§ 4207. Dividends to shareholders of life, and accident and health
insurance companies. (a)(1) For purposes of this subsection, "earned
surplus" means an amount equal to an insurer's positive unassigned
funds, excluding eighty-five percent of the change in net unrealized
capital gains or losses less capital gains tax, for the immediately
preceding calendar year as set forth in the insurer's most recent annual
statutory financial statement filed with the superintendent pursuant to
section three hundred seven of this chapter.

(2) Notwithstanding paragraph five of this subsection, any domestic
stock life insurance company may distribute a dividend to its
shareholders out of earned surplus where the aggregate amount of such
dividends in any calendar year does not exceed the greater of:

(A) ten percent of its surplus to policyholders as of the immediately
preceding calendar year; or

(B) its net gain from operations for the immediately preceding
calendar year, not including realized capital gains, not to exceed
thirty percent of its surplus to policyholders as of the immediately
preceding calendar year; provided, however, that, notwithstanding this
paragraph, in no event may a dividend be distributed without approval of
the superintendent, in accordance with paragraph five of this
subsection, in the calendar year immediately following a calendar year
for which its net gain from operations, not including realized capital
gains, was negative.

(3) Notwithstanding paragraph five of this subsection, any domestic
stock life insurance company may distribute a dividend to its
shareholders where the aggregate amount of such dividends in any
calendar year does not exceed the lesser of:

(A) ten percent of its surplus to policyholders as of the immediately
preceding calendar year; or

(B) its net gain from operations for the immediately preceding
calendar year, not including realized capital gains.

(4) An insurer shall not distribute a dividend pursuant to both
paragraph two and paragraph three of this subsection.

(5) Except as provided in paragraphs two and three of this subsection,
no domestic stock life insurance company shall distribute any dividend
to its shareholders unless a notice of its intention to declare such
dividend and the amount thereof shall have been filed with the
superintendent not less than thirty days in advance of such proposed
declaration. The superintendent may disapprove such distribution by
giving written notice to such company within thirty days after such
filing that the superintendent finds that the financial condition of the
company does not warrant such distribution.

(6) With respect to dividends to shareholders distributed pursuant to
paragraph two of this subsection, every domestic stock life insurance
company shall report to the superintendent all such dividends within
five business days following the declaration thereof and at least ten
days prior to the payment thereof.

(7) A domestic stock life insurance company's surplus to policyholders
following any distribution of dividends to its shareholders under
paragraph two of this subsection shall be reasonable in relation to the
company's outstanding liabilities and adequate to meet its financial
needs.

(8) With respect to dividends to shareholders distributed pursuant to
paragraph two of this subsection, the superintendent may limit or
disallow dividends if the superintendent determines that the:

(A) domestic stock life insurance company's surplus to policyholders
is not reasonable in relation to the company's outstanding liabilities
and not adequate to meet its financial needs; or

(B) domestic stock life insurance company is financially distressed or
troubled.

(b) (1) Except as provided in paragraph three hereof, no domestic
stock accident and health insurance company shall declare or distribute
any dividend on its capital stock, except out of earned surplus, as
defined in subsection (a) of section four thousand one hundred five of
this chapter. Notwithstanding the forgoing, the superintendent may
permit a domestic stock accident and health 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 accident and health insurance company shall declare or
distribute any dividend to shareholders which, together with all such
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
for such period unless, upon prior application therefor, the
superintendent approves a greater dividend payment based upon his
finding that the insurer will retain sufficient surplus to support its
obligations and writings. Within the meaning of this section, "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; "surplus" means
the amount of the insurer's admitted assets in excess of its capital and
its liabilities; and both "surplus" and "surplus to policyholders" shall
include any voluntary reserves, or any part thereof, which are not
required by law.

(2) If the superintendent finds, after notice to and hearing of such
company, that any such company has distributed any dividend in violation
of this subsection, he may order such company to cease doing any new
business until the amount of such dividend has been restored to such
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 such company to the extent of the
dividend so declared and paid, and every shareholder receiving any such
dividend shall be liable to such creditors of such company to the extent
of the dividend received by such shareholder.

(3) Any domestic stock accident and health insurance company may
declare and distribute a stock dividend to its shareholders whenever it
shall have a surplus as defined in paragraph one hereof, in an amount at
least equal to the sum of such dividend and thirty percent of its
unearned premium liability as shown by its last statement on file in the
office of the superintendent and, for such purpose, such 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 such additional or increased stock to its shareholders in
proportion to the stock held by each, respectively.

(c) Any stock accident and health insurance company authorized to do
business in this state may include in its charter a provision
authorizing the board of directors to permit its policyholders from time
to time to participate in the profits of its operations through the
payment of dividends to policyholders. For the purpose of carrying into
effect any such provision, the board of directors may from time to time
make reasonable classifications of policies. Every such classification
of risks shall be filed with the superintendent and shall not be
effective as to policies issued or delivered in this state unless
approved by the superintendent as fair and equitable and not unfairly
discriminatory. Any such classification approved by the superintendent
shall remain in effect in this state until disapproved by him or until
withdrawn or modified with his approval by the company filing the same.
No dividends to policyholders shall be declared or paid by any such
company except out of its earned surplus, as defined in subsection (a)
of section four thousand one hundred five of this chapter.