304.37-120 Preacquisition notification -- Review.
(1)
(2)
No person other than the issuer shall make a tender offer for, a request or invitation
for tenders of, enter into any agreement to exchange securities, seek to acquire, or
acquire in the open market or otherwise, any voting security of a domestic insurer if,
after the consummation, the person would, directly or indirectly, or by conversion,
or by exercise of any right to acquire, be in control of the insurer. No person shall
enter into an agreement to merge with or to acquire control of a domestic insurer or
any person controlling a domestic insurer unless, at the time of the offer, request, or
invitation is made, or any agreement is entered into, or prior to the acquisition of
these securities if no offer or agreement is involved, the person has filed with the
commissioner and has sent to the insurer, a statement containing the information
required by this section and the offer, request, invitation, agreement, or acquisition
has been approved by the commissioner in the manner prescribed in this section.
(a) For purposes of this section a domestic insurer shall include any person
controlling a domestic insurer unless the person as determined by the
commissioner is either directly or through its affiliates primarily engaged in
business other than the business of insurance. However, the person shall file a
preacquisition notification with the commissioner containing the information
required in KRS 304.37-130(3)(a) thirty (30) days prior to the proposed
effective date of the acquisition. The person who fails to file a preacquisition
notification shall be subject to the penalty set out in KRS 304.99-151. For the
purposes of this section, "person" shall not include any securities broker
holding, in the usual and customary brokers function, less than twenty percent
(20%) of the voting securities of an insurance company or of any person
which controls an insurance company.
The statement to be filed with the commissioner under this section shall be made
under oath or affirmation and shall contain the following information:
(a) The name and address of each person by whom or on whose behalf the merger
or other acquisition of control referred to in subsection (1) of this section is to
be effected; and
1.
If the person is an individual, his or her principal occupation and all
offices and positions held during the past five (5) years, and any
conviction of crimes other than minor traffic violations during the past
ten (10) years; or
2.
If the person is not an individual, a report of the nature of its business
operations during the past five (5) years or for a lesser period that the
person and any predecessors have been in existence, an informative
description of the business intended to be done by the person and the
person's subsidiaries, and a list of all individuals who are or who have
been selected to become directors or executive officers of the person, or
who perform or will perform functions appropriate to these functions.
The list shall include for each individual the information required by
subparagraph 1. of this paragraph;
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
The source, nature, and amount of the consideration used or to be used in
effecting the merger or other acquisition of control, a description of any
transaction in which funds were or are to be obtained for merger or other
acquisition of control, including any pledge of the insurer's stock, or the stock
of any of its subsidiaries or controlling affiliates, and the identity of persons
furnishing the consideration; but if a source of the consideration is a loan
made in the lender's ordinary course of business, the identity of the lender
shall remain confidential, if the person filing the statement so requests;
Fully audited financial information as to the earnings and financial condition
of each acquiring party for the preceding five (5) fiscal years of each acquiring
party, or for a lesser period that the acquiring party and any predecessors have
been in existence, and similar unaudited information as of a date not earlier
than ninety (90) days prior to the filing of the statement;
Any plans or proposals which each acquiring party may have to liquidate the
insurer, to sell its assets, or merge or consolidate it with any person, or to
make any other material change in its business or corporate structure or
management;
The number of shares of any security referred to in subsection (1) of this
section which the acquiring party proposes to acquire, and the terms of the
offer, request, invitation, agreement, or acquisition referred to in subsection
(1) of this section, and a statement as to the method used to determine the
fairness of the proposal;
The amount of each class of any security referred to in subsection (1) of this
section which is beneficially owned, or concerning any security referred to in
subsection (1) of this section which there is a right to acquire beneficial
ownership of by each acquiring party;
A full description of any contracts, arrangements, or understandings with
respect to any security referred to in subsection (1) of this section in which
any acquiring party is involved, such as transfer of any of the securities, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or guarantees of profits, division of losses or profits, or
the giving or withholding of proxies. The description shall identify the persons
with whom these contracts, arrangements, or understandings have been
entered into;
A description of the purchase of any security referred to in subsection (1) of
this section during the twelve (12) calendar months preceding the filing of the
statement by any acquiring party, including the dates of purchase, names of
the purchasers, and consideration paid or agreed to be paid;
A description of any recommendations to purchase any security referred to in
subsection (1) of this section made during the twelve (12) calendar months
preceding the filing of the statement, by any acquiring party, or by anyone
based upon interviews or at the suggestion of the acquiring party;
Copies of all tender offers for requests, or invitations for tenders of, exchange
offers for, and agreements to acquire or exchange any securities referred to in
(3)
(4)
subsection (1) of this section, and of additional soliciting material distributed
which relates;
(k) The term of any agreement, contract, or understanding made with, or proposed
to be made with any broker-dealer, as to solicitation of securities referred to in
subsection (1) of this section for tender, and the amount of any fees,
commissions, or other compensation to be paid to broker-dealers with regard
to subsection (1) of this section;
(l) Any additional information as the commissioner may by regulation prescribe
as necessary or appropriate for the protection of policyholders of the insurer or
in the public interest;
(m) If the person required to file the statement referred to in subsection (1) of this
section is a partnership, limited partnership, syndicate, or other group, the
commissioner may require that the information called for by paragraphs (a) to
(l) of this subsection shall be given with respect to each partner of the
partnership or limited partnership, each member of the syndicate or other
group, and each person who controls the partner or member. If any partner,
member, or person is a corporation, or the person required to file the statement
referred to in subsection (1) of this section is a corporation, the commissioner
may require that the information called for by paragraphs (a) to (l) of this
subsection shall be given with respect to the corporation, each officer and
director of the corporation, and each person who is directly or indirectly the
beneficial owner of more than ten percent (10%) of the outstanding voting
securities of the corporation; and
(n) If any material change occurs in the facts in the statement filed with the
commissioner and sent to the insurer pursuant to this section, an amendment
stating the change, with copies of all documents and other materials relevant
to the change, shall be filed with the commissioner and sent to the insurer
within two (2) business days after the person learns of the change.
If any offer, request, invitation, agreement, or acquisition referred to in subsection
(1) of this section is proposed to be made by means of a registration statement under
the Securities Act of 1933, or in circumstances requiring the disclosure of similar
information under the Securities Exchange Act of 1934, or under a state law
requiring similar registration or disclosure, the person required to file the statement
referred to in subsection (1) of this section may utilize those documents in
furnishing the information required by the statement referred to in subsection (1) of
this section.
(a) The commissioner shall approve any merger or other acquisition of control
referred to in subsection (1) of this section unless, after a public hearing the
commissioner finds that:
1.
After the change of control, the domestic insurer referred to in
subsection (1) of this section would not be able to satisfy the
requirements for issuance of a certificate of authority to write the line or
lines of insurance for which it is presently authorized;
2.
(5)
The effect of the merger or other acquisition of control would be
substantially to lessen competition in insurance in Kentucky or tend to
create a monopoly. In applying the competitive standard in this
paragraph:
a.
The informational requirements of KRS 304.37-130(3)(a) and the
standards of KRS 304.37-130(4)(b) shall apply;
b.
The merger or other acquisition shall not be disapproved if the
commissioner finds that any of the situations meeting the criteria
provided by KRS 304.37-130(4)(c) exist; and
c.
The commissioner may condition the approval of the merger or
other acquisition on the removal of the basis of disapproval within
a specified period of time;
3.
The financial condition of the acquiring party might jeopardize the
financial stability of the insurer or prejudice the interest of its
policyholders;
4.
The plans or proposals which the acquiring party has to liquidate the
insurer, sell its assets, consolidate or merge it with any person, or to
make any other material change in its business or corporate structure or
management are unfair and unreasonable to policyholders of the insurer
and not in the public interest;
5.
The competence, experience, and integrity of persons who would control
the operation of the insurer would not be in the interest of policyholders
of the insurer and of the public to permit the merger or other acquisition
of control; or
6.
The acquisition is likely to be hazardous or prejudicial to the insurance
buying public.
(b) The public hearing required by this section shall be conducted as directed in
Subtitle 2 of this chapter.
(c) The commissioner may retain at the acquiring person's expense any attorneys,
actuaries, accountants, and other experts not otherwise a part of the
commissioner's staff that may be necessary to assist the commissioner in
reviewing the proposed acquisition of control.
The provisions of this section shall not apply to:
(a) Any transaction which is subject to the provisions of KRS 304.24-390,
dealing with the merger or consolidation of a domestic insurer; or
(b) Any offer, request, invitation, agreement, or acquisition which the
commissioner, by order, shall exempt from the section as not having been
made or entered into for the purpose of and not having the effect of changing
or influencing the control of, a domestic insurer, or not comprehended within
the purposes of this section; or
(c) Any acquisition of stock of a former mutual by an affiliate company that
occurs in connection with the conversion of a mutual insurer to a stock insurer
under KRS 304.24-600 to 304.24-625, provided that no person acquires
(6)
(7)
control of the parent company. For purposes of this paragraph, "former
mutual" has the meaning provided in KRS 304.24-601.
The following shall be violations of this section:
(a) The failure to file any statement, amendment, or other material required to be
filed pursuant to subsection (1) or (2) of this section; or
(b) The effectuation or any attempt to effectuate an acquisition of control of, or
merger with, a domestic insurer unless the commissioner has given his or her
approval.
The courts of this state shall have jurisdiction over every person not resident,
domiciled, or authorized to do business in this state who files a statement with the
commissioner under this section, and overall actions involving such person arising
out of violations of this section. Each person shall be deemed to have performed
acts equivalent to and constituting an appointment by the person of the Secretary of
State to be his or her true and lawful attorney upon whom may be served all lawful
process in any action, suit, or proceeding arising out of the violations of this section.
Copies of all lawful process shall be served on the Secretary of State and
transmitted to the person at his or her last known address by the Secretary of State
in the same manner as service of process on foreign insurers.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1483, effective July 15, 2010. -Amended 2000 Ky. Acts ch. 42, sec. 15, effective July 14, 2000. -- Created 1992 Ky.
Acts ch. 267, sec. 2, effective July 14, 1992.
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