. 1 1. It is declared that policyholders of a mutual company 2 have contractual rights to insurance coverage and certain 3 membership rights consisting principally of the right to 4 elect directors of a mutual company, the right to vote on 5 certain fundamental transactions undertaken by a mutual 6 company, and the right to share in surplus in the event of a 7 liquidation of a solvent mutual company. It is declared that 8 the membership rights of policyholders in a domestic mutual 9 company, or policyholders of a foreign mutual company who vote 10 to redomesticate to Iowa pursuant to section 512.5, are not 11 equivalent to an ownership interest in such mutual company. 12 Therefore, in connection with the mutual-to-stock conversion of 13 a mutual company, adequate compensation for the relinquishment 14 of such membership right shall be, at each policyholder’s 15 election either of the following: 16 a. The exercise of a first priority subscription right to 17 purchase stock in the converting company or a holding company 18 for such converting company. 19 b. The right to receive cash in exchange for the redemption 20 of such subscription right by such mutual company. 21 2. The purpose of this chapter shall be the following: 22 a. To provide for the mutual-to-stock conversion of a 23 mutual company in a manner substantially consistent with the 24 manner in which a mutual savings institution converts from a 25 mutual-to-stock form under federal law and regulation. 26 b. To facilitate the recapitalization of the insurance 27 industry nationally by establishing a proven method of capital 28 formation for companies that elect to establish a domicile in 29 this state. 30 Sec. 2. NEW SECTION . 512.2 Short title. 31 This chapter shall be known and may be cited as the “Iowa 32 Insurance Company Mutual-to-Stock Conversion Act” . 33 Sec. 3. NEW SECTION . 512.3 Definitions. 34 As used in this chapter: 35 -1- LSB 5906HV (1) 85 rj/rj 1/ 27

H.F. 2416 1. “Capital stock” means common or preferred stock or any 1 hybrid security or other equity security issued by a converted 2 stock company or other company or entity pursuant to the 3 exercise of subscription rights granted pursuant to section 4 512.6, subsection 1, paragraph “c” . 5 2. “Commissioner” means the commissioner of insurance 6 appointed pursuant to section 505.2. 7 3. “Converted stock company” means a stock company that 8 converted from a mutual company to a stock company under this 9 chapter or any successor to the stock company. 10 4. “Division” means the insurance division of the department 11 of commerce. 12 5. “Domestic mutual company” means a mutual insurance 13 company domiciled in this state and organized under chapter 508 14 or 515. 15 6. “Eligible member” means a member of a mutual company 16 whose policy is in force on the date the mutual company’s 17 governing body adopts a plan of conversion or such earlier date 18 as the mutual company may establish with the consent of the 19 commissioner. A person insured under a group policy is not 20 an eligible member. A person whose policy becomes effective 21 after the governing body adopts the plan but before the plan’s 22 effective date is not an eligible member but shall have those 23 rights established under section 512.11. 24 7. “Foreign mutual company” means a mutual insurance company 25 domiciled in a jurisdiction other than this state and organized 26 in a similar manner to a domestic mutual company organized 27 under chapter 508 or 515. 28 8. “Mutual company” means a mutual insurance company that 29 is seeking to convert to a stock company under this chapter 30 including a domestic mutual company and a foreign mutual 31 company that has applied to redomesticate to this state with an 32 intent to file an application to convert from a mutual company 33 to a stock company under this chapter. 34 9. a. “Mutual holding company” means any of the following 35 -2- LSB 5906HV (1) 85 rj/rj 2/ 27

H.F. 2416 whose certificate of incorporation includes the provisions set 1 out in paragraph “b” : 2 (1) A nonstock corporation resulting from a reorganization 3 of a mutual company under this chapter. 4 (2) A nonstock corporation resulting from a reorganization 5 of a mutual company under the laws of any other jurisdiction 6 that subsequently redomesticates in this state. 7 (3) A nonstock corporation incorporated in this state 8 surviving or resulting from a merger or consolidation with a 9 nonstock corporation that resulted from a reorganization of a 10 mutual company under the laws of any other jurisdiction. 11 b. The certificate of incorporation of a mutual holding 12 company shall include provisions setting forth all of the 13 following: 14 (1) That the mutual holding company is a mutual holding 15 company as defined in this chapter. 16 (2) That the mutual holding company shall hold not less 17 than a majority of the shares of voting stock of a converted 18 stock company or intermediate holding company, which in turn 19 holds, directly or indirectly, all of the voting stock of the 20 converted stock company. 21 (3) That the mutual holding company is not authorized to 22 issue any capital stock except pursuant to a conversion in 23 accordance with the provisions of this chapter. 24 (4) That the mutual holding company’s members shall have 25 the rights specified in this chapter and in its certificate of 26 incorporation and bylaws. 27 (5) That the mutual holding company’s assets shall be 28 subject to inclusion in the estate of the converted company in 29 any rehabilitation or insolvency proceedings initiated by the 30 commissioner. 31 10. “Participating policy” means a policy of a mutual 32 company that grants a holder the right to receive dividends if, 33 as, and when declared by the mutual company. 34 11. “Person” means an individual, a corporation, a limited 35 -3- LSB 5906HV (1) 85 rj/rj 3/ 27

H.F. 2416 liability company, a partnership, an association, a joint stock 1 company, a trust, an unincorporated organization, a similar 2 entity, or a combination of the foregoing acting in concert. 3 12. “Plan of conversion” or “plan” means a plan adopted by a 4 mutual company’s governing body to convert the mutual company 5 into a stock company under this chapter. 6 13. “Policy” means an insurance policy, including an annuity 7 contract. 8 14. “Standby investor” means a person that has agreed in 9 writing to purchase all or a portion of the capital stock to be 10 sold in a mutual-to-stock conversion that is not subscribed by 11 eligible members. 12 15. “Stock company” means a stock insurance company that 13 meets all of the current requirements for admission to do 14 business as a domestic company in this state under chapter 508 15 or 515. 16 16. “Subscription right” means the nontransferable right 17 to purchase, for a period of not less than twenty or more than 18 thirty-five days, the stock of the converted stock company, 19 its proposed stock holding company, or an unaffiliated stock 20 company, or other corporation or entity that will acquire the 21 converted stock company through the purchase of all the stock 22 of the converted stock company. 23 17. “Voting member” means a member who is an eligible member 24 and is also a member of the mutual company as of a date not more 25 than ninety days prior to the date of the meeting at which the 26 plan shall be voted upon by members. 27 Sec. 4. NEW SECTION . 512.4 Adoption of plan of conversion. 28 1. A plan of conversion shall not become effective unless 29 the mutual company seeking to convert to a stock company 30 shall have adopted, by the affirmative vote of not less than 31 two-thirds of its governing body and otherwise in accordance 32 with law, a plan consistent with the requirements of sections 33 512.6, 512.7, and 512.8 or of section 512.9. At any time 34 before approval of a plan by the commissioner, the mutual 35 -4- LSB 5906HV (1) 85 rj/rj 4/ 27

H.F. 2416 company, by the affirmative vote of not less than a majority of 1 its governing body, may amend or withdraw the plan. 2 2. Before a mutual company’s eligible members may vote on 3 approval of a plan, a mutual company whose governing body has 4 adopted a plan shall file all of the following documents with 5 the commissioner within ninety days after adoption of the plan 6 together with the specified application fee: 7 a. The plan, including the independent evaluation required 8 by section 512.6, subsection 4. 9 b. The form of notice required by subsection 7. 10 c. The form of proxy to be solicited from eligible members 11 pursuant to subsection 8. 12 d. The form of notice required by section 512.11 to persons 13 whose policies are issued after adoption of the plan but before 14 its effective date. 15 e. The proposed certificate of incorporation and bylaws of 16 the converted stock company. 17 f. The acquisition of control statement. 18 g. An application fee equal to the greater of ten thousand 19 dollars or an amount equal to one-tenth of one percent of 20 the estimated pro forma market value of the converted stock 21 company as determined in accordance with section 512.6, 22 subsection 4. If such value is expressed as a range of values, 23 the application fee shall be based upon the midpoint of the 24 range. For good cause shown, the commissioner may waive the 25 application fee in whole or in part, or permit a portion of 26 the application fee to be deferred until completion of the 27 conversion. 28 h. Such other information as the commissioner may request. 29 3. Upon filing of the foregoing documents with the 30 commissioner, the mutual company shall send to eligible members 31 a notice advising eligible members of the adoption and filing 32 of the plan, their ability to provide the commissioner and the 33 mutual company with comments on the plan within thirty days 34 of the date of such notice, and procedures for providing such 35 -5- LSB 5906HV (1) 85 rj/rj 5/ 27

H.F. 2416 comments. 1 4. The commissioner shall immediately give written notice 2 to the mutual company of any decision and, in the event of 3 disapproval, a statement in detail of the reasons for the 4 decision. The commissioner shall approve the plan if the 5 commissioner finds all of the following: 6 a. The plan complies with this chapter. 7 b. The plan will not prejudice the interests of the eligible 8 members. 9 c. The plan’s method of allocating subscription rights is 10 fair and equitable. 11 5. The commissioner may retain, at the mutual company’s 12 expense, any qualified expert not otherwise a part of the 13 commissioner’s staff, including counsel and financial advisors, 14 to assist in reviewing the plan and the independent evaluations 15 required under section 512.6, subsection 4. 16 6. The commissioner may order a hearing on whether the 17 terms of the plan comply with this chapter after giving written 18 notice by mail or publication to the mutual company and other 19 interested persons, all of whom have the right to appear at the 20 hearing. 21 7. All voting members shall be sent notice of the members’ 22 meeting to vote on the plan. The notice shall briefly but 23 fairly describe the proposed plan, shall inform the voting 24 member of the voting member’s right to vote upon the plan, 25 and shall be sent to each voting member’s last known address, 26 as shown on the mutual company’s records. If the meeting to 27 vote upon the plan is held during the mutual company’s annual 28 meeting of policyholders, only a combined notice of the meeting 29 is required. 30 8. The plan shall be voted upon by voting members and shall 31 be adopted upon receiving the affirmative vote of at least 32 two-thirds of the votes cast at the meeting. Voting members 33 entitled to vote upon the proposed plan may vote in person or 34 by proxy. The number of votes each voting member may cast 35 -6- LSB 5906HV (1) 85 rj/rj 6/ 27

H.F. 2416 shall be determined by the mutual company’s bylaws. If the 1 bylaws are silent, each voting member may cast one vote. 2 9. The certificate of incorporation of the converted 3 stock company shall be considered at the meeting of the 4 voting members called for the purpose of adopting the plan and 5 shall require for adoption the affirmative vote of at least 6 two-thirds of the votes cast at the meeting. 7 10. Within thirty days after the voting members have 8 approved the plan in accordance with the requirements of this 9 section, the converted stock company shall file all of the 10 following documents with the commissioner: 11 a. The minutes of the meeting of the voting members at which 12 the plan was approved which shall include the record of total 13 votes cast and votes cast in favor of the plan. 14 b. The certificate of incorporation and bylaws of the 15 converted stock company. 16 Sec. 5. NEW SECTION . 512.5 Redomestication and conversion. 17 1. A foreign mutual company or foreign mutual holding 18 company that has filed an application for redomestication 19 may file an application for conversion under this chapter 20 promptly after completion of the redomestication or promptly 21 after approval of the redomestication by the members of the 22 foreign mutual company or foreign mutual holding company if 23 such a member vote is required under the laws of the state 24 of domicile of the foreign mutual company or foreign mutual 25 holding company. A redomestication application shall contain 26 such information as the commissioner may require. If the state 27 of domicile of the foreign mutual company or foreign mutual 28 holding company does not object to the redomestication and the 29 members of the foreign mutual company or foreign mutual holding 30 company, to the extent required, approve the redomestication, 31 the redomestication application of a foreign mutual company 32 or foreign mutual holding company shall not be denied solely 33 because the applicant has indicated its intention to avail 34 itself of the provisions of this chapter. 35 -7- LSB 5906HV (1) 85 rj/rj 7/ 27

H.F. 2416 2. In addition to any requirements imposed by the existing 1 state of domicile with respect to approval of redomestication 2 by its voting members, a foreign mutual company that files an 3 application for redomestication under this section also shall 4 provide to its voting members a comparison of the method of 5 mutual-to-stock conversion in its existing state of domicile 6 and the method of mutual-to-stock conversion established by 7 this chapter. 8 3. Any order approving the redomestication of a foreign 9 mutual company or foreign mutual holding company shall contain 10 such terms and conditions as the commissioner requires. 11 4. A foreign mutual company or foreign mutual holding 12 company that redomesticates under this section, within ten 13 days of the date of redomestication, shall adopt resolutions 14 ratifying any previously adopted plan of conversion and 15 file such resolutions as an amendment to the application for 16 conversion. The commissioner may deem any failure to file such 17 ratifying resolutions as a withdrawal of the application for 18 conversion. 19 5. This chapter is not intended or shall not be deemed 20 to supersede or conflict with the requirements of the state 21 of domicile of any foreign mutual company or foreign mutual 22 holding company regarding approval of redomestication. 23 6. Except to the extent specifically provided by this 24 section, a plan of conversion shall be adopted as required by 25 section 512.4 and shall be consistent with the requirements of 26 sections 512.6, 512.7, and 512.8 or of section 512.9. 27 Sec. 6. NEW SECTION . 512.6 Required provisions of plan of 28 conversion. 29 1. All of the following provisions shall be included in a 30 plan of conversion: 31 a. The reasons for the proposed conversion. 32 b. The effect of conversion on existing policies, including 33 all of the following: 34 (1) A provision that all policies in force on the effective 35 -8- LSB 5906HV (1) 85 rj/rj 8/ 27

H.F. 2416 date of conversion continue to remain in force under the terms 1 of the policies, except that the following rights, to the 2 extent the rights existed in the mutual company, shall be 3 extinguished on the effective date of the conversion: 4 (a) Any voting rights of the policyholders provided under 5 the policies. 6 (b) Except as provided under subparagraph (2), any right to 7 share in the surplus of the mutual company, unless such right 8 is expressly provided for under the provisions of the existing 9 policy. 10 (c) Any assessment provisions provided for under certain 11 types of policies. 12 (2) Except as provided in subparagraph (3), a provision 13 that holders of participating policies in effect on the date 14 of conversion continue to have a right to receive dividends as 15 provided in the participating policies, if any. 16 (3) Except for the mutual company’s life policies, 17 participating guaranteed renewable accident and health 18 policies, and participating guaranteed renewable noncancelable 19 accident and health policies, a provision that upon the renewal 20 date of a participating policy, the converted stock company 21 may issue the member a nonparticipating policy as a substitute 22 for the participating policy. This subparagraph shall not be 23 construed to permit the substitution, during the term of a 24 policy, of a nonexperience-rated policy for an experience-rated 25 policy. 26 c. The grant of subscription rights to eligible members, 27 including both of the following: 28 (1) (a) A provision that each eligible member is to 29 receive, without payment, nontransferable subscription rights 30 to purchase the capital stock of the converted stock company 31 and that, in the aggregate, all eligible members shall have the 32 right, prior to the right of any other party, to purchase one 33 hundred percent of the capital stock of the converted stock 34 company, exclusive of any shares of capital stock required to 35 -9- LSB 5906HV (1) 85 rj/rj 9/ 27

H.F. 2416 be sold or distributed to the holders of surplus notes, if any, 1 and capital stock purchased by the company’s tax-qualified 2 employee stock benefit plan that is in excess of the total 3 price of the capital stock established under subsection 4, as 4 permitted by section 512.8, subsection 3. As an alternative to 5 subscription rights in the converted stock company, the plan 6 may provide that each eligible member is to receive, without 7 payment, nontransferable subscription rights to purchase a 8 portion of the capital stock of one of the following: 9 (i) A corporation or entity organized for the purpose of 10 purchasing and holding all the stock of the converted stock 11 company. 12 (ii) A stock company owned by the mutual company into which 13 the mutual company will be merged. 14 (iii) An unaffiliated stock company or other corporation or 15 entity that will purchase all the stock of the converted stock 16 company. 17 (b) For purposes of any plan, the following transfers of 18 subscription rights shall not be deemed an unpermitted transfer 19 under this chapter: 20 (i) Transfer of subscription rights from an individual to 21 such individual and such individual’s spouse or children or to 22 a trust or other estate or wealth planning entity established 23 for the benefit of such individual, or such individual’s spouse 24 or children. 25 (ii) Transfer of subscription rights from an individual to 26 such individual’s individual or joint individual retirement 27 account, or other tax-qualified retirement plan. 28 (iii) Transfer of subscription rights from an entity to the 29 shareholders, partners, or members of such entity. 30 (iv) Transfer of subscription rights from the holder of such 31 rights to the mutual company, its proposed holding company, 32 or an unaffiliated stock company or other corporation or 33 entity that will purchase all the stock of the converted stock 34 company as provided in subparagraph division (a), subparagraph 35 -10- LSB 5906HV (1) 85 rj/rj 10/ 27

H.F. 2416 subdivision (iii). 1 (2) A provision that the subscription rights shall be 2 allocated in whole shares among the eligible members using a 3 fair and equitable formula. The formula need not allocate 4 subscription rights to eligible members on a pro rata basis 5 based on premium payments or contributions to surplus, but 6 may take into account how the different classes of policies 7 of the eligible members contributed to the surplus of the 8 mutual company or any other factors that may be fair or 9 equitable. Allocation of subscription rights on a per capita 10 basis shall be entitled to a presumption that such method is 11 fair, subject to rebuttal of fairness by clear and convincing 12 evidence. In accordance with section 512.4, subsection 5, the 13 commissioner may retain an independent consultant to assist in 14 the determination that the allocation of subscription rights 15 is fair and equitable. 16 2. The plan shall provide a fair and equitable means 17 for allocating shares of capital stock in the event of an 18 oversubscription to shares by eligible members exercising 19 subscription rights received under subsection 1, paragraph “c” . 20 3. The plan shall provide that any shares of capital stock 21 not subscribed to by eligible members exercising subscription 22 rights received under subsection 1, paragraph “c” , shall be 23 sold in a public offering or to another corporation or entity 24 that is participating in the plan, as provided in subsection 25 1, paragraph “c” , subparagraph (1). If the number of shares of 26 capital stock not subscribed by eligible members is so small in 27 number or other factors exist that do not warrant the time or 28 expense of a public offering, or warrant the participation of 29 standby investors to facilitate completion of the conversion, 30 the plan may provide for sale of the unsubscribed shares 31 through a private placement or other alternative method 32 approved by the commissioner that is fair and equitable to 33 eligible members. 34 4. The plan shall provide for the preparation of a valuation 35 -11- LSB 5906HV (1) 85 rj/rj 11/ 27

H.F. 2416 by a qualified independent expert that establishes all of the 1 following: 2 a. The dollar amount of the capital stock for which 3 subscription rights must be granted pursuant to subsection 1, 4 paragraph “c” , which shall be equal to the estimated pro forma 5 market value of the converted stock company. The qualified 6 independent expert may do all of the following: 7 (1) To the extent feasible, determine the pro forma market 8 value by reference to a peer group of stock companies and the 9 application of generally accepted valuation techniques. 10 (2) State the pro forma market value of the converted stock 11 company as a range of value. 12 (3) Establish the value as the value that is estimated to be 13 necessary to attract full subscription for the shares. 14 b. The dollar value of a subscription right based upon 15 the application of the Black-Scholes option pricing model or 16 another generally accepted option pricing model. In connection 17 with the determination of stock price volatility or other 18 valuation inputs used in option pricing models, the qualified 19 independent expert may assume that the attributes of the 20 converted stock company will be substantially similar to the 21 attributes of the stock of the peer companies used to determine 22 the estimated pro forma market value of the converted stock 23 company. Solely for purposes of determining the value of a 24 subscription right, the term of a subscription right shall be 25 deemed to be a minimum of ninety days. 26 5. The plan shall provide that each eligible member 27 shall be given the right to require the mutual company to 28 redeem such subscription rights, in lieu of the exercise of 29 subscription rights allocated to such eligible member, at a 30 price equal to the number of such subscription rights allocated 31 to such eligible member multiplied by the dollar value of a 32 subscription right as determined by the qualified independent 33 expert pursuant to subsection 4, paragraph “b” . The obligation 34 of the mutual company to redeem such subscription rights shall 35 -12- LSB 5906HV (1) 85 rj/rj 12/ 27

H.F. 2416 arise only upon the effective date of the plan as provided 1 in section 512.10. The redemption price payable to each 2 eligible member shall be paid to such eligible member within 3 thirty days of the effective date of the plan. Alternatively, 4 the converted stock company may, but shall not be required 5 to, offer each eligible member the option of receiving the 6 redemption amount in cash or having such redemption amount 7 credited against future premium payments. An eligible member 8 that does not exercise such eligible member’s subscription 9 rights and also fails to affirmatively request redemption 10 of such subscription rights before the expiration of the 11 subscription offering, nevertheless shall be deemed to have 12 requested redemption of such eligible member’s subscription 13 rights and shall receive the redemption amount in cash in the 14 manner otherwise provided in this subsection. 15 6. The plan shall set the purchase price per share of 16 capital stock equal to any reasonable amount. However, the 17 minimum subscription amount required of any eligible member 18 cannot exceed five hundred dollars, but the plan may provide 19 that the minimum number of shares any person may purchase 20 pursuant to the plan is twenty-five shares. The purchase price 21 per share at which capital stock is offered to persons who are 22 not eligible members may be greater than but not less than the 23 purchase price per share at which capital stock is offered to 24 eligible members. 25 7. The plan shall provide that any person or group of 26 persons acting in concert shall not acquire, in the public 27 offering or pursuant to the exercise of subscription rights, 28 more than five percent of the capital stock of the converted 29 stock company or the stock of another corporation that is 30 participating in the plan, as provided in subsection 1, 31 paragraph “c” , subparagraph (1), subparagraph division (a), 32 subparagraph subdivision (iii), except with the approval of the 33 commissioner. This limitation does not apply to any entity 34 that is to purchase one hundred percent of the capital stock 35 -13- LSB 5906HV (1) 85 rj/rj 13/ 27

H.F. 2416 of the converted stock company as part of the plan approved 1 by the commissioner or to any person that acts as a standby 2 investor of the capital stock of the converted stock company 3 for an amount equal to ten percent or more of the capital stock 4 of the converted stock company, provided that in each case such 5 purchase by a standby investor of ten percent or more of the 6 capital stock of the converted stock company is approved by the 7 commissioner in accordance with the law of this state following 8 the filing of an acquisition of control statement. 9 8. The plan shall provide that a director or officer or 10 person acting in concert with a director or officer of the 11 mutual company shall not acquire any capital stock of the 12 converted stock company or the stock of another corporation 13 that is participating in the conversion plan, as provided in 14 subsection 1, paragraph “c” , subparagraph (1), subparagraph 15 division (a), subparagraph subdivision (iii), for three 16 years after the effective date of the plan, except through a 17 broker-dealer, without the permission of the commissioner. 18 This provision does not prohibit the directors and officers 19 from doing any of the following: 20 a. Making block purchases of one percent or more of the 21 outstanding common stock other than through a broker-dealer if 22 approved in writing by the division. 23 b. Exercising subscription rights received under the plan. 24 c. Participating in a stock benefit plan permitted by 25 section 512.8, subsection 3, or approved by shareholders 26 pursuant to section 512.13, subsection 2. 27 9. The plan shall provide that a director or officer shall 28 not sell stock purchased pursuant to this section, or section 29 512.8, subsection 1, within one year after the effective date 30 of the conversion, except that this section shall not be deemed 31 to restrict a transfer of stock by such director or officer if 32 the stock is the stock of a corporation that is participating 33 in the plan as provided in subsection 1, paragraph “c” , 34 subparagraph (1), subparagraph division (a), subparagraph 35 -14- LSB 5906HV (1) 85 rj/rj 14/ 27

H.F. 2416 subdivision (iii), and has a class of stock registered under 1 the Securities Exchange Act of 1934, as amended, 15 U.S.C. §78a 2 et seq., or if the transfer is to the spouse or minor children 3 of such director or officer, or to a trust or other estate or 4 wealth planning entity established for the benefit of such 5 director or officer, or the spouse or minor children of such 6 director or officer. 7 10. The plan shall provide that the rights of a holder of a 8 surplus note to participate in the conversion, if any, shall be 9 governed by the terms of the surplus note. 10 11. The plan shall provide that, without the prior approval 11 of the commissioner, a converted stock company, or any 12 corporation participating in the conversion plan pursuant to 13 subsection 1, paragraph “c” , subparagraph (1), subparagraph 14 division (a), subparagraph subdivision (i) or (ii), shall not, 15 for a period of three years from the date of the completion of 16 the conversion, repurchase any of its capital stock from any 17 person, except that this restriction shall not apply to either 18 of the following: 19 a. A repurchase on a pro rata basis pursuant to an offer 20 made to all shareholders of the converted stock company, or any 21 corporation participating in the conversion plan pursuant to 22 subsection 1, paragraph “c” , subparagraph (1), subparagraph 23 division (a), subparagraph subdivision (i) or (ii). 24 b. A purchase in the open market by a tax-qualified, or 25 nontax-qualified employee stock benefit plan in an amount 26 reasonable and appropriate to fund the plan. 27 Sec. 7. NEW SECTION . 512.7 Closed block of business for 28 participating life policies. 29 1. A plan that is adopted by a mutual company that is a 30 life insurance company that issues participating life policies 31 shall provide that participating life policies in force on 32 the effective date of the conversion shall be operated by the 33 converted stock company for dividend purposes as a closed block 34 of participating business, except that any and all classes of 35 -15- LSB 5906HV (1) 85 rj/rj 15/ 27

H.F. 2416 group participating policies may be excluded from the closed 1 block. 2 2. The plan shall provide that sufficient assets of the 3 mutual company shall be allocated for the benefit of the 4 closed block of business so that the assets, together with the 5 revenue from the closed block of business, are sufficient to 6 support the closed block, including but not limited to the 7 payment of claims, expenses, taxes, and any dividends that are 8 provided for under the terms of the participating policies, 9 with appropriate adjustments in the dividends for experience 10 changes. The plan shall be accompanied by an opinion of a 11 qualified actuary, or an appointed actuary, who meets the 12 standards set forth in the insurance laws or regulations of 13 this state for the submission of actuarial opinions as to the 14 adequacy of reserves or assets. The opinion shall relate to 15 the adequacy of the assets allocated in support of the closed 16 block of business. The actuarial opinion shall be based on 17 methods of analysis deemed appropriate for those purposes by 18 the actuarial standards board. 19 3. The amount of assets allocated for the benefit of the 20 closed block shall be based upon the mutual life insurance 21 company’s last annual statement, updated to the last day of 22 the quarter immediately preceding the effective date of the 23 conversion. 24 4. The converted stock company shall keep a separate 25 accounting for the closed block and shall make and include 26 in the annual statement to be filed with the commissioner 27 each year a separate statement showing the gains, losses, and 28 expenses properly attributable to the closed block. 29 5. The assets and liabilities allocated to the closed 30 block may be periodically reviewed by the commissioner or the 31 commissioner’s designee. The converted stock company shall 32 bear the cost of any such review. If, as a result of such 33 review, the commissioner determines that the assets allocated 34 to the closed block are insufficient to support the remaining 35 -16- LSB 5906HV (1) 85 rj/rj 16/ 27

H.F. 2416 policies in the closed block, the commissioner may issue 1 an order directing the converted stock company to allocate 2 additional assets to the closed block sufficient to support the 3 remaining policies in the closed block and the converted stock 4 company shall comply with such order within thirty days of the 5 date of the order. If, as a result of such review, or as a 6 result of a review initiated by the converted stock company and 7 accepted by the commissioner, assets allocated to the closed 8 block are in excess of the amount necessary to support the 9 remaining policies, upon application made to the commissioner 10 by the converted stock company, the commissioner may issue an 11 order permitting such excess assets in the closed block to 12 revert to the benefit of the converted stock company. 13 6. The commissioner may waive the requirement for 14 establishing a closed block of business if, in the 15 commissioner’s discretion, it is in the best interests of 16 policyholders to do so. The commissioner may waive from 17 inclusion in the closed block of participating policies those 18 participating policies for which there is no expectation of 19 dividends being paid if, in the commissioner’s discretion, it 20 is fair and equitable to do so. 21 Sec. 8. NEW SECTION . 512.8 Optional provisions of plan of 22 conversion. 23 1. The plan may provide that the directors, officers, 24 and employees of the mutual company shall receive, without 25 payment, nontransferable subscription rights to purchase 26 capital stock of the converted stock company or the stock of 27 another corporation that is participating in the conversion 28 plan, as provided in section 512.6, subsection 1, paragraph 29 “c” , subparagraph (1), subparagraph division (a), subparagraph 30 subdivision (iii). These subscription rights shall be 31 allocated among the directors, officers, and employees by a 32 fair and equitable formula and shall be subordinate to the 33 subscription rights of eligible members. This chapter shall 34 not require the subordination of subscription rights received 35 -17- LSB 5906HV (1) 85 rj/rj 17/ 27

H.F. 2416 by directors and officers in their capacity as eligible 1 members, if any. 2 2. The aggregate total number of shares that may be 3 purchased by directors and officers of the mutual company in 4 their capacity under subsection 1, and in their capacity as 5 eligible members under section 512.6, subsection 1, paragraph 6 “c” , subparagraph (1), subparagraph division (a), subparagraph 7 subdivision (iii), shall not exceed thirty-five percent of the 8 total number of shares to be issued for a mutual company if 9 total assets of the mutual company are less than fifty million 10 dollars or twenty-five percent of the total number of shares 11 to be issued for a mutual company if total assets of the mutual 12 company are more than five hundred million dollars. For mutual 13 companies with total assets of or between fifty million dollars 14 and five hundred million dollars, the percentage of the total 15 number of shares that may be purchased shall be interpolated. 16 3. The plan may allocate to a tax-qualified employee benefit 17 plan nontransferable subscription rights to purchase up to ten 18 percent of the capital stock of the converted stock company or 19 the stock of another corporation that is participating in the 20 plan, as provided in section 512.6, subsection 1, paragraph 21 “c” , subparagraph (1), subparagraph division (a), subparagraph 22 subdivision (iii). A tax-qualified employee benefit plan is 23 entitled to exercise subscription rights granted under this 24 subsection regardless of the total number of shares purchased 25 by other persons. 26 4. The plan may provide that the other classes of 27 subscribers approved by the commissioner shall receive, without 28 payment, nontransferable subscription rights to purchase 29 capital stock of the converted stock company or the stock of 30 another corporation that is participating in the conversion 31 plan, as provided in section 512.6, subsection 1, paragraph 32 “c” , subparagraph (1), subparagraph division (a), subparagraph 33 subdivision (iii). Other classes of subscribers that may be 34 approved by the commissioner include, without limitation, any 35 -18- LSB 5906HV (1) 85 rj/rj 18/ 27

H.F. 2416 of the following: 1 a. Members of the mutual company that became members after 2 the date fixed for establishing eligible members. 3 b. Brokers, agents, or other producers or their directors, 4 officers, or employees that represent the mutual company. 5 c. The shareholders of another corporation that is 6 participating in the plan, as provided in section 512.6, 7 subsection 1, paragraph “c” , subparagraph (1), subparagraph 8 division (a), subparagraph subdivision (iii). 9 d. The shareholders of another corporation that is a party 10 to an acquisition, merger, consolidation, or other similar 11 transaction with the mutual company. 12 5. The plan may provide for the creation of a liquidation 13 account for the benefit of members in the event of voluntary 14 liquidation subsequent to conversion in an amount equal to 15 the surplus of the mutual company, exclusive of the principal 16 amount of any surplus note, on the last day of the quarter 17 immediately preceding the date of adoption of the plan. 18 Sec. 9. NEW SECTION . 512.9 Alternative plan of conversion. 19 1. The governing body may adopt a plan of conversion that 20 does not rely in whole or in part upon issuing nontransferable 21 subscription rights to members to purchase stock of the 22 converted stock company if the commissioner finds that the plan 23 does not prejudice the interests of the members, is fair and 24 equitable, and is not inconsistent with the purpose of this 25 chapter. Subject to a finding of the commissioner that an 26 alternative plan is fair and equitable and is not inconsistent 27 with the purpose of this chapter, an alternative plan may do 28 any of the following: 29 a. Include the merger of a domestic mutual company into a 30 domestic or foreign stock company. 31 b. Provide for issuing transferable or redeemable 32 subscription rights. 33 c. Provide for issuing stock, cash, policyholder credits, or 34 other consideration, or any combination of the foregoing, to 35 -19- LSB 5906HV (1) 85 rj/rj 19/ 27

H.F. 2416 policyholders instead of subscription rights. 1 d. Provide for partial conversion of the mutual company 2 and formation of a mutual holding company in accordance with 3 subsection 2. 4 e. Set forth another plan containing any other provisions 5 approved by the commissioner. 6 2. The commissioner may approve a partial conversion 7 and formation of a mutual holding company provided that the 8 mutual company is not insolvent or in hazardous financial 9 condition according to information supplied in its most recent 10 annual or quarterly statement filed with the commissioner or 11 as determined by a financial examination performed by the 12 commissioner. The commissioner may retain, at the mutual 13 company’s expense, any qualified expert, including counsel and 14 financial advisors, not otherwise a part of the commissioner’s 15 staff, to assist in reviewing whether the plan may be approved 16 by the commissioner. 17 3. a. A mutual holding company may convert to stock form 18 under this chapter, and shall be subject to the provisions 19 of this chapter and to any other provisions of this title 20 applicable to insurance holding companies, except as otherwise 21 provided in this chapter. It is the policy of this chapter to 22 enable and facilitate such a conversion of a mutual holding 23 company to stock form, and this chapter shall be interpreted 24 accordingly. 25 b. Any mutual holding company may convert to a stock holding 26 company only in accordance with the provisions of this chapter. 27 Solely for purposes of establishing the process for and 28 enabling and facilitating any conversion of a mutual holding 29 company to a stock holding company, references in this chapter 30 to a mutual company shall be deemed to refer to a mutual 31 holding company and other provisions of this chapter shall be 32 interpreted accordingly. 33 c. Any stock issued by a subsidiary insurance company or 34 subsidiary holding company of a mutual holding company to 35 -20- LSB 5906HV (1) 85 rj/rj 20/ 27

H.F. 2416 persons other than the parent mutual holding company shall be 1 exchanged for the stock issued by the parent mutual holding 2 company in connection with the conversion of the parent mutual 3 holding company to the parent stock holding company or any 4 corporation participating in the conversion of the mutual 5 holding company pursuant to section 512.6, subsection 1, 6 paragraph “c” , subparagraph (1), subparagraph division (a). 7 The parent mutual holding company and the subsidiary insurance 8 company or subsidiary holding company must demonstrate to 9 the satisfaction of the commissioner that the basis for the 10 exchange is fair and reasonable. 11 d. If a subsidiary insurance company or subsidiary holding 12 company has issued shares to an entity other than the mutual 13 holding company, the conversion of the mutual holding company 14 to a stock holding company shall not be consummated unless a 15 majority of the shares issued to the entities other than the 16 mutual holding company vote in favor of the conversion. This 17 requirement applies in addition to any otherwise required 18 policyholder or shareholder votes. 19 Sec. 10. NEW SECTION . 512.10 Effective date of plan of 20 conversion. 21 A plan of conversion is effective when the commissioner has 22 approved the plan, the voting members have approved the plan 23 and adopted the certificate of incorporation of the converted 24 stock company, and the certificate of incorporation is filed in 25 the office of the secretary of state of this state. 26 Sec. 11. NEW SECTION . 512.11 Rights of members whose 27 policies are issued after adoption of plan of conversion and 28 before effective date. 29 1. All members whose policies are issued after the proposed 30 plan of conversion has been adopted by the governing body and 31 before the effective date of the plan shall be sent a written 32 notice regarding the plan upon issuance of such policy. 33 2. A member of a life or health insurance company entitled 34 to be sent the notice described in subsection 1 is entitled 35 -21- LSB 5906HV (1) 85 rj/rj 21/ 27

H.F. 2416 to rescind the member’s policy and receive a full refund 1 of any amounts paid for the policy or contract within ten 2 days after such member has received the notice. Except as 3 provided in subsection 3, each member of a property or casualty 4 insurance company entitled to receive the notice provided for 5 in subsection 1 shall be advised of the member’s right of 6 cancellation and to a pro rata refund of unearned premiums. 7 3. A member of a life or health insurance company, or 8 property or casualty insurance company, who has made or filed 9 a claim under such member’s insurance policy shall not be 10 entitled to any right to receive any refund under subsection 2. 11 A person who has exercised the rights provided by subsection 12 2 shall not be entitled to make or file any claim under such 13 person’s insurance policy. 14 Sec. 12. NEW SECTION . 512.12 Corporate existence. 15 1. On the effective date of the conversion, the corporate 16 existence of the mutual company continues in the converted 17 stock company. On the effective date of the conversion, all 18 the assets, rights, franchises, and interests of the mutual 19 company or the mutual holding company in and to every species 20 of property, real, personal, and mixed, and any accompanying 21 things in action, are vested in the converted stock company 22 without any deed or transfer and the converted stock company 23 assumes all the obligations and liabilities of the mutual 24 company or the mutual holding company. 25 2. Unless otherwise specified in the plan of conversion, 26 the persons who are directors and officers of the mutual 27 company or the mutual holding company on the effective date of 28 the conversion shall serve as directors and officers of the 29 converted stock company until new directors and officers of the 30 converted stock company are elected pursuant to the certificate 31 of incorporation and bylaws of the converted stock company. 32 Sec. 13. NEW SECTION . 512.13 Conflict of interest. 33 1. A director, officer, agent, or employee of the mutual 34 company shall not receive any fee, commission, or other 35 -22- LSB 5906HV (1) 85 rj/rj 22/ 27

H.F. 2416 valuable consideration, other than such person’s usual regular 1 salary or compensation, for aiding, promoting, or assisting 2 in a conversion under this chapter, except as provided for in 3 the plan approved by the commissioner. This provision does 4 not prohibit the payment of reasonable fees and compensation 5 to attorneys, accountants, financial advisors, and actuaries 6 for services performed in the independent practice of their 7 professions, even if the attorney, accountant, financial 8 advisor, or actuary is also a director or officer of the mutual 9 company. 10 2. For a period of two years after the effective date of the 11 conversion, a converted stock company shall not implement any 12 nontax-qualified stock benefit plan unless the plan is approved 13 by a majority of votes cast at a duly-convened meeting of 14 shareholders held not less than six months after the effective 15 date of the conversion. 16 3. All the costs and expenses connected with a plan of 17 conversion shall be paid for or reimbursed by the mutual 18 company or the converted stock company. However, if the plan 19 provides for participation by another corporation or stock 20 company in the plan pursuant to section 512.6, subsection 1, 21 paragraph “c” , subparagraph (1), subparagraph division (a), the 22 corporation or stock company may pay for or reimburse all or a 23 portion of the costs and expenses connected with the plan. 24 Sec. 14. NEW SECTION . 512.14 Failure to give notice. 25 If the mutual company complies substantially and in good 26 faith with the notice requirements of this chapter, the mutual 27 company’s failure to send a member the required notice does not 28 impair the validity of any action taken under this chapter. 29 Sec. 15. NEW SECTION . 512.15 Limitation on actions. 30 Any action challenging the validity of or arising out of 31 acts taken or proposed to be taken under this chapter shall be 32 commenced no later than the latter of the following: 33 1. Sixty days after the approval of the plan by the 34 commissioner. 35 -23- LSB 5906HV (1) 85 rj/rj 23/ 27

H.F. 2416 2. Thirty days after notice of the meeting of voting members 1 to approve the plan of conversion is first mailed or delivered 2 to voting members or posted on the mutual company’s internet 3 site. 4 Sec. 16. NEW SECTION . 512.16 Mutual company insolvent or in 5 hazardous financial condition. 6 1. If a mutual company seeking to convert is insolvent or 7 is in hazardous financial condition according to information 8 supplied in its most recent annual or quarterly statement 9 filed with the division or as determined by a financial 10 examination performed by the division, the requirements of 11 this chapter, including notice to and policyholder approval of 12 the plan of conversion, may be waived at the discretion of the 13 commissioner, if requested by the mutual company. If a waiver 14 under this section is ordered by the commissioner, the mutual 15 company shall specify in its plan of conversion all of the 16 following: 17 a. The method and basis for the issuance of the converted 18 stock company’s shares of its capital stock to an independent 19 party in connection with an investment by the independent party 20 in an amount sufficient to restore the converted stock company 21 to a sound financial condition. 22 b. That the conversion shall be accomplished without 23 granting subscription rights or other consideration to the 24 past, present, or future policyholders. 25 2. This section shall not alter or limit the authority of 26 the commissioner under any of the provisions of law, including 27 but not limited to receivership and liquidation provisions 28 applicable to insurance companies. 29 Sec. 17. NEW SECTION . 512.17 Rules. 30 The commissioner may adopt rules to administer and enforce 31 this chapter. 32 Sec. 18. NEW SECTION . 512.18 Laws applicable to converted 33 stock company. 34 1. A mutual company shall not be permitted to convert 35 -24- LSB 5906HV (1) 85 rj/rj 24/ 27

H.F. 2416 under this chapter if, as a direct result of the conversion, a 1 person or any affiliate of the person acquires control of the 2 converted stock company, unless the person and the person’s 3 affiliates comply with the provisions of this state’s laws 4 regarding the acquisition of control of an insurance company. 5 2. Except as otherwise specified in this chapter, a stock 6 company converted under this chapter shall have and may 7 exercise all the rights and privileges and shall be subject 8 to all of the requirements and regulations imposed on stock 9 companies under this chapter and any other laws of this 10 state relating to the regulation and supervision of insurance 11 companies, but the stock company shall not exercise any rights 12 or privileges which other stock companies cannot exercise. 13 Sec. 19. NEW SECTION . 512.19 Commencement of business as a 14 stock company. 15 A mutual company shall not have the power to engage in the 16 business of insurance as a stock company until it complies with 17 all provisions of this chapter. 18 Sec. 20. NEW SECTION . 512.20 Amendment of policies. 19 A mutual company, by endorsement or rider approved by the 20 commissioner and sent to a policyholder, may simultaneously 21 with or at any time after the adoption of a plan of conversion 22 amend any outstanding insurance policy for the purpose of 23 extinguishing the right of the policyholder to share in the 24 surplus of the mutual company. However, this amendment shall 25 be null and void if the plan of conversion is not submitted 26 to the commissioner or, if submitted, is disapproved by 27 the commissioner or, if approved by the commissioner, is 28 not approved by the eligible members on or before the first 29 anniversary of its approval by the commissioner. 30 Sec. 21. NEW SECTION . 512.21 Prohibition on acquisitions 31 of control. 32 Except as otherwise specifically provided in section 512.6, 33 from the date a plan of conversion is adopted by the governing 34 body of a mutual company until three years after the effective 35 -25- LSB 5906HV (1) 85 rj/rj 25/ 27

H.F. 2416 date of the plan, a person shall not directly or indirectly 1 offer to acquire, make any announcement to acquire or acquire 2 in any manner, including making a filing with the division for 3 such acquisition under a statute or rule of this state, the 4 beneficial ownership of ten percent or more of a class of a 5 voting security of the converted stock company or of a person 6 which controls the voting securities of the converted stock 7 company, unless the converted stock company or a person who 8 controls the voting securities of the converted stock company 9 consents to such acquisition and such acquisition is otherwise 10 approved by the commissioner. 11 EXPLANATION 12 The inclusion of this explanation does not constitute agreement with 13 the explanation’s substance by the members of the general assembly. 14 This bill enacts new Code chapter 512 which provides an 15 additional procedure for mutual insurance companies domiciled 16 in this state and organized under Code chapter 508 (life 17 insurance companies) or Code chapter 515 (insurance other 18 than life), as well as certain foreign mutual insurance 19 companies, to convert from a mutual company to a stock company. 20 The procedure does not replace current Code chapter 508C 21 (conversion from mutual company to stock company) or current 22 Code chapter 515G (mutual insurance company conversions). 23 The bill requires the mutual company wishing to convert 24 to a stock company to submit a plan of conversion to its 25 governing body for adoption, to the commissioner of insurance 26 for approval, and to the mutual company’s voting members for 27 approval. Following final approval the converted stock company 28 must file its certificate of incorporation and bylaws with the 29 commissioner. 30 The bill allows a foreign mutual company or foreign 31 mutual holding company to redomesticate to Iowa and to file 32 an application for conversion to a stock company. Such a 33 company’s plan of conversion must be adopted and approved 34 consistent with the provisions of the new Code chapter 35 -26- LSB 5906HV (1) 85 rj/rj 26/ 27

H.F. 2416 applicable to domestic companies. 1 The required contents of a plan of conversion are set 2 out in the bill and include provisions relating to policy 3 continuation, voting rights, subscription rights to purchase 4 the capital stock of the converted stock company or of related 5 entities, valuation of capital stock by a qualified independent 6 expert, redemption rights, and restrictions on the purchase, 7 sale, and repurchase of capital stock by directors, officers, 8 and others. The bill contains specific provisions regarding a 9 closed block of business for participating life policies. 10 The commissioner is authorized to approve alternative plans 11 of conversion that allow for partial conversions, mutual 12 holding companies, mergers, and variable subscription rights. 13 The bill also includes provisions relating to rights of 14 members whose policies were issued after adoption of the plan 15 of conversion, conflicts of interest, limitations on actions 16 challenging a conversion, conversions involving insolvent 17 companies, amendment of outstanding policies, and acquisitions 18 of control following conversion. 19 -27- LSB 5906HV (1) 85 rj/rj 27/ 27