Sec. 31.04.18.14. Extraordinary Dividends and Other Distributions

A. Pursuant to Insurance Article, §7-706, Annotated Code of Maryland, a domestic insurer may not pay an extraordinary dividend or make any other extraordinary distribution to its shareholders unless:

(1) The insurer provides notice of the declaration to the Commissioner at least 30 days before the declaration is made; and

(2) The Commissioner has approved or not disapproved the declaration within 30 days following the notice.

B. The insurer shall file a written request for approval of extraordinary dividends or any other extraordinary distribution to shareholders and shall include the following in the request:

(1) The amount of the proposed dividend or distribution;

(2) The date proposed for the payment of the dividend or the distribution;

(3) A statement as to whether the dividend is to be in cash or other property and, if in property, a description thereof, its cost, and its fair market value together with an explanation of the basis for valuation;

(4) The copy of the calculations determining that the proposed dividend is extraordinary pursuant to the definition in Insurance Article, §7-706(b), Annotated Code of Maryland, which shall include the following information:

(a) The amounts, dates, and form of payment of all dividends or distributions of cash or other property stated at fair market value paid within the preceding 12 consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought;

(b) Surplus as regards policyholders (total capital and surplus) as of the 31st day of December of the preceding year;

(c) One of the following:

(i) If the insurer is a life insurer, the net gain from operations of the insurer not including realized capital gains for the 12-month-period ending December 31 of the preceding year or pro rata distributions of any class of the insurer’s own securities; or

(ii) If the insurer is not a life insurer, the net investment income not including realized capital gains for the 12-month period ending December 31 of the preceding year or pro rata distributions of any class of the insurer’s own securities; and

(d) If the insurer is not a life insurer, the net investment income from the 3 calendar years prior to the preceding calendar year, not including realized capital gains, minus dividends paid to stockholders in the preceding 3 calendar years;

(5) A balance sheet and statement of income for the period intervening from the last annual statement filed with the Commissioner and the end of the month preceding the month in which the request for dividend approval is submitted; and

(6) A brief statement as to the effect of the proposed dividend upon the insurer’s surplus and the reasonableness of surplus in relation to the insurer’s outstanding liabilities and the adequacy of surplus relative to the insurer’s financial needs.