§ 4105. Domestic stock companies; declaration and payment of
dividends. (a) Except as provided in subsection (c) of this section no
domestic stock property/casualty insurance company shall declare or
distribute any dividend to shareholders except out of earned surplus.
Notwithstanding the foregoing, the superintendent may permit a domestic
stock property/casualty insurance company to restate its earned surplus
under a plan of quasi-reorganization in accordance with regulations as
may be promulgated by the superintendent. No domestic stock
property/casualty insurance company shall declare or distribute any
dividend to shareholders which, together with all dividends declared or
distributed by it during the next preceding twelve months, exceeds the
lesser of ten percent of its surplus to policyholders as shown by its
last statement on file with the superintendent, or one hundred percent
of adjusted net investment income during such period unless, upon prior
application therefor, the superintendent approves a greater dividend
distribution based upon his finding that the insurer will retain
sufficient surplus to support its obligations and writings.

In this section, (1) "earned surplus" means the portion of the surplus
that represents the net earnings, gains or profits, after deduction of
all losses, that have not been distributed to the shareholders as
dividends, or transferred to stated capital or capital surplus or
applied to other purposes permitted by law but does not include
unrealized appreciation of assets;

(2) "adjusted net investment income" means net investment income for
the twelve months immediately preceding the declaration or distribution
of the current dividend increased by the excess, if any, of net
investment income over dividends declared or distributed during the
period commencing thirty-six months prior to the declaration or
distribution of the current dividend and ending twelve months prior
thereto; and

(3) "surplus" means the amount of the insurer's admitted assets in
excess of its capital and liabilities, and both "surplus" and "surplus
to policyholders" include any voluntary reserves, or any part thereof,
which are not required by law.

(b) If the superintendent finds, after notice and hearing, that any
such company has distributed any dividend in violation of this section,
he may order the company to cease doing any new business until the
amount of the dividend has been restored to the company. The directors
of any such company who vote in favor of the declaration and
distribution of any dividend in violation of this section shall, in
addition to all other liabilities or penalties prescribed by law, be
jointly and severally liable to the creditors, including policyholder
creditors, of the company to the extent of the dividend so declared and
distributed, and every shareholder receiving any such dividend shall be
liable to the creditors of the company to the extent of the dividend
received by such shareholder.

(c) Such company may declare and distribute a stock dividend to its
shareholders whenever it shall have a surplus, as defined in subsection
(a) hereof, in an amount at least equal to the sum of the dividend and
thirty percent of its unearned premium liability as shown by its last
statement on file with the superintendent and, for such purpose, the
company may increase its capital stock from such surplus in the manner
prescribed in section one thousand two hundred six of this chapter, and
it shall distribute the additional or increased stock to its
shareholders in proportion to the stock held by each, respectively.