0001| AN ACT | 0002| RELATING TO INSURANCE; AMENDING SECTIONS OF THE INSURANCE HOLDING | 0003| COMPANY LAW TO INCLUDE HEALTH MAINTENANCE ORGANIZATIONS IN AN | 0004| INSURER'S PAYMENT OF DIVIDENDS OR DISTRIBUTIONS. | 0005| | 0006| BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO: Section 1. Section 59A-37-2 NMSA 1978 (being Laws 1984, Chapter 127, Section 617, | 0007| as amended) is amended to read: | 0008| "59A-37-2. DEFINITIONS.--As used in Chapter 59A, Article 37 NMSA 1978: | 0009| A. "acquire" means to come into possession or control of, and "acquisition" | 0010| means any agreement, arrangement or activity the consummation of which results in a person | 0011| acquiring directly or indirectly the control of another person and includes but is not limited to | 0012| the acquisition of voting securities or assets, bulk reinsurance and mergers; | 0013| B. "affiliate" means a person that directly or indirectly is controlled by, is under | 0014| common control with or controls another person; | 0015| C. "control" means the possession of the power to direct or cause the direction of | 0016| the management and policies of a person, whether directly or indirectly, through the ownership | 0017| of voting securities, by contract other than a commercial contract for goods or nonmanagement | 0018| services, or otherwise, unless the power is the result of an official position with or corporate | 0019| office held by an individual. Control shall be presumed to exist if any person, directly or | 0020| indirectly, owns, controls, holds with the power to vote or holds ten or more percent of the | 0021| voting securities of any other person. This presumption may be rebutted by a showing, in the | 0022| manner provided by Section 59A-37-19 NMSA 1978, that control does not in fact exist. The | 0023| superintendent may determine, after furnishing all persons in interest notice and an opportunity | 0024| to be heard, that control exists in fact, notwithstanding the absence of a presumption to that | 0025| effect, provided that the determination is based on specific findings of fact in its support; | 0001| D. "insurance holding company" is a person which controls an insurer; | 0002| "insurance holding company system" means a combination of two or more affiliated persons, at | 0003| least one of which is an insurer; | 0004| E. "insurer" means a person which undertakes, under contract, to indemnify a | 0005| person against loss, damage or liability arising from an unknown or contingent future event. | 0006| The term does not include agencies, authorities or instrumentalities of the United States, its | 0007| possessions or territories, the commonwealth of Puerto Rico, the District of Columbia, a state or | 0008| any of its political subdivisions, a fraternal benefit society or a nonprofit medical and hospital | 0009| service association; | 0010| F. "person" means an individual, corporation, association, partnership, joint stock | 0011| company, trust, unincorporated organization or any similar entity or combination of entities; | 0012| G. "securityholder" means the owner of any security of a person, including | 0013| common stock, preferred stock, debt obligations and any other security convertible into or | 0014| evidencing the right to acquire any of the foregoing; | 0015| H. "subsidiary" means an affiliate of a person controlled by the person either | 0016| directly or indirectly through one or more intermediaries; | 0017| I. "voting security" means a certificate evidencing the ownership or indebtedness | 0018| of a person, to which is attached a right to vote on the management or policymaking of that | 0019| person and includes any security convertible into or evidencing a right to acquire such a voting | 0020| security; and | 0021| J. "health maintenance organization" means any person which undertakes to | 0022| provide or arrange for the delivery of basic health care services to enrollees on a prepaid basis, | 0023| except for enrollee responsibility for co-payments or deductibles." | 0024| Section 2. Section 59A-37-22 NMSA 1978 (being Laws 1984, Chapter 127, Section | 0025| 637, as amended) is amended to read: | 0001| "59A-37-22. DIVIDENDS AND OTHER DISTRIBUTIONS.-- | 0002| A. No domestic stock insurer shall declare or distribute any dividend to | 0003| shareholders, other than a pro rata distribution of any class of the insurer's own securities, except | 0004| out of earned surplus. For purposes of this section, "earned surplus" means the portion of the | 0005| surplus that represents the net earnings, gains or profits, after deduction of all losses, that have | 0006| not been distributed to the shareholders as dividends or transferred to stated capital or capital | 0007| surplus or applied to other purposes permitted by law, but does not include twenty-five percent | 0008| of the unrealized appreciation of assets. | 0009| B. No domestic insurer shall pay an extraordinary dividend or make any other | 0010| extraordinary distribution to its shareholders until: | 0011| (1) thirty days after the superintendent has received notice of the | 0012| declaration thereof and has not within such period disapproved such payment; or | 0013| (2) the superintendent shall have approved such payment within the | 0014| thirty-day period. | 0015| C. For the purposes of Sections 59A-37-20 through 59A-37-22 NMSA 1978, an | 0016| extraordinary dividend or distribution includes any dividend or distribution of cash or other | 0017| property, whose fair market value together with that of other dividends or distributions made | 0018| within the preceding twelve months exceeds the lesser of ten percent of the insurer's surplus as | 0019| regards policyholders as of December 31 next preceding or the net gain from operations of the | 0020| insurer, if the insurer is either a life insurer or a health maintenance organization, or the net | 0021| investment income, if the insurer is not a life insurer or a health maintenance organization, not | 0022| including realized capital gains, for the twelve-month period ending December 31 next | 0023| preceding, but shall not include pro rata distributions of any class of the insurer's own securities. | 0024| D. In determining whether a dividend or distribution is extraordinary: | 0025| (1) an insurer other than a life insurer or a health maintenance | 0001| organization may carry forward net income from the previous three calendar years that has not | 0002| already been paid out as dividends, which carry-forward shall be computed by taking the net | 0003| income from the second, third and fourth preceding calendar years, not including realized capital | 0004| gains, less dividends paid in the third, second and immediate preceding calendar years; and | 0005| (2) a life insurer or a health maintenance organization may carry forward | 0006| net gains from operations not including realized capital gains from the previous two calendar | 0007| years that have not already been paid out as dividends, which carry-forward shall be computed | 0008| by taking the net gain from the second and third preceding calendar years, not including realized | 0009| capital gains, less dividends paid in the second and immediate preceding calendar years. | 0010| E. Notwithstanding any other provision of law, an insurer may declare an | 0011| extraordinary dividend or distribution which is conditioned upon the superintendent's approval | 0012| thereof, and such a declaration shall confer no rights upon shareholders until: | 0013| (1) the superintendent has approved the payment of the dividend or | 0014| distribution; or | 0015| (2) the superintendent has not disapproved the payment within | 0016| thirty days after he has received notice of the declaration." | 0017| |