House Study Bill 141 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON COWNIE) A BILL FOR An Act relating to mutual-to-stock insurance company 1 conversions. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2335HC (4) 86 av/rj

H.F. _____ Section 1. NEW SECTION . 512.1 Conversion from a mutual 1 company to stock company allowed. 2 A mutual company may convert to a stock company pursuant to 3 a plan of conversion established and approved in the manner 4 provided by this chapter. 5 Sec. 2. NEW SECTION . 512.2 Short title. 6 This chapter shall be known and may be cited as the “Iowa 7 Insurance Company Mutual-to-Stock Conversion Act” . 8 Sec. 3. NEW SECTION . 512.3 Definitions. 9 As used in this chapter: 10 1. “Capital stock” means common or preferred stock or any 11 hybrid security or other equity security issued by a converted 12 stock company or other company or entity pursuant to the 13 exercise of subscription rights granted pursuant to section 14 512.6, subsection 1, paragraph “c” . 15 2. “Commissioner” means the commissioner of insurance 16 appointed pursuant to section 505.2. 17 3. “Converted stock company” means a stock company that 18 converted from a mutual company to a stock company under this 19 chapter or any successor to the stock company. 20 4. “Division” means the insurance division of the department 21 of commerce. 22 5. “Domestic mutual company” means a mutual company 23 domiciled in this state and organized under chapter 508 or 515. 24 6. “Eligible member” means a member of a mutual company 25 whose policy is in force on the date the mutual company’s 26 governing body adopts a plan of conversion or such earlier date 27 as the mutual company may establish with the consent of the 28 commissioner. A person insured under a group policy is not 29 an eligible member. A person whose policy becomes effective 30 after the governing body adopts the plan but before the plan’s 31 effective date is not an eligible member but shall have those 32 rights established under section 512.10. 33 7. “Foreign mutual company” means a mutual company domiciled 34 in a jurisdiction other than this state and organized in a 35 -1- LSB 2335HC (4) 86 av/rj 1/ 22

H.F. _____ similar manner to a domestic mutual company organized under 1 chapter 508 or 515. 2 8. “Governing body” means the board of directors of a mutual 3 company, a mutual holding company, or a stock company. 4 9. “Mutual company” means a mutual insurance company that 5 is seeking to convert to a stock company under this chapter 6 including a domestic mutual company and a foreign mutual 7 company that has applied to redomesticate to this state with an 8 intent to file an application to convert from a mutual company 9 to a stock company under this chapter. 10 10. “Mutual holding company” means any of the following: 11 a. A nonstock corporation formed under chapter 521A. 12 b. A nonstock corporation formed under the laws of any other 13 jurisdiction that subsequently redomesticates in this state. 14 c. A nonstock corporation incorporated in this state 15 surviving or resulting from a merger or consolidation with a 16 nonstock corporation that resulted from a reorganization of a 17 mutual company under the laws of any other jurisdiction. 18 11. “Participating policy” means a policy of a mutual 19 company that grants a member the right to receive dividends if, 20 as, and when declared by the mutual company. 21 12. “Person” means an individual, a corporation, a limited 22 liability company, a partnership, an association, a joint stock 23 company, a trust, an unincorporated organization, a similar 24 entity, or a combination of the foregoing acting in concert. 25 13. “Plan of conversion” or “plan” means a plan adopted by a 26 mutual company’s governing body to convert the mutual company 27 into a stock company under this chapter. 28 14. “Policy” means an insurance policy, including an annuity 29 contract. 30 15. “Standby investor” means a person that has agreed in 31 writing to purchase all or a portion of the capital stock to be 32 sold in a mutual-to-stock conversion that is not subscribed by 33 eligible members. 34 16. “Stock company” means a stock insurance company that 35 -2- LSB 2335HC (4) 86 av/rj 2/ 22

H.F. _____ meets all of the current requirements for admission to do 1 business as a domestic company in this state under chapter 508 2 or 515. 3 17. “Subscription right” means the nontransferable right 4 to purchase, for a period of not less than twenty or more than 5 thirty-five days, the stock of the converted stock company, 6 its proposed stock holding company, or an unaffiliated stock 7 company, or other corporation or entity that will acquire the 8 converted stock company through the purchase of all the stock 9 of the converted stock company. 10 18. “Voting member” means a member who is an eligible member 11 and is also a member of the mutual company as of a date not more 12 than ninety days prior to the date of the meeting at which the 13 plan shall be voted upon by members. 14 Sec. 4. NEW SECTION . 512.4 Adoption of plan of conversion. 15 1. A plan of conversion shall not become effective unless 16 the mutual company seeking to convert to a stock company 17 shall have adopted, by the affirmative vote of not less than 18 two-thirds of its governing body and otherwise in accordance 19 with law, a plan consistent with the requirements of sections 20 512.6 and 512.7 or section 512.8. At any time before approval 21 of a plan by the commissioner, the mutual company, by the 22 affirmative vote of not less than a majority of its governing 23 body, may amend or withdraw the plan. 24 2. Before a mutual company’s eligible members may vote on 25 approval of a plan, a mutual company whose governing body has 26 adopted a plan shall file all of the following documents with 27 the commissioner within ninety days after adoption of the plan 28 together with the specified application fee: 29 a. The plan, including the independent valuation required 30 by section 512.6, subsection 4. 31 b. The form of notice required by subsection 7. 32 c. The form of proxy to be solicited from eligible members 33 pursuant to subsection 8. 34 d. The form of notice required by section 512.10 to persons 35 -3- LSB 2335HC (4) 86 av/rj 3/ 22

H.F. _____ whose policies are issued after adoption of the plan but before 1 its effective date. 2 e. The proposed amended and restated articles of 3 incorporation and bylaws of the converted stock company. 4 f. The acquisition of control statement. 5 g. An application fee equal to the greater of ten thousand 6 dollars or an amount equal to one-tenth of one percent of 7 the estimated pro forma market value of the converted stock 8 company as determined in accordance with section 512.6, 9 subsection 4. If such value is expressed as a range of values, 10 the application fee shall be based upon the midpoint of the 11 range. For good cause shown, the commissioner may waive the 12 application fee in whole or in part, or permit a portion of 13 the application fee to be deferred until completion of the 14 conversion. 15 h. Such other information as the commissioner may request. 16 3. Upon filing of the foregoing documents with the 17 commissioner, the mutual company shall send to eligible members 18 a notice advising eligible members of the adoption and filing 19 of the plan, their ability to provide the commissioner and the 20 mutual company with comments on the plan within thirty days 21 of the date of such notice, and procedures for providing such 22 comments. 23 4. Within twenty days following the end of the comment 24 period in subsection 3, the commissioner shall immediately give 25 written notice to the mutual company of any decision and, in 26 the event of disapproval, a statement in detail of the reasons 27 for the decision. The commissioner shall approve the plan if 28 the commissioner finds all of the following: 29 a. The plan complies with this chapter. 30 b. The plan is fair and equitable to the mutual company and 31 its members. 32 c. The converted stock company will have the amount of 33 capital and surplus deemed by the commissioner to be reasonably 34 necessary for its future solvency. 35 -4- LSB 2335HC (4) 86 av/rj 4/ 22

H.F. _____ d. The plan’s method of allocating subscription rights is 1 fair and equitable. 2 5. The commissioner may retain, at the mutual company’s 3 expense, any qualified expert not otherwise a part of the 4 commissioner’s staff, including counsel and financial advisors, 5 to assist in reviewing the plan and the independent valuations 6 required under section 512.6, subsection 4. 7 6. The commissioner may order, at the mutual company’s 8 expense, a hearing on whether the terms of the plan comply with 9 this chapter after giving written notice by mail or publication 10 to the mutual company and other interested persons, all of whom 11 have the right to appear at the hearing. 12 7. All voting members shall be sent notice of the members’ 13 meeting to vote on the plan. The notice shall fairly describe 14 the proposed plan, shall inform the voting member of the voting 15 member’s right to vote on the plan, and shall be sent to each 16 voting member’s last known address, as shown on the mutual 17 company’s records. If the meeting to vote on the plan is held 18 during the mutual company’s annual meeting of members, only a 19 combined notice of the meeting is required. 20 8. The plan shall be voted upon by voting members and shall 21 be adopted upon receiving the affirmative vote of at least 22 two-thirds of the votes cast at the meeting. Voting members 23 entitled to vote upon the proposed plan may vote in person or 24 by proxy. The number of votes each voting member may cast 25 shall be determined by the mutual company’s bylaws. If the 26 bylaws are silent, each voting member may cast one vote. 27 9. The amended and restated articles of incorporation of the 28 converted stock company shall be considered at the meeting of 29 the voting members called for the purpose of adopting the plan 30 and shall require for adoption the affirmative vote of at least 31 two-thirds of the votes cast at the meeting. 32 10. Within thirty days after the voting members have 33 approved the plan in accordance with the requirements of this 34 section, the converted stock company shall file all of the 35 -5- LSB 2335HC (4) 86 av/rj 5/ 22

H.F. _____ following documents with the commissioner: 1 a. The minutes of the meeting of the voting members at which 2 the plan was approved which shall include the record of total 3 votes cast and votes cast in favor of the plan. 4 b. The amended and restated articles of incorporation and 5 bylaws of the converted stock company. 6 Sec. 5. NEW SECTION . 512.5 Redomestication and conversion. 7 A foreign mutual company or foreign mutual holding company 8 that has filed an application for redomestication may file an 9 application for conversion under this chapter promptly after 10 completion of the redomestication or promptly after approval 11 of the redomestication by the members of the foreign mutual 12 company or foreign mutual holding company if such a member vote 13 is required under the laws of the state of domicile of the 14 foreign mutual company or foreign mutual holding company. 15 Sec. 6. NEW SECTION . 512.6 Required provisions of plan of 16 conversion. 17 1. All of the following provisions shall be included in a 18 plan of conversion: 19 a. The reasons for the proposed conversion. 20 b. The effect of conversion on existing policies, including 21 all of the following: 22 (1) A provision that all policies in force on the effective 23 date of conversion continue to remain in force under the terms 24 of the policies, except that the following rights, to the 25 extent the rights existed in the mutual company, shall be 26 extinguished on the effective date of the conversion: 27 (a) Any voting rights of the policyholders provided under 28 the policies. 29 (b) Except as provided under subparagraph (2), any right to 30 share in the surplus of the mutual company, unless such right 31 is expressly provided for under the provisions of the existing 32 policy. 33 (c) Any assessment provisions provided for under certain 34 types of policies. 35 -6- LSB 2335HC (4) 86 av/rj 6/ 22

H.F. _____ (2) Except as provided in subparagraph (3), a provision that 1 policyholders of participating policies in effect on the date 2 of conversion continue to have a right to receive dividends as 3 provided in the participating policies, if any. 4 (3) Except for the mutual company’s life policies, 5 participating guaranteed renewable accident and health 6 policies, and participating guaranteed renewable noncancelable 7 accident and health policies, a provision that upon the renewal 8 date of a participating policy, the converted stock company 9 may issue the member a nonparticipating policy eliminating the 10 rights of the members to receive dividends as a substitute 11 for the participating policy. This subparagraph shall not be 12 construed to permit the substitution, during the term of a 13 policy, of a nonexperience-rated policy for an experience-rated 14 policy. 15 c. The grant of subscription rights to eligible members, 16 including both of the following: 17 (1) (a) A provision that each eligible member is to 18 receive, without payment, nontransferable subscription rights 19 to purchase the capital stock of the converted stock company 20 and that, in the aggregate, all eligible members shall have the 21 right, prior to the right of any other party, to purchase one 22 hundred percent of the capital stock of the converted stock 23 company, exclusive of any shares of capital stock required to 24 be sold or distributed to the holders of surplus notes, if any, 25 and capital stock purchased by the company’s tax-qualified 26 employee stock benefit plan that is in excess of the total 27 price of the capital stock established under subsection 4, as 28 permitted by section 512.7, subsection 1. As an alternative to 29 subscription rights in the converted stock company, the plan 30 may provide that each eligible member is to receive, without 31 payment, nontransferable subscription rights to purchase a 32 portion of the capital stock of one of the following: 33 (i) A corporation or entity organized for the purpose of 34 purchasing and holding all the stock of the converted stock 35 -7- LSB 2335HC (4) 86 av/rj 7/ 22

H.F. _____ company. 1 (ii) A stock company owned by the mutual company into which 2 the mutual company will be merged. 3 (iii) An unaffiliated stock company or other corporation or 4 entity that will purchase all the stock of the converted stock 5 company. 6 (b) For purposes of any plan, the following transfers of 7 subscription rights shall not be deemed an unpermitted transfer 8 under this chapter: 9 (i) Transfer of subscription rights from an individual to 10 such individual and such individual’s spouse or children or to 11 a trust or other estate or wealth planning entity established 12 for the benefit of such individual, or such individual’s spouse 13 or children. 14 (ii) Transfer of subscription rights from an individual to 15 such individual’s individual or joint individual retirement 16 account, or other tax-qualified retirement plan. 17 (iii) Transfer of subscription rights from an entity to the 18 shareholders, partners, or members of such entity. 19 (iv) Transfer of subscription rights from the holder of such 20 rights to the mutual company, its proposed holding company, 21 or an unaffiliated stock company or other corporation or 22 entity that will purchase all the stock of the converted stock 23 company as provided in subparagraph division (a), subparagraph 24 subdivision (iii). 25 (2) A provision that the subscription rights shall be 26 allocated in whole shares among the eligible members using a 27 fair and equitable formula. The formula need not allocate 28 subscription rights to eligible members on a pro rata basis 29 based on premium payments or contributions to surplus, but 30 may take into account how the different types of policies of 31 the eligible members contributed to the surplus of the mutual 32 company or any other factors that may be fair or equitable. 33 Allocation of subscription rights on a per capita basis 34 shall be entitled to a presumption that such method is fair, 35 -8- LSB 2335HC (4) 86 av/rj 8/ 22

H.F. _____ subject to rebuttal of fairness by a preponderance of the 1 evidence. In accordance with section 512.4, subsection 5, the 2 commissioner may retain an independent consultant to assist in 3 the determination that the allocation of subscription rights 4 is fair and equitable. 5 2. The plan shall provide a fair and equitable means 6 for allocating shares of capital stock in the event of an 7 oversubscription to shares by eligible members exercising 8 subscription rights received under subsection 1, paragraph “c” . 9 3. The plan shall provide that any shares of capital stock 10 not subscribed to by eligible members exercising subscription 11 rights received under subsection 1, paragraph “c” , shall be 12 sold in a public offering or to another corporation or entity 13 that is participating in the plan, as provided in subsection 14 1, paragraph “c” , subparagraph (1). If the number of shares of 15 capital stock not subscribed by eligible members is so small in 16 number or other factors exist that do not warrant the time or 17 expense of a public offering, or warrant the participation of 18 standby investors to facilitate completion of the conversion, 19 the plan may provide for sale of the unsubscribed shares 20 through a private placement or other alternative method 21 approved by the commissioner that is fair and equitable to 22 eligible members. 23 4. The plan shall provide for the preparation of a valuation 24 by a qualified independent expert that establishes all of the 25 following: 26 a. The dollar amount of the capital stock for which 27 subscription rights must be granted pursuant to subsection 1, 28 paragraph “c” , which shall be equal to the estimated pro forma 29 market value of the converted stock company. The qualified 30 independent expert may do all of the following: 31 (1) To the extent feasible, determine the pro forma market 32 value by reference to a peer group of stock companies and the 33 application of generally accepted valuation techniques. 34 (2) State the pro forma market value of the converted stock 35 -9- LSB 2335HC (4) 86 av/rj 9/ 22

H.F. _____ company as a range of value. 1 (3) Establish the value as the value that is estimated to be 2 necessary to attract full subscription for the shares. 3 b. The dollar value of a subscription right based upon 4 the application of the Black-Scholes option pricing model or 5 another generally accepted option pricing model. In connection 6 with the determination of stock price volatility or other 7 valuation inputs used in option pricing models, the qualified 8 independent expert may assume that the attributes of the 9 converted stock company will be substantially similar to the 10 attributes of the stock of the peer companies used to determine 11 the estimated pro forma market value of the converted stock 12 company. Solely for purposes of determining the value of a 13 subscription right, the term of a subscription right shall be 14 deemed to be a minimum of ninety days. 15 5. The plan shall provide that each eligible member 16 shall be given the right to require the mutual company to 17 redeem such subscription rights, in lieu of the exercise of 18 subscription rights allocated to such eligible member, at a 19 price equal to the number of such subscription rights allocated 20 to such eligible member multiplied by the dollar value of a 21 subscription right as determined by the qualified independent 22 expert pursuant to subsection 4, paragraph “b” . The obligation 23 of the mutual company to redeem such subscription rights shall 24 arise only upon the effective date of the plan as provided 25 in section 512.9. The redemption price payable to each 26 eligible member shall be paid to such eligible member within 27 thirty days of the effective date of the plan. Alternatively, 28 the converted stock company may, but shall not be required 29 to, offer each eligible member the option of receiving the 30 redemption amount in cash or having such redemption amount 31 credited against future premium payments. An eligible member 32 that does not exercise such eligible member’s subscription 33 rights and also fails to affirmatively request redemption 34 of such subscription rights before the expiration of the 35 -10- LSB 2335HC (4) 86 av/rj 10/ 22

H.F. _____ subscription offering, nevertheless shall be deemed to have 1 requested redemption of such eligible member’s subscription 2 rights and shall receive the redemption amount in cash in the 3 manner otherwise provided in this subsection. 4 6. The plan shall set the purchase price per share of 5 capital stock equal to any reasonable amount. However, the 6 minimum subscription amount required of any eligible member 7 cannot exceed five hundred dollars, but the plan may provide 8 that the minimum number of shares any person may purchase 9 pursuant to the plan is twenty-five shares. The purchase price 10 per share at which capital stock is offered to persons who are 11 not eligible members may be greater than but not less than the 12 purchase price per share at which capital stock is offered to 13 eligible members. 14 7. The plan shall provide that any person or group of 15 persons acting in concert shall not acquire, in the public 16 offering or pursuant to the exercise of subscription rights, 17 more than five percent of the capital stock of the converted 18 stock company or the stock of another corporation that is 19 participating in the plan, as provided in subsection 1, 20 paragraph “c” , subparagraph (1), subparagraph division (a), 21 subparagraph subdivision (i), (ii), or (iii), except with the 22 approval of the commissioner. This limitation does not apply 23 to any entity that is to purchase one hundred percent of the 24 capital stock of the converted stock company as part of the 25 plan approved by the commissioner or to any person that acts 26 as a standby investor of the capital stock of the converted 27 stock company for an amount equal to ten percent or more of the 28 capital stock of the converted stock company, provided that in 29 each case such purchase by a standby investor of ten percent 30 or more of the capital stock of the converted stock company is 31 approved by the commissioner in accordance with the laws of 32 this state following the filing of an acquisition of control 33 statement. 34 8. The number of the common shares which any person, 35 -11- LSB 2335HC (4) 86 av/rj 11/ 22

H.F. _____ together with any affiliates or group of persons acting in 1 concert, may subscribe for or purchase in the converted stock 2 company shall be limited to not more than five percent of 3 the common shares. For this purpose, neither the members of 4 the governing body of the converted stock company nor of its 5 parent corporation, if any, shall be deemed to be affiliates 6 or a group of persons acting in concert solely by reason of 7 being members of the governing body. This provision does not 8 prohibit the officers and directors from doing any of the 9 following: 10 a. Making block purchases of one percent or more of the 11 outstanding common stock other than through a broker-dealer if 12 approved in writing by the division. 13 b. Exercising subscription rights received under the plan. 14 c. Participating in a stock benefit plan permitted by 15 section 512.7, subsection 1, or approved by shareholders 16 pursuant to section 512.12, subsection 2. 17 9. The plan shall provide that, unless the common shares 18 have a public market when issued, officers and directors 19 of the converted stock company and their affiliates shall 20 not, for at least ninety days after the date of conversion, 21 purchase common shares of the issuer, except in negotiated 22 transactions involving more than ten percent of the outstanding 23 common shares, and shall not sell stock purchased pursuant to 24 this section within one year after the effective date of the 25 conversion, except that this section shall not be deemed to 26 restrict a transfer of stock by such officer or director if 27 the stock is the stock of a corporation that is participating 28 in the plan as provided in subsection 1, paragraph “c” , 29 subparagraph (1), subparagraph division (a), subparagraph 30 subdivision (iii), and has a class of stock registered under 31 the federal Securities Exchange Act of 1934, as amended, 15 32 U.S.C. §78a et seq., or if the transfer is to the spouse or 33 minor children of such officer or director, or to a trust or 34 other estate or wealth planning entity established for the 35 -12- LSB 2335HC (4) 86 av/rj 12/ 22

H.F. _____ benefit of such officer or director, or the spouse or minor 1 children of such officer or director. 2 10. The plan shall provide that the rights of a holder of a 3 surplus note to participate in the conversion, if any, shall be 4 governed by the terms of the surplus note. 5 11. The plan shall provide that, without the prior approval 6 of the commissioner, a converted stock company, or any 7 corporation participating in the conversion plan pursuant to 8 subsection 1, paragraph “c” , subparagraph (1), subparagraph 9 division (a), subparagraph subdivision (i) or (ii), shall not, 10 for a period of five years from the date of the completion of 11 the conversion, repurchase any of its capital stock from any 12 person, except that this restriction shall not apply to either 13 of the following: 14 a. A repurchase on a pro rata basis pursuant to an offer 15 made to all shareholders of the converted stock company, or any 16 corporation participating in the conversion plan pursuant to 17 subsection 1, paragraph “c” , subparagraph (1), subparagraph 18 division (a), subparagraph subdivision (i) or (ii). 19 b. A purchase in the open market by a tax-qualified, or 20 nontax-qualified employee stock benefit plan in an amount 21 reasonable and appropriate to fund the plan. 22 12. The plan shall provide whether the mutual holding 23 company, if any, or the mutual company will dissolve as part of 24 a proposed conversion pursuant to chapter 491. 25 Sec. 7. NEW SECTION . 512.7 Optional provisions of plan of 26 conversion. 27 1. With the prior approval of the commissioner, the 28 plan may allocate to a tax-qualified employee benefit plan 29 nontransferable subscription rights to purchase up to ten 30 percent of the capital stock of the converted stock company or 31 the stock of another corporation that is participating in the 32 plan, as provided in section 512.6, subsection 1, paragraph 33 “c” , subparagraph (1), subparagraph division (a), subparagraph 34 subdivision (iii). A tax-qualified employee benefit plan is 35 -13- LSB 2335HC (4) 86 av/rj 13/ 22

H.F. _____ entitled to exercise subscription rights granted under this 1 subsection regardless of the total number of shares purchased 2 by other persons. 3 2. With the prior approval of the commissioner, the plan 4 may provide that the other classes of subscribers approved by 5 the commissioner shall receive nontransferable subscription 6 rights to purchase capital stock of the converted stock company 7 or the stock of another corporation that is participating in 8 the conversion plan, as provided in section 512.6, subsection 9 1, paragraph “c” , subparagraph (1), subparagraph division (a), 10 subparagraph subdivision (iii). Other classes of subscribers 11 that may be approved by the commissioner include, without 12 limitation, any of the following: 13 a. Members of the mutual company that became members after 14 the date fixed for establishing eligible members. 15 b. The shareholders of another corporation that is 16 participating in the plan, as provided in section 512.6, 17 subsection 1, paragraph “c” , subparagraph (1), subparagraph 18 division (a), subparagraph subdivision (iii). 19 c. The shareholders of another corporation that is a party 20 to an acquisition, merger, consolidation, or other similar 21 transaction with the mutual company. 22 d. The officers, directors, and employees of the mutual 23 company. The subscription rights allocated under this 24 paragraph shall be subordinate to the subscription rights of 25 the eligible members. This paragraph shall not require the 26 subordination of subscription rights received by officers, 27 directors, and employees as eligible members, if any. 28 Sec. 8. NEW SECTION . 512.8 Alternative plan of conversion. 29 1. The governing body may adopt a plan of conversion that 30 does not rely in whole or in part upon issuing nontransferable 31 subscription rights to members to purchase stock of the 32 converted stock company if the commissioner finds that the plan 33 does not prejudice the interests of the members, is fair and 34 equitable, and is not inconsistent with the purpose of this 35 -14- LSB 2335HC (4) 86 av/rj 14/ 22

H.F. _____ chapter. Subject to a finding of the commissioner that an 1 alternative plan is fair and equitable and is not inconsistent 2 with the purpose of this chapter, an alternative plan may do 3 any of the following: 4 a. Include the merger of a domestic mutual company into a 5 domestic or foreign stock company. 6 b. Provide for issuing transferable or redeemable 7 subscription rights. 8 c. Provide for issuing stock, cash, policyholder credits, or 9 other consideration, or any combination of the foregoing, to 10 members instead of subscription rights. 11 d. Provide for partial conversion of the mutual company 12 and formation of a mutual holding company pursuant to section 13 521A.14. 14 e. Set forth another plan containing any other provisions 15 approved by the commissioner. 16 2. The commissioner may approve a partial conversion 17 pursuant to this chapter and formation of a mutual holding 18 company pursuant to section 521A.14. 19 3. a. A mutual holding company may convert to stock form 20 under this chapter, and shall be subject to the provisions 21 of this chapter and to any other provisions of this title 22 applicable to insurance holding companies, except as otherwise 23 provided in this chapter. It is the policy of this chapter to 24 enable and facilitate such a conversion of a mutual holding 25 company to stock form, and this chapter shall be interpreted 26 accordingly. 27 b. Any mutual holding company may convert to a stock holding 28 company in accordance with the provisions of this chapter. 29 Solely for purposes of establishing the process for and 30 enabling and facilitating any conversion of a mutual holding 31 company to a stock holding company, references in this chapter 32 to a mutual company shall be deemed to refer to a mutual 33 holding company and other provisions of this chapter shall be 34 interpreted accordingly. 35 -15- LSB 2335HC (4) 86 av/rj 15/ 22

H.F. _____ c. Any stock issued by a subsidiary insurance company or 1 subsidiary holding company of a mutual holding company to 2 persons other than the parent mutual holding company shall be 3 exchanged for the stock issued by the parent mutual holding 4 company in connection with the conversion of the parent mutual 5 holding company to the parent stock holding company or any 6 corporation participating in the conversion of the mutual 7 holding company pursuant to section 512.6, subsection 1, 8 paragraph “c” , subparagraph (1), subparagraph division (a). 9 The parent mutual holding company and the subsidiary insurance 10 company or subsidiary holding company must demonstrate to 11 the satisfaction of the commissioner that the basis for the 12 exchange is fair and reasonable. 13 d. If a subsidiary insurance company or subsidiary holding 14 company has issued shares to an entity other than the mutual 15 holding company, the conversion of the mutual holding company 16 to a stock holding company shall not be consummated unless a 17 majority of the shares issued to the entities other than the 18 mutual holding company vote in favor of the conversion. This 19 requirement applies in addition to any otherwise required 20 policyholder or shareholder votes. 21 Sec. 9. NEW SECTION . 512.9 Effective date of plan of 22 conversion. 23 A plan of conversion is effective when the commissioner has 24 approved the plan, the voting members have approved the plan 25 and adopted the amended and restated articles of incorporation 26 of the converted stock company, and the amended and restated 27 articles of incorporation are filed in the office of the 28 secretary of state of this state. The secretary of state shall 29 accept for filing a verified copy of the amended and restated 30 articles of incorporation of the converted stock company. 31 Sec. 10. NEW SECTION . 512.10 Rights of members whose 32 policies are issued after adoption of plan of conversion and 33 before effective date. 34 1. All members whose policies are issued after the proposed 35 -16- LSB 2335HC (4) 86 av/rj 16/ 22

H.F. _____ plan of conversion has been adopted by the governing body and 1 before the effective date of the plan shall be sent a written 2 notice regarding the plan upon issuance of such policy. 3 2. A member of a life or health insurance company entitled 4 to be sent the notice described in subsection 1 is entitled 5 to rescind the member’s policy and receive a full refund 6 of any amounts paid for the policy or contract within ten 7 days after such member has received the notice. Except as 8 provided in subsection 3, each member of a property or casualty 9 insurance company entitled to receive the notice provided for 10 in subsection 1 shall be advised of the member’s right of 11 cancellation and to a pro rata refund of unearned premiums. 12 3. A member of a life or health insurance company, or 13 property or casualty insurance company, who has made or filed 14 a claim under such member’s insurance policy shall not be 15 entitled to any right to receive any refund under subsection 2. 16 A person who has exercised the rights provided by subsection 17 2 shall not be entitled to make or file any claim under such 18 person’s insurance policy. 19 Sec. 11. NEW SECTION . 512.11 Corporate existence. 20 1. On the effective date of the conversion, the corporate 21 existence of the mutual company or mutual holding company 22 continues in the converted stock company. The commissioner 23 shall issue a new certificate of authority to the converted 24 stock company effective on the date specified in the plan. The 25 converted stock company is a continuation of the mutual company 26 or mutual holding company and the conversion does not annul or 27 modify any of the mutual company’s or mutual holding company’s 28 existing suits, contracts, or liabilities except as provided 29 in the approved conversion plan. All rights, franchises, and 30 interests of the mutual company or mutual holding company 31 in and to property, assets, and other interests shall be 32 transferred to and shall vest in the converted stock company 33 and the converted stock company shall assume all obligations 34 and liabilities of the mutual company or mutual holding 35 -17- LSB 2335HC (4) 86 av/rj 17/ 22

H.F. _____ company. The converted stock company shall exercise all rights 1 and powers and perform all duties conferred or imposed by law 2 on insurance companies writing the classes of insurance written 3 by the converted stock company, and shall retain the rights and 4 contracts existing before conversion, subject to provisions of 5 the plan. 6 2. Unless otherwise specified in the plan of conversion, 7 the persons who are officers and directors of the mutual 8 company or the mutual holding company on the effective date of 9 the conversion shall serve as officers and directors of the 10 converted stock company until new officers and directors of the 11 converted stock company are elected pursuant to the amended and 12 restated articles of incorporation and bylaws of the converted 13 stock company. 14 Sec. 12. NEW SECTION . 512.12 Conflict of interest. 15 1. An officer, director, agent, or employee of the mutual 16 company shall not receive any fee, commission, or other 17 valuable consideration, other than such person’s usual regular 18 salary or compensation, for aiding, promoting, or assisting 19 in a conversion under this chapter, except as provided for in 20 the plan approved by the commissioner. This provision does 21 not prohibit the payment of reasonable fees and compensation 22 to attorneys, accountants, financial advisors, and actuaries 23 for services performed in the independent practice of their 24 professions, even if the attorney, accountant, financial 25 advisor, or actuary is also an officer or director of the 26 mutual company. 27 2. For a period of the later of five years after the 28 effective date of the conversion, or five years following 29 the date of distribution of consideration to the members in 30 exchange for their membership interests, a converted stock 31 company shall not implement any nontax-qualified stock benefit 32 plan unless the plan is approved by a majority of votes cast at 33 a duly-convened meeting of shareholders held not less than six 34 months after the effective date of the conversion. 35 -18- LSB 2335HC (4) 86 av/rj 18/ 22

H.F. _____ 3. All the costs and expenses connected with a plan of 1 conversion shall be paid for or reimbursed by the mutual 2 company or the converted stock company. However, if the plan 3 provides for participation by another corporation or stock 4 company in the plan pursuant to section 512.6, subsection 1, 5 paragraph “c” , subparagraph (1), subparagraph division (a), the 6 corporation or stock company may pay for or reimburse all or a 7 portion of the costs and expenses connected with the plan. 8 Sec. 13. NEW SECTION . 512.13 Failure to give notice. 9 If the mutual company complies substantially and in good 10 faith with the notice requirements of this chapter, the mutual 11 company’s failure to send a member the required notice does not 12 impair the validity of any action taken under this chapter. 13 Sec. 14. NEW SECTION . 512.14 Limitation on actions. 14 Any action challenging the validity of or arising out of 15 acts taken or proposed to be taken under this chapter shall 16 be commenced not later than thirty days following the date 17 of approval by the commissioner, unless an application for 18 rehearing is filed pursuant to section 17A.16, subsection 2. 19 If an application for rehearing is filed, then such action must 20 be filed within thirty days after that application is denied or 21 deemed denied or, if the application is granted, within thirty 22 days after the issuance of the commissioner’s final decision 23 on rehearing. The converted stock company or any defendant 24 may petition the court in such action to give security for the 25 reasonable attorney fees which may be incurred by any party to 26 the action. The amount of the security may be increased or 27 decreased in the discretion of the court having jurisdiction if 28 a showing is made that the security provided is or may become 29 inadequate or excessive. 30 Sec. 15. NEW SECTION . 512.15 Rules. 31 The commissioner shall adopt rules pursuant to chapter 17A 32 to carry out the provisions of this chapter. 33 Sec. 16. NEW SECTION . 512.16 Laws applicable to converted 34 stock company. 35 -19- LSB 2335HC (4) 86 av/rj 19/ 22