(b) Insurers and method of acquisition. State the name and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired.

(1) State the name and address of the applicant seeking to acquire control over the insurer.

(2) If the applicant is not an individual, state the nature of its business operations for the past five years or for such lesser period as the person and any predecessors have been in existence and fully describe any business the person and any of its affiliates intend to commence.

(3) Furnish a chart or listing clearly identifying the interrelationships between the applicant and all affiliates of the applicant. Indicate in the chart or listing the percentage of voting securities of each person controlled by the applicant or by any other person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of control. As to each person specified in the chart or listing, indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings looking toward a reorganization or liquidation are pending with respect to any person, indicate which person, and set forth the title of the court, nature of proceedings, and the date when commenced.

(d) Identity and background of individuals associated with the applicant.

(1) Furnish biographical data for the applicant if the person is an individual, or for all persons who are directors, executive officers, or owners of 10 percent or more of the voting securities of the applicant if the applicant is not an individual, with the biographical data in the form of the latest version of the biographical affidavit form published by and available from the National Association of Insurance Commissioners and adopted by reference under §7.201(a)(1) of this title (relating to Forms Filings).

(2) The applicant if the person is an individual, or for persons who are the chair of the board, chief executive officer, president, chief financial officer, treasurer, and controller of the applicant if the applicant is not an individual, must comply with the requirements of Chapter 1, Subchapter D of this title (relating to Effect of Criminal Conduct).

(e) Nature, source, and amount of funds or other consideration.

(1) Describe the nature, source, and amount of funds or other consideration used or to be used in effecting the merger or other acquisition of control. If any part is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, or trading securities, furnish a description of the transaction, the names of the parties, the relationship, if any, between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes, and security arrangements.

(2) Explain the criteria used in determining the nature and amount of the consideration.

(3) If the source of the consideration is a loan made in the lender's ordinary course of business and if the applicant wishes the identity of the lender to remain confidential, he or she must specifically request that the identity be kept confidential.

(f) Future plans for insurer.

(1) Provide a business plan which describes any plans or proposals which the applicant may have or may contemplate making to cause the insurer to pay dividends or make other distributions, liquidate the insurer, sell any of its assets, merge or consolidate it with any person or persons, make any other material change in its business operations or corporate structure or management, or cause the insurer to enter into material agreements, arrangements, or transactions of any kind with any party, and describe any financial or employment guarantees given to present and contemplated management.

(2) Describe applicant's operational plans for the domestic insurer covering the succeeding 24 months, including, but not limited to, change of location, change of name, increase in capital and/or surplus, reinsurance activity, type of business to be written, and anticipated premium volume.

(3) Provide:

(A) an affirmative statement of applicant's and the domestic insurer's compliance with Chapter 22 of this title (relating to Privacy); and

(B) if applicant proposes revisions to the domestic insurer's current privacy policy, the proposed revised privacy policy along with any revised notices required under §22.12 of this title (relating to Revised Privacy Notices) and any other notices or authorization requests and forms applicant will be required to provide to maintain compliance with Chapter 22 of this title.

(4) For the domestic insurer, provide the full name of each individual proposed to be an executive officer or director of the domestic insurer and the full name of each individual who will be responsible for major areas of operations of the domestic insurer, including, but not limited to, supervision of agents, underwriting, advertising, production of business through agents and through reinsurance, policyholder services, premium accounting, claims processing and litigation, reinsurance cessions, investments, and financial accounting and reporting. For each position, evidence of the individual's ability and experience to perform same by providing biographical data in the form of the latest version of the biographical affidavit form published by and available from the National Association of Insurance Commissioners and adopted by reference under §7.201(a)(1) of this title.

(5) Describe any other arrangement or agreement, oral or written, entered into by any acquiring party or any of its affiliates and the domestic insurer during the immediately preceding 12 months.

(g) Voting securities to be acquired. State the number of shares of the insurer's voting securities and the amount or number of shares convertible into voting securities which the applicant, its affiliates, and any person listed in subsection (d) of this section plan to acquire, and the terms of the offer, request, invitation, agreement, or acquisition, and a statement of the method by which the fairness of the proposal was determined.

(h) Ownership of voting securities. State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates, or any person listed in subsection (d) of this section.

(i) Contracts, arrangements, or understandings with respect to voting securities of the insurer. Give a full description of any contracts, arrangements, or understandings with respect to any voting security of the insurer in which the applicant, its affiliates, or any persons listed in subsection (d) of this section is involved, including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description must identify the persons with whom the contracts, arrangements, or understandings have been made.

(j) Recent purchases of voting securities. Describe any purchases of any voting securities of the insurer by the applicant, any of its affiliates, or any person listed in subsection (d) of this section during the 12 calendar months preceding the filing of this statement. Include in the description the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid. State whether any shares so purchased are hypothecated.

(k) Recent recommendations to purchase. Provide a copy of any written, or a confirmed description of any oral, recommendations to purchase any voting security of the insurer made by the applicant, any of its affiliates, or any person listed in subsection (d) of this section, or by anyone based on interviews with or at the suggestion of the applicant, any of its affiliates, or any person listed in subsection (d) of this section during the 12 calendar months preceding the filing of this statement.

(l) Agreements with broker-dealers. Provide a copy of any written, or a confirmed description of any oral, agreement, arrangement, or understanding made with any broker-dealer as to the solicitation of voting securities of the insurer for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers.

(m) Financial statements and exhibits.

(1) Financial statements, exhibits, and financial projections of the insurer and the applicant must be attached to this statement as an appendix, but list under this subsection the financial statements and exhibits so attached. Projections of the domestic insurer and the applicant must be for a period equal to the greater of three years or the length of time of debt service required by applicant in its acquisition of control and any additional document or papers required by regulation.

(2) The financial statements must include the annual financial statements of the persons identified in subsection (c)(3) of this section for the preceding three fiscal years (or for such lesser period as the applicant and its affiliates and any predecessors have been in existence), and similar unaudited financial information as of a date not earlier than 120 days prior to the filing of the statement, accompanied by affidavit or certification of the chief financial officer of the applicant that the unaudited financial statement is true and correct, as of its date, and that there has been no material change in financial condition, as defined by the Act, from the date of the financial statement to the date of the affidavit or certification. The statements may be prepared on either an individual basis, or, unless the commissioner otherwise requires, on a consolidated basis if the consolidated statements are prepared in the usual course of business.

(3) Unless exempted by the commissioner, the annual financial statements of the applicant must be made in accord with generally accepted auditing standards and accompanied by the certificate of an independent certified public accountant that the statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the certificate is not available, then the financial statement must be sworn to by the applicant as correctly reflecting its financial condition, and in that case, the commissioner at the commissioner's discretion may require the financial statement to be certified by an independent public accountant.

(A) If the applicant is an insurer which is actively engaged in the business of insurance and licensed to do business in this state, it may provide financial statements which conform to the annual statements of the insurer filed with the insurance department of the insurer's domiciliary state and which are in accord with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of the domiciliary state.

(B) If the applicant is an individual person, the person must provide a reviewed financial statement accompanied by the certificate of an independent public accountant that he or she is not aware of any material modifications that should be made to the accompanying financial statement for it to be in conformity with generally accepted accounting principles and must provide a balance sheet as of a date not earlier than 120 days prior to the filing of the statement and balance sheets for the second and third fiscal years preceding the filing of the statement accompanied by affidavit or certification that each balance sheet is true and correct as of its date.

(4) File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material; and proposed employment, consultation, advisory, or management contracts concerning the insurer.

(5) In addition to the other material required to be filed by this section, a person described in §7.205(a) of this title (relating to Acquisition or Divestiture Statements--Filing Requirements) must file, as an exhibit, annual reports to the stockholders of the insurer and the applicant for the last two fiscal years. These reports are for review of the department, and are not a part of the material required to be submitted under the Act. However, the materials will be open for public inspection at the offices of the department during the pendency of the application.

(n) Enterprise risk management. Applicant agrees to provide, to the best of its knowledge and belief, the information required by Form F under Insurance Code §823.0595, as applicable, within 15 days after the end of the month in which the acquisition of control occurs.

(o) Notice regarding divestiture of control under Insurance Code §823.154.

Figure: 28 TAC §7.209(o) (.pdf)

(1) Provide the name, title, address, email, and telephone number of the individual to whom notices and correspondence concerning this statement should be addressed.

(2) Provide notice that applicant is divesting control of the above named insurance company(ies) and describe how control is being divested and include the percentage of control being divested.

(3) State the name and address of the recipient(s) of the divestiture of control.

(4) Provide copies of any sales contracts and an organizational chart before and after the divestiture of control.

(5) Describe and state the name of the person in control of the insurer before and after the divestiture of control.

(p) Signature and certification. Signature and certification of the following form:

Figure: 28 TAC §7.209(p) (.pdf)

§7.210.Form B.

(a) Insurance holding company system registration statement.

Figure: 28 TAC §7.210(a) (.pdf)

(b) Identity and control of registrant. Furnish the exact name of each insurer registering or being registered ("the registrant"), the home office address and principal executive offices of each; the date on which each registrant became part of the insurance holding company system; and the method(s) by which control of each registrant was acquired and is maintained.

(c) Organizational chart. Furnish a chart or listing clearly presenting the identities of and interrelationships among all affiliated persons within the insurance holding company system, including all affiliated persons as defined in §7.202(a)(2) of this title (relating to Definitions). The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of the control. As to each person specified in the chart or listing, indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile.

(d) The ultimate controlling person. As to the ultimate controlling person (that person which is not controlled by another person) in the insurance holding company system, furnish the following information:

(1) name;

(2) home office address;

(3) principal executive office address;

(4) the organizational structure of the person, i.e., corporation, partnership, individual, trust, etc.; together with a conformed copy of the charter or articles of incorporation and its bylaws;

(5) the principal business of the person;

(6) the name and address of any person who holds or owns 10 percent or more of any class of voting security, the class of the security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned; and

(7) if court proceedings looking toward a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings, and the date when commenced.

(e) Biographical information. If the ultimate controlling person is a corporation, organization, limited liability company, or other legal entity, furnish the following information for the directors and executive officers of the ultimate controlling person: the individual's name and address, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations. If the ultimate controlling person is an individual, furnish the individual's name and address, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations.

(f) Transactions, relationships, and agreements.

(1) Briefly describe the following agreements in force, relationships subsisting, and transactions currently outstanding between the registrant and its holding company, its subsidiaries, and its affiliates:

(A) loans, other investments or purchases, sales or exchanges of securities of the affiliates by the registrant, or of the registrant by its affiliates;

(B) purchase, sales, or exchanges of assets;

(C) investment activities of an investment pool and transactions between pools and participants (Insurance Code Chapters 424 and 425);

(D) transactions not in the ordinary course of business;

(E) guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the registrant's assets to liability, other than insurance contracts entered into in the ordinary course of the registrant's business;

(F) all management and service contracts and all cost sharing arrangements;

(G) reinsurance agreements covering all or substantially all of one or more lines of insurance of the ceding company;

(H) all dividends and other distributions to shareholders;

(I) agreements with affiliates to consolidate federal income tax returns;

(J) all transactions with affiliated financial institutions;

(K) the amount of commissions paid to the controlling producer, the percentage such amount represents of the net premium written, and comparable amounts and percentages paid to noncontrolling producers for placements of the same kinds of insurance;

(L) all surplus debentures, surplus notes, premium income notes, bonds, or debentures, and other contingent evidences of indebtedness outstanding;

(M) any affiliated transaction not disclosed in subparagraphs (A) - (L) of this paragraph which is subject to the Act;

(N) any pledge of an insurer's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of its insurance holding company system;

(O) the corporate governance and internal control responsibilities of the insurer's board of directors, including a statement that:

(i) the insurer's senior management or officers have approved and implemented, and continue to maintain and monitor, corporate governance and internal control procedures; and

(ii) the insurer's board of directors oversees corporate governance and internal controls; and

(P) any other information the commissioner requires.

(2) No information need be disclosed if such information is not material. See §7.203(d) of this title (relating to Registration of Insurers). The description must be in a manner permitting the proper evaluation by the commissioner, and must include at least the following: the nature and purpose of the transaction; the nature and amounts of any payments or transfers of assets between the parties; the identity of all parties to the transaction; relationship of the affiliated parties to the registrant; and the holding company section number and/or commissioner's order number.

(g) Litigation or administration proceedings. Furnish a brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any of its directors or executive officers was a party or of which the property of any person is or was the subject; give the names of the parties and the court or agency in which the litigation or proceeding is or was pending:

(1) criminal prosecutions or administrative proceedings by any government agency or authority which may be relevant to the trustworthiness of any party; and

(2) proceedings which may have a material effect upon the solvency or capital structure of the ultimate holding company including, but not necessarily limited to, bankruptcy, receivership, or other corporate reorganizations.

(h) Required statement. The insurer must furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions, the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur.

(i) Financial statements and exhibits.

(1) Financial statements and exhibits should be attached to this statement as an appendix. List under this item the financial statements and exhibits attached.

(2) If the ultimate controlling person is a corporation, an organization, a limited liability company, or other legal entity, the financial statements must include the annual financial statements of the ultimate controlling person and, on request of the commissioner, the annual financial statements of the affiliates in the insurance holding company system as of the end of the person's latest fiscal year or any other period as determined by the commissioner.

(3) If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information must be filed for any subsequent period to the extent available. Financial statements may be prepared on either an individual basis or, unless the commissioner otherwise requires on a consolidated basis if consolidated statements are prepared in the usual course of business.

(4) Other than with respect to the preceding, the financial statement must be filed in a standard form and format adopted by the National Association of Insurance Commissioners, unless an alternative form is accepted by the commissioner. Documentation and financial statements filed with the Securities and Exchange Commission or audited GAAP financial statements are deemed to be an appropriate form and format.

(5) Unless the commissioner permits otherwise, the annual financial statements must be accompanied by the certificate of an independent public accountant to the effect that the statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the ultimate controlling person is an insurer actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the Annual Statement of the insurer's domiciliary state and are in accord with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of that state.

(6) Unless the commissioner permits otherwise, any ultimate controlling person who is an individual may file personal financial statements that are reviewed rather than audited by an independent public accountant. The review must be conducted in accord with standards for review of personal financial statements as issued by the American Institute of Certified Public Accountants. Personal financial statements must be accompanied by the independent public accountant's Standard Review Report stating that the accountant is not aware of any material modifications that should be made to the financial statements for the statements to be in conformity with generally accepted accounting principles.

(7) Exhibits must include copies of the latest annual reports to shareholders of the ultimate controlling person, proxy material used by the ultimate controlling person, and any additional documents or papers required by regulation.

(j) Form C required. A Form C, Summary of Changes to Registration Statement, must be prepared and filed with this Form B.

(k) Signature and certification. Furnish signature and certification of the following form:

Figure: 28 TAC §7.210(k) (.pdf)

§7.211.Form C.

(a) Summary of Material Changes to Registration Statement is required as follows.

Figure: 28 TAC §7.211(a) (.pdf)

(b) Furnish a brief description of all items in the current annual registration statement which represent material changes from the prior year's annual registration statement. The description must be in a manner permitting proper evaluation by the commissioner, and must include specific references to the items in the annual registration statement and to the terms contained.

(c) Changes occurring under §7.210(c) of this title (relating to Form B) in the percentage of each class of voting securities held by each affiliate need only be included where the changes result in ownership or holdings of 10 percent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.

(d) Changes occurring under §7.210(e) of this title need only be included where an individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person.

(e) If a transaction disclosed on the prior year's annual registration statement has been changed, the nature of the change must be included. If a transaction disclosed on the prior year's annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.

(f) The insurer must furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions whose purpose is to avoid statutory threshold amounts and the review that might otherwise occur.

(g) Signature and certification are required as follows.

Figure: 28 TAC §7.211(g) (.pdf)

§7.212.Form D.

(a) Prior notice of a transaction. Prior notice of a transaction is required as follows.

Figure: 28 TAC §7.212(a) (.pdf)

(b) Identity of parties to transaction. Furnish the following information for each of the parties to the transaction:

(1) name;

(2) home office address;

(3) principal executive office address;

(4) the organizational structure, i.e. corporation, partnership, individual, trust, etc.;

(5) a description of the nature of the parties' business operations;

(6) relationship, if any, of other parties to the transaction to the insurer filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer seeking approval, or by the insurer filing the notice in the affiliated parties;

(7) where the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction.

(1) a statement identifying the statute under which the transaction is filed;

(2) a statement of the nature of the transaction and the reasons for entering into or changing the transaction;

(3) a statement of how the transaction complies with §823.101;

(4) the proposed effective date of the transaction; and

(5) the financial impact of the transaction on the domestic insurer.

(d) Sales, purchases, exchanges, loans, extensions of credit, guarantees or investments.

(1) Furnish a brief description of the amount and source of funds, securities, property, or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, or investment, whether any provision exists for purchase by the insurer filing notice, by any party to the transaction, or by any affiliate of the insurer filing notice, a description of the terms of any securities being received, if any, and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements, and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost, and its fair market value, together with an explanation of the basis for evaluation.

(2) If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount the insurer will be obligated to make available under the loan, extension of credit, or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest.

(3) If the transaction involves an investment, guarantee, or other arrangement, state the period during which the investment, guarantee, or other arrangement will remain in effect, together with any provisions for extensions or renewals of the investments, guarantees, or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.

(e) Loans or extensions of credit to a non-affiliate. If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding through which the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, purchase the assets of, or make investments in, any affiliate of the insurer making loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of, or make investments in any affiliate. Describe the amount and source of funds, securities, property, or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction on the insurer's surplus.

(f) Reinsurance. If the transaction is a reinsurance agreement or modification or a reinsurance pooling agreement or modification described in Insurance Code §823.103(a)(2), furnish a description of the known or estimated amount of liability to be ceded or assumed in each calendar year, the period the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and non-affiliate that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer's affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer's surplus.

(g) Management agreements, service agreements, and cost sharing arrangements.

(1) For management and service agreements, furnish:

(A) a brief description of the managerial responsibilities or services to be performed;

(B) a brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made.

(2) For cost-sharing arrangements, furnish:

(A) a brief description of the purpose of the agreement;

(B) a description of the period of time during which the agreement is to be in effect;

(D) a brief description of the accounting basis to be used in calculating each party's costs under the agreement;

(E) a brief statement as to the effect of the transaction upon the insurer's policyholder surplus;

(F) a statement regarding the cost allocation methods specifying whether proposed charges are cost or market based. If market based, include the rationale for using market instead of cost, including justification for the company's determination that amounts are fair and reasonable; and

(G) a statement regarding compliance with the NAIC Accounting Practices and Procedure Manual regarding expense allocation.

(h) Signature and certification. Signature and certification are required as follows.

Figure: 28 TAC §7.212(h) (.pdf)

§7.213.Form E.

(a) Notice of Ordinary and Extraordinary Dividends and Other Distributions. Complete subsections (a) and (b) of this section for an Ordinary Dividend under §7.203(o) of this title (relating to Registration of Insurers) and complete subsections (a) - (c) of this section for an Extraordinary Dividend under §7.204(d) of this title (relating to Transactions Subject to Prior Notice).

Figure: 28 TAC §7.213(a) (.pdf)

(b) Dividend or distribution.

(1) Name of insurer.

(2) Address of insurer.

(3) Declaration of dividend:

(A) Amount of declared dividend or distribution: $

(B) Recipient of declared dividend or distribution.

(D) Proposed payment date.

(4) The dividend or distribution is in compliance with the Act and is indicated in subparagraphs (A) and (B) of this paragraph:

(A) Calculation.

(i) Amount of current dividend or distribution: $

(ii) Dividends or distributions paid during preceding 12 months, excluding current dividend or distribution but including declaration date, payment date, type of dividend or distribution, and amount: $

(iii) Total of (i) and (ii): $

(iv) Surplus as regards policyholders (net worth for HMO) as of preceding December 31: $

(I) 10 percent of (iv) for Life, P&C, and HMO: $

(II) 20 percent of (iv) for Title: $

(v) Operating income:

(I) Net gain from operations before realized capital gains as of preceding December 31 for Life, Title and HMO: $

(II) Net income as of preceding December 31 for P&C: $

(vi) Greater of calculated surplus from (iv) or the operating income from (v): $

(B) If the amount from (iii) exceeds the amount from (vi), then provide the information required by subsection (c) relating to extraordinary dividend and distribution.

(5) Earned surplus, defined as the unassigned funds (surplus), must be greater than the current dividend or distribution amount stated in (4)(A)(i) of this subsection. Earned surplus must be calculated as of the most recent financial information available.

(6) Supporting documentation of the balance sheet, summary of operations including capital and surplus account, and cash flow statement of the most recently filed monthly, quarterly, or annual statement, together with documentation to support the standards specified in Insurance Code §823.008.

(7) Additional requirements are as follows:

(A) Identify property, including bank accounts, to be used to pay the dividend or distribution or to be converted to pay the dividend or distribution.

(B) Provide Insurer's ratio of net written premium to capital and surplus for 12 months as of the end of the last calendar year. In addition, provide the same ratio after deducting the total amount of the present dividend or distribution.

(D) Identify any investment or contribution by the Insurer to subsidiaries made since the last calendar year or to be made in the immediate future.

(E) Give a brief statement as to the effect upon the insurer's capital and surplus or HMO's net worth and the reasonableness of remaining capital and surplus or net worth after payment of dividend or distribution in relation to the Insurer's outstanding liabilities and the adequacy of capital and surplus or net worth relative to the Insurer's financial needs.

(8) Certification that there has been no material adverse change in the financial condition of the Insurer since the date of the most recent financial statement filed with the department and the payment of the dividend or distribution does not adversely affect the interest of policyholders.

(9) Certification that the declaration or payment of the dividend or distribution does not violate any of the provisions of Insurance Code Chapter 403 or §841.253, as applicable, and that the amount of the dividend or distribution declared was calculated based on the amount of cash and the current fair market value of any other property to be paid or distributed.

(10) Signature.

Figure: 28 TAC §7.213(b)(10) (.pdf)

(1) State purpose of dividend or distribution.

(2) On request of the commissioner, furnish a copy of directors' resolution declaring dividend and any shareholders resolution supporting the declaration are to be attached to this form.

(3) Effect of declaration.

(A) Give the total amount of dividend or distribution in dollars when so expressed, or if declared in some other terms, the approximate dollar value and identify the exact property in which the dividend or distribution is payable if not cash (include method of valuing the property other than cash).

(B) Explain any difference in treatment and basis with regard to any share of issued and outstanding stock that will not be treated equally in distribution of dividend, excluding treatment of classes of stock.

(D) Give number of shares by class to whom proposed dividend is payable, the dividend per share of each class and total amount of dividend by class of stock.

(E) By class of stock, give total amount of each dividend declared, the amount payable per share, and the date of declaration for the five calendar years preceding this notice.

(F) Give the net gain or loss from operations after dividends to policyholders and federal income taxes, excluding capital gains and losses of the Insurer for each of the last five calendar years as reported in the Insurer's annual statement to the department.

(4) Provide a balance sheet, income statement, and cash flow statement for the interim period from the last annual statement to the end of the month preceding the month in which this application is submitted.

(5) Provide the National Association of Insurance Commissioners authorized control level Risk Based Capital Ratio before and after dividend or distribution and projected for year end and the following year end.

(6) Explain any restrictions on the volume of the Insurer's underwritings within the last year or in the immediate future that did not previously exist.

(7) Explain any limitations and reasons for limitations established for geographical underwriting within the last year or in immediate future that did not previously exist.

(8) Describe the existing reinsurance program of Insurer, including limits of retention.

(9) Identify and describe any deviation of more than 10 percent in value of any loans or investments held by Insurer (other than replacement of maturing securities with comparable securities) from that disclosed in your last annual statement.

(10) Signature and certification of the following form is required:

Figure: 28 TAC §7.213(c)(10) (.pdf)

§7.214.Form F.

(a) Enterprise Risk Report is required as follows.

Figure: 28 TAC §7.214(a) (.pdf)

(b) The registrant/applicant, to the best of its knowledge and belief, must provide information regarding the following areas that could produce enterprise risk as defined in §7.202 of this title (relating to Definitions), provided such information is not disclosed in the Insurance Holding Company System Annual Registration Statement filed on behalf of itself or another insurer for which it is the ultimate controlling person:

(1) any material developments regarding strategy, internal audit findings, compliance, or risk management affecting the insurance holding company system;

(2) acquisition or disposal of insurance entities and reallocation of existing financial or insurance entities within the insurance holding company system;

(3) any changes of shareholders of the insurance holding company system exceeding 10 percent or more of voting securities;

(4) developments in various investigations, regulatory activities, or litigation that may have a significant bearing or impact on the insurance holding company system;

(5) business plan of the insurance holding company system and summarized strategies for the next 12 months;

(6) identification of material concerns of the insurance holding company system raised by supervisory college, if any, in the last year;

(7) identification of insurance holding company system capital resources and material distribution patterns;

(8) identification of any negative movement, or discussions with rating agencies which may have caused, or may cause, potential negative movement in the credit ratings and individual insurer financial strength ratings assessment of the insurance holding company system (including both the rating score and outlook);

(9) information on corporate or parental guarantees throughout the holding company and the expected source of liquidity should the guarantees be called; and

(10) identification of any material activity or development of the insurance holding company system that, in the opinion of senior management, could adversely affect the insurance holding company system.

(c) The registrant/applicant may attach the appropriate form most recently filed with the U.S. Securities and Exchange Commission, provided the registrant/applicant includes specific references to those areas listed under subsection (b) of this section for which the form provides responsive information. If the registrant/applicant is not domiciled in the U.S., it may attach its most recent public audited financial statement filed in its country of domicile, provided the registrant/applicant includes specific references to those areas listed under subsection (b) of this section for which the financial statement provides responsive information.

(d) If the registrant/applicant has not disclosed any information under subsection (b) of this section, the registrant/applicant must include a statement affirming that, to the best of its knowledge and belief, it has not identified enterprise risk subject to disclosure under subsection (b) of this section.

(e) As added by §18 of Acts 2011, 82nd Leg., ch. 922 (S.B. 1431), the commissioner of insurance has determined that the National Association of Insurance Commissioners has completed an enterprise risk form and has proposed a master confidentiality agreement.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on May 6, 2013.

TRD-201301777

Sara Waitt

General Counsel

Texas Department of Insurance

Effective date: May 26, 2013

Proposal publication date: December 28, 2012

For further information, please call: (512) 463-6327

28 TAC §§7.211 - 7.213

The Texas Department of Insurance (TDI) adopts the repeal of 28 Texas Administrative Code §§7.211 - 7.213, concerning Form C, Disclaimer of Control or Affiliation filed with TDI; Form D, Notice of Declaration of Extraordinary Dividend; and Form E, Statement Regarding the Exemption from Approval of the Acquisition of Control of a Domestic Insurer, respectively. The repeal is adopted without changes to the proposal published in the December 28, 2012, issue of the Texas Register (37 TexReg 10121).

REASONED JUSTIFICATION. The repeal of §§7.211 - 7.213 is necessary to implement statutory changes from SB 1283 and SB 1284 (79th Legislature, 2005), SB 1542 (80th Legislature, 2007), and SB 1431 (82nd Legislature, 2011); adopt rules consistent with the National Association of Insurance Commissioners (NAIC) model regulation forms, as applicable; and delete obsolete forms. In addition, the repeal permits the simultaneous adoption of new §§7.211 - 7.213, concerning Form C, Summary of Material Changes to a Registration Statement; Form D, Prior Notice of a Transaction; and Form E, Notice of Ordinary and Extraordinary Dividends and Other Distributions. The content contained in Forms C and D is relocated within the holding company rules while the content in Form E is obsolete. As a result, the repealed sections are no longer necessary. In conjunction with the adopted repeal, the adoption of new §§7.11 - 7.213 is also published in this issue of the Texas Register.