A. No domestic stock insurer shall declare or distribute any dividend to shareholders, other than a pro rata distribution of any class of the insurer's own securities, except out of earned surplus. For purposes of this section, "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 twenty-five percent of the unrealized appreciation of assets.
B. No domestic insurer shall pay an extraordinary dividend or make any other extraordinary distribution to its shareholders until:
(1) thirty days after the superintendent has received notice of the declaration thereof and has not within such period disapproved such payment; or
(2) the superintendent shall have approved such payment within the thirty-day period.
C. For the purposes of Sections 59A-37-20 through 59A-37-22 NMSA 1978, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding twelve months exceeds the lesser of ten percent of the insurer's surplus as regards policyholders as of the most recent December 31 or the net gain from operations of the insurer after dividends to policyholders and federal income taxes and before realized capital gains and losses, if the insurer is either a life insurer or a health maintenance organization, or the net income, if the insurer is not a life insurer or a health maintenance organization, not including realized capital gains, for the twelve-month period ending December 31 next preceding, but shall not include pro rata distributions of any class of the insurer's own securities.
D. In determining whether a dividend or distribution is extraordinary:
(1) an insurer other than a life insurer or a health maintenance organization may carry forward net income from the previous two calendar years that has not already been paid out as dividends, which carry-forward shall be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years; and
(2) a life insurer or a health maintenance organization may carry forward net gains from operations, not including realized capital gains from the previous two calendar years, that have not already been paid out as dividends, which carry-forward shall be computed by taking the net gain from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years.
E. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution that is conditioned upon the superintendent's approval thereof, and such a declaration shall confer no rights upon shareholders until the superintendent has:
(1) approved the payment of the dividend or distribution; or
(2) not disapproved the payment within thirty days after the superintendent has received notice of the declaration.
History: Laws 1984, ch. 127, § 637; 1993, ch. 320, § 84; 1996, ch. 73, § 2; 2014, ch. 59, § 39.
ANNOTATIONSThe 2014 amendment, effective July 1, 2014, expanded the limitation on extraordinary dividends or distributions; in Subsection C, after "policyholders as of", added "the most recent", after "December 31", deleted "next preceding", after "operations of the insurer", added "after dividends to policyholders and federal income taxes and before realized capital gains and losses", and after "or the net", deleted "investment"; and in Subsection D, Paragraph (1), after "from the previous", deleted "three" and added "two", after "income from the second" added "and", after "income from the second and third", deleted "and fourth", and after "dividends paid in the", deleted "third".
Severability. — Laws 2014, ch. 59, § 54 provided that if any part or application of the provisions of Laws 2014, ch. 59 is held invalid, the remainder or its application to other situations or persons shall not be affected.
The 1996 amendment, inserted "or a health maintenance organization" throughout Subsections C and D, and inserted "either" following "insurer is" near the middle of Subsection C. Laws 1996, ch. 73 contains no effective date provision, but, pursuant to N.M. Const., art. IV, § 23, is effective May 15, 1996, 90 days after adjournment of the legislature.
The 1993 amendment, effective June 18, 1993, added Subsection A; redesignated former Subsection A as Subsection B; in Subsection B, substituted "No domestic insurer shall" for "No insurer subject to registration under Sections 626 through 634 of this article shall" in the introductory language and made a stylistic change; redesignated former Subsection B as Subsection C; in Subsection C, substituted "Sections 59A-37-20 through 59A-37-22 NMSA 1978" for "Sections 635 through 637 of this article", substituted "exceeds the lesser of ten percent of the insurer's" for "exceeds the greater of ten percent of each insurer's", inserted "not including realized capital gains", and made stylistic changes; added Subsection D; redesignated former Subsection C as Subsection E; in Subsection E, substituted "conditioned" for "conditional" in the introductory language and made a stylistic change.