991.1401.

Definitions As used in this article, and for the purposes of this article only, the following words and phrases shall have the meanings given to them in this section: "AFFILIATE." A person that directly or indirectly through one or more intermediaries controls or is controlled by, or is under common control with, the person specified. "COMMISSIONER." The Insurance Commissioner of the Commonwealth. "COMPANY ACTION LEVEL EVENT." AS DEFINED IN SECTION 501-A OR 501-B OF THE ACT OF MAY 17, 1921 (P.L. 789, NO. 285), KNOWN AS "THE INSURANCE DEPARTMENT ACT OF 1921." "CONTROL," "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH." THE POSSESSION, DIRECT OR INDIRECT, OF THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND POLICIES OF A PERSON, WHETHER THROUGH THE OWNERSHIP OF VOTING SECURITIES, BY CONTRACT OTHER THAN A COMMERCIAL CONTRACT FOR GOODS OR NONMANAGEMENT SERVICES OR OTHERWISE, UNLESS THE POWER IS THE RESULT OF AN OFFICIAL POSITION WITH OR CORPORATE OFFICE HELD BY THE PERSON. CONTROL SHALL BE PRESUMED TO EXIST IF ANY PERSON, DIRECTLY OR INDIRECTLY, OWNS, CONTROLS, HOLDS WITH THE POWER TO VOTE OR HOLDS PROXIES REPRESENTING TEN PER CENTUM (10%) OR MORE OF THE VOTES THAT ALL SHAREHOLDERS WOULD BE ENTITLED TO CAST IN THE ELECTION OF DIRECTORS. THIS PRESUMPTION MAY BE REBUTTED BY A SHOWING THAT CONTROL DOES NOT EXIST IN FACT. THE INSURANCE DEPARTMENT MAY DETERMINE, AFTER FURNISHING ALL PERSONS IN INTEREST NOTICE AND OPPORTUNITY TO BE HEARD AND MAKING SPECIFIC FINDINGS OF FACT TO SUPPORT SUCH DETERMINATION, THAT CONTROL EXISTS IN FACT, NOTWITHSTANDING THE ABSENCE OF A PRESUMPTION TO THAT EFFECT OR THAT ANOTHER PERSON HAS CONTROL. "DEPARTMENT." The Insurance Department of the Commonwealth. "ENTERPRISE RISK." AN ACTIVITY, CIRCUMSTANCE, EVENT OR SERIES OF EVENTS INVOLVING ONE OR MORE AFFILIATES OF AN INSURER THAT, IF NOT REMEDIED PROMPTLY, WOULD LIKELY HAVE A MATERIAL ADVERSE EFFECT ON THE FINANCIAL CONDITION OR LIQUIDITY OF AN INSURER OR ITS INSURANCE HOLDING COMPANY SYSTEM, INCLUDING, BUT NOT LIMITED TO, ANYTHING THAT WOULD: (1) trigger a company action level event for the insurer; or

 (2) cause the insurer to be deemed to be in hazardous financial condition under: (i) Article V of the act of May 17, 1921 (P.L. 789, No. 285), known as "The Insurance Department Act of 1921." (ii) 31 Pa. Code Ch. 160 (relating to standards to define insurers deemed to be in hazardous financial condition). "IAIS." THE INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS OR SUCCESSOR ORGANIZATION. "INSURANCE HOLDING COMPANY SYSTEM." Two or more affiliated persons, one or more of which is an insurer. "INSURER." Any health maintenance organization, preferred provider organization, company, association, exchange, hospital plan corporation as defined in and subject to 40 Pa.C.S. Ch. 61 (relating to hospital plan corporations) or professional health services plan corporation subject to 40 Pa.C.S. Ch. 63 (relating to professional health services plan corporations), authorized by the Insurance Commissioner to transact the business of insurance in this Commonwealth except that the term shall not include: (1) the Commonwealth or any agency or instrumentality thereof; (2) agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia or a state or political subdivision; or (3) fraternal benefit societies. "NAIC." THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS OR SUCCESSOR ORGANIZATION. "PERSON." An individual, an insurer, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert. The term shall not include any joint venture partnership exclusively engaged in owning, managing, leasing or developing real or tangible personal property. "SEC." THE SECURITIES AND EXCHANGE COMMISSION OF THE UNITED STATES. "SECURITY HOLDER." One who owns any security of a specified person, including common stock, preferred stock, debt obligations and any other security convertible into or evidencing the right to acquire any of the foregoing.

 "SHAREHOLDER." A record holder or record owner of shares of an insurer. (1) The term shall include all of the following: (i) A member of an insurer that is a domestic nonstock corporation under 15 Pa.C.S. Ch. 21 (relating to nonstock corporations) or a prior statute. (ii) A member, as defined in 15 Pa.C.S. 5103 (relating to definitions), of an insurer that is a domestic nonprofit corporation under 15 Pa.C.S. Ch. 51 (relating to general provisions) or a prior statute. (iii) A subscriber of an insurer that is a domestic reciprocal exchange under Article X or a prior statute. (2) The term shall not include any subscriber, insured or customer of: (i) a hospital plan corporation subject to 40 Pa.C.S. Ch. 61 (relating to hospital plan corporations); or (ii) a professional health services plan corporation subject to 40 Pa.C.S. Ch. 63 (relating to professional health services plan corporations). "SUBSIDIARY." An affiliate of a specified person controlled by another person directly or indirectly through one or more intermediaries. "VOTING SECURITY." Includes any security convertible into or evidencing a right to acquire a voting security.

 991.1402. Acquisition of control of or merger or consolidation with domestic insurer (a)(1) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities or seek to acquire or acquire in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, such person would directly or indirectly or by conversion or by exercise of any right to acquire, be in control of such insurer, and no person shall enter into an agreement to merge or consolidate with or otherwise to acquire control of a domestic insurer or any person controlling a domestic insurer unless, at the time any such offer, request or invitation is made or any such agreement is entered into or prior to the acquisition of such securities if no offer or agreement is involved, such person has filed with the department and has sent to such insurer a statement containing the information required by this section and such offer, request, invitation, agreement or acquisition has been approved by the department in the manner hereinafter prescribed. (2) For purposes of this section: (i) "Domestic insurer" includes a person controlling a domestic insurer unless the department determines that the person is primarily engaged in business other than the business of insurance either directly or through its affiliates. (ii) "Person" does not include a securities broker who holds, in the usual and customary manner, less than twenty per centum (20%) of the voting securities of an insurer or of a person that controls an insurer. (3) A controlling person of a domestic insurer seeking to divest its controlling interest in the insurer in any manner shall file with the department, with a copy to the insurer, a notice of the proposed divestiture at least thirty (30) days prior to the cessation of control except that notice under this paragraph is not required if a statement is filed under paragraph (1). The notice must contain information sufficient for the department to determine if the proposed divestiture requires filing and approval under paragraph (1). Information obtained by or disclosed to the department under this paragraph shall be given confidential treatment as provided under section 1407. (4) The acquiring person for transactions subject to this section must file a preacquisition notification as required under section 1403(c) or be subject to a penalty as provided under section 1403(e)(3). (5) A person seeking to rebut the presumption of control under this article shall file with the department, with a copy to the insurer, a rebuttal filing containing information sufficient for the department to determine whether control exists in fact. The filing is not effective unless the department finds that control does not exist

or accepts a disclaimer of control. Information obtained by or disclosed to the department under this subsection must be given confidential treatment as provided under section 1407. (b) The statement to be filed with the department under this section shall be made under oath or affirmation and shall contain the following information: (1) The name and address of each person by whom or on whose behalf the merger, consolidation or other acquisition of control referred to in subsection (a) is to be effected, hereinafter called "acquiring party," and (i) if such person is an individual, his 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 (ii) if such person is not an individual, a report of the nature of its business operations during the past five (5) years or for such lesser period as the person and any predecessors thereof shall 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 those positions. This list shall include for each individual the information required by subparagraph (i). (2) The source, nature and amount of the consideration used or to be used in effecting the merger, consolidation or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, 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 such consideration, provided, however, that where a source of such 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 such statement so requests. (3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five (5) fiscal years of each such acquiring party, or for such lesser period as such acquiring party and any predecessors thereof shall 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. (4) Any plans or proposals which each acquiring party may have to liquidate such 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. (5) The number of shares of any security referred to in subsection (a) which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement or acquisition referred to in subsection (a), and a statement as to the

method by which the fairness of the proposal was arrived. (6) The amount of each class of any security referred to in subsection (a) which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party. (7) A full description of any contracts, arrangements or understandings with respect to any security referred to in subsection (a) in which any acquiring party is involved, including, but not limited to, 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. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into. (8) A description of the purchase of any security referred to in subsection (a) during the twelve 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 therefor. (9) A description of any recommendations to purchase any security referred to in subsection (a) made during the twelve calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party. (10) 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 subsection (a) and, if distributed, of additional soliciting material relating thereto. (11) 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 (a) for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto. (11.1) An agreement by the person required to file the statement referred to in subsection (a) that it will provide the annual enterprise risk report specified in section 1404(k.1) as long as control exists. (11.2) An acknowledgment by the person required to file the statement referred to in subsection (a) that the person and the subsidiaries within its control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer. (12) Such additional information as the department may by regulation prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.

 (c) If the person required to file the statement referred to in subsection (a) is a partnership, limited partnership, syndicate or other group, the department may require that the information called for by subsection (b)(1) through (12) shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group and each person who controls such partner or member. If any such partner, member or person is a corporation or the person required to file the statement referred to in subsection (a) is a corporation, the department may require that the information called for by subsection (b)(1) through (12) shall be given with respect to such corporation, each officer and director of such corporation and each person who is directly or indirectly the beneficial owner of more than ten per centum (10%) of the outstanding voting securities of such corporation. (d) If any material change occurs in the facts set forth in the statement filed with the department and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the department and sent to such insurer within two (2) business days after the person learns of such change. (e) If any offer, request, invitation, agreement or acquisition referred to in subsection (a) is proposed to be made by means of a registration statement under the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. 77a et seq.), or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. 78a et seq.), or under a State law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) may utilize such documents in furnishing the information called for by that statement. (f)(1) The department shall approve any merger, consolidation or other acquisition of control referred to in subsection (a) unless it finds any of the following: (i) After the merger, consolidation or other acquisition of control, the domestic insurer referred to in subsection (a) would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed. (ii) The effect of the merger, consolidation or other acquisition of control would be to substantially lessen competition in insurance in this Commonwealth or tend to create a monopoly therein. In applying the competitive standard in this subparagraph: (A) the informational requirements of section 1403(c)(2) and the standards of section 1403(d)(2) shall apply; (B) the merger, consolidation or other acquisition of control shall not be

disapproved if the department finds that any of the situations meeting the criteria provided by section 1403(d)(3) exist; and (C) the department may condition the approval of the merger, consolidation or other acquisition of control on the removal of the basis of disapproval within a specified period of time. (iii) The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer or prejudice the interest of its policyholders. (iv) The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or 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 and fail to confer benefit on policyholders of the insurer and are not in the public interest. (v) The competence, experience and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger, consolidation or other acquisition of control. (vi) The merger, consolidation or other acquisition of control is likely to be hazardous or prejudicial to the insurance buying public. (vii) The merger, consolidation or other acquisition of control is not in compliance with the laws of this Commonwealth, including Article VIII-A (2) If the merger, consolidation or other acquisition of control is approved, the department shall so notify the person filing the statement and the insurer that is proposed to be acquired, and such a determination is hereafter referred to as an approving determination. Notice shall also be given by the department of any determination which is not an approving determination. If an approving determination is made by the department and not otherwise, the proposed offer and acquisition may thereafter be made and consummated on the terms and conditions and in the manner described in the statement and subject to such conditions as may be prescribed by the department as hereinafter provided. An approving determination by the department shall be deemed to extend to offers or acquisitions made pursuant thereto within one year following the date of determination. The department may, as a condition of its approving determination, require the inclusion in any offer of provisions requiring the offer to remain open a specified minimum length of time, permitting withdrawal of shares deposited prior to the time the offeror becomes bound to consummate the acquisition and requiring pro rata acceptance of any shares deposited pursuant to the offer. The department shall hold a hearing before making the determination required by this subsection if, within ten (10) days following the filing with the department of the statement, written request for the holding of such hearing is made either by the person

proposing to make the acquisition, by the insurer that is proposed to be acquired or, if the issuer of stock proposed to be acquired is not an insurer, by the insurer controlled by such issuer. Otherwise, the department shall determine in its discretion whether such a hearing shall be held. Thirty (30) days' notice of any such hearing shall be given to the person proposing to make the acquisition, to the issuer whose stock is proposed to be acquired and, if such issuer is not an insurer, to the insurance company controlled by such issuer. Notice of any such hearing shall also be given to such other persons, if any, as the department may determine. (2.1) If the proposed acquisition of control requires the approval of more than one chief insurance regulatory official, the public hearing under paragraph (2) may be held on a consolidated basis upon request of the person filing the statement under subsection (a). He shall file the statement under subsection (a) with the NAIC within five (5) days of making the request for a public hearing. A chief insurance regulatory official may opt out of a consolidated hearing and shall provide notice to the applicant of the decision to opt out within ten (10) days of the receipt of the statement under subsection (a). A hearing conducted on a consolidated basis must be public and held in the United States before the chief insurance regulatory officials of the states in which the insurers are domiciled. The chief insurance regulatory officials shall hear and receive evidence. A chief insurance regulatory official may attend the hearing in person or participate using telecommunication. (3) The department may retain at the acquiring party's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the department's staff as may be reasonably necessary to assist the department in reviewing the proposed acquisition of control. (g) The provisions of this section shall not apply to any offer, request, invitation, agreement or acquisition which the department by order shall exempt therefrom as: (1) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer; or (2) as otherwise not comprehended within the purposes of this section. (h) The following shall constitute a violation of this section: (1) the failure to file any statement, amendment or other material required to be filed pursuant to subsection (a) or (b); (2) the effectuation or any attempt to effectuate an acquisition of control of or divestiture of or merger or consolidation with a domestic insurer unless the department has given its approval thereto; or (3) a violation of section 819-A.

 (i) The department shall, within seventy-two (72) hours of receiving a statement filed under this section, provide notification to the Office of Attorney General that the filing was received. (j) (Reserved).

 991.1403. Acquisitions involving insurers not otherwise covered (a) As used in this section the following words and phrases shall have the meanings given to them in this subsection: "Acquisition." Any agreement, arrangement or activity the consummation of which results in a person acquiring, directly or indirectly, the control of another person and includes, but is not limited to, the acquisition of voting securities, the acquisition of assets, bulk reinsurance, mergers and consolidations. "Involved insurer." Includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired or is the result of a merger or consolidation. (b)(1) Except as exempted in paragraph (2), this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this Commonwealth. (2) This section shall not apply to any of the following: (i) An acquisition subject to approval or disapproval by the department pursuant to section 1402 (ii) A purchase of securities solely for investment purposes so long as such securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this Commonwealth. If a purchase of securities results in a presumption of control as described in the definition of "control" in section 1401, it is not solely for investment purposes unless the chief insurance regulatory official in the jurisdiction of the insurer's domicile accepts a disclaimer of control or affirmatively finds that control does not exist and such disclaimer action or affirmative finding is communicated by the domiciliary insurance regulator to the department. (iii) The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the department in accordance with subsection (c)(2) thirty (30) days prior to the proposed effective date of the acquisition. However, such preacquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by this paragraph. (iv) The acquisition of already affiliated persons. (v) An acquisition if, as an immediate result of the acquisition: (A) in no market would the combined market share of the involved insurers

exceed five per centum (5%) of the total market; (B) there would be no increase in any market share; or (C) in no market would: (I) the combined market share of the involved insurers exceeds twelve per centum (12%) of the total market; and (II) the market share increases by more than two per centum (2%) of the total market. For the purpose of this subparagraph, a market means direct written insurance premium in this Commonwealth for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this Commonwealth. (vi) An acquisition for which a preacquisition notification would be required pursuant to this section due solely to the resulting effect on the ocean marine insurance line of business. (vii) An acquisition of an insurer whose domiciliary insurance regulator affirmatively finds that such insurer is in failing condition; there is a lack of feasible alternative to improving such condition; the public benefits of improving such insurer's condition through the acquisition exceed the public benefits that would arise from not lessening competition; and such findings are communicated by the domiciliary insurance regulator to the department. (3) Sections 1409(b) and (c) and 1411 shall not apply to acquisitions provided for in this subsection. (c)(1) An acquisition covered by subsection (b) may be subject to an order pursuant to subsection (e) unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification. The department shall give confidential treatment to information submitted under this subsection in the same manner provided in section 1407. (2) The preacquisition notification shall be in such form and contain such information as prescribed by the NAIC relating to those markets which, under subsection (b)(2)(v), cause the acquisition not to be exempted from the provisions of this section. The department may require such additional material and information as it deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (d). The required information may include an opinion of an economist as to the competitive impact of the acquisition in this Commonwealth accompanied by a summary of the

education and experience of such person indicating his or her ability to render an informed opinion. (3) The waiting period required shall begin on the date of receipt by the department of a preacquisition notification and shall end on the earlier of the thirtieth day after the date of such receipt or termination of the waiting period by the department. Prior to the end of the waiting period, the department on a one- time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the thirtieth day after receipt of such additional information by the department or termination of the waiting period by the department. (d)(1) The department may enter an order under subsection (e)(1) with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this Commonwealth or tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection (c). (2) In determining whether a proposed acquisition would violate the competitive standard of paragraph (1), the department shall consider the following: (i) Any acquisition covered under subsection (b) involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standards as follows: (A) if the market is highly concentrated and the involved insurers possess the following shares of the market: STBLN4 DTBLN HN7ZInsurer AZInsurer B DTBLN BNZ DTBLN BN7Z 4%Z7Z4% or more BNZ10%ZZ2% or more BNZ15%ZZ1% or more; 6or . (B) if the market is not highly concentrated and the involved insurers possess the following shares of the market: STBLN4 DTBLN HN7ZInsurer AZInsurer B DTBLN BNZ DTBLN BN7Z 5%Z7Z5% or more BNZ10%ZZ4% or more BNZ15%ZZ3% or more BNZ19%ZZ1% or more. . A highly concentrated market is one in which the share of the four largest insurers is seventy-five per centum (75%) or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two insurers are involved, exceeding the total of the two columns in the table is prima facie evidence of violation of the competitive standard in paragraph (1). For the purpose of this subparagraph, the insurer with the largest share of the market shall be deemed to be insurer A. (ii) There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven per centum (7%) or more

of the market over a period of time extending from any base year five (5) to ten (10) years prior to the acquisition up to the time of the acquisition. Any acquisition, merger or consolidation covered under subsection (b) involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in paragraph (1) if: (A) there is a significant trend toward increased concentration in the market; (B) one of the insurers involved is one of the insurers in a grouping of such large insurers showing the requisite increase in the market share; and (C) another involved insurer's market is two per centum (2%) or more. (iii) For the purposes of this paragraph: (A) The term "insurer" includes any company or group of companies under common management, ownership or control. (B) The term "market" means the relevant product and geographical markets. In determining the relevant product and geographical markets, the department shall give due consideration to, among other things, the definitions or guidelines, if any, promulgated by the NAIC and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this Commonwealth and the relevant geographical market is assumed to be this Commonwealth. (C) The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner. (iv) Even though an acquisition is not prima facie violative of the competitive standard under subparagraphs (i) and (ii), the department may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under subparagraphs (i) and (ii), a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this paragraph include, but are not limited to, the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry and ease of entry and exit into the market. (3) An order may not be entered under subsection (e)(1) if: (i) the acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the

public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition; or (ii) the acquisition will substantially increase the availability of insurance, and the public benefits of such increase exceed the public benefits which would arise from not lessening competition. (e)(1)(i) If an acquisition violates the standards of this section, the department may enter an order: (A) requiring an involved insurer to cease and desist from doing business in this Commonwealth with respect to the line or lines of insurance involved in the violation; or (B) denying the application of an acquired or acquiring insurer for a license to do business in this Commonwealth. (ii) Such an order shall be issued in compliance with 2 Pa.C.S. (relating to administrative law and procedure). (iii) An order pursuant to this paragraph shall not apply if the acquisition is not consummated. (2) Any person who violates a cease and desist order of the department under paragraph (1) and while such order is in effect, may, after notice and hearing and upon order of the department, be subject at the discretion of the department to either or both of the following: (i) A civil penalty of not more than ten thousand dollars ($ 10,000) for every day of violation. (ii) Suspension or revocation of such person's license. (3) Any insurer or other person who fails to make any filing required by this section and who also fails to demonstrate a good faith effort to comply with any such filing requirement shall be subject to a civil penalty not to exceed fifty thousand dollars ($ 50,000).

 991.1404. Registration of insurers (a)(1) Every insurer which is authorized to do business in this Commonwealth and which is a member of an insurance holding company system shall register with the department, except a foreign insurer subject to registration requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in this section and 1405(a)(1) and (2), (b) and (d). Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions within fifteen (15) days after the end of the month in which it learns of each such change or addition. (2) Any insurer which is subject to registration under this section shall register within fifteen (15) days after it becomes subject to registration, and annually thereafter by the thirty-first day of March of each year for the previous calendar year, unless the department for good cause shown extends the time for registration, and then within such extended time. The department may require any insurer authorized to do business in this Commonwealth which is a member of an insurance holding company system and which is not subject to registration under this section to furnish a copy of the registration statement, the summary specified in subsection (c) or other information filed by such insurance company with the insurance regulatory authority of its domiciliary jurisdiction. (b) Every insurer subject to registration shall file the registration statement with the department on a form and in a format prescribed by the NAIC, which shall contain all of the following current information: (1) The capital structure, general financial condition, ownership and management of the insurer and any person controlling the insurer. (2) The identity and relationship of every member of the insurance holding company system. (3) All of the following agreements in force and transactions currently outstanding or which have occurred during the last calendar year between such insurer and its affiliates: (i) Loans and other investments and the purchase, sale or exchange of securities of an affiliate by the insurer or of the insurer by an affiliate. (ii) Purchases, sales or exchange of assets. (iii) Transactions not in the ordinary course of business. (iv) Guarantees or undertakings for the benefit of an affiliate which result in an

actual contingent exposure of the insurer's assets to liability, other than insurance contracts entered into in the ordinary course of the insurer's business. (v) All management agreements, service contracts and all cost-sharing arrangements. (vi) Reinsurance agreements. (vii) Dividends and other distributions to shareholders. (viii) Consolidated tax allocation agreements. (4) Any pledge of the insurer's stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system. (4.1) If requested by the department, the insurer shall include financial statements of an insurance holding company system, including its affiliates. Financial statements may include, but are not limited to: (i) annual audited financial statements filed with the SEC under the Securities Exchange Act of 1933 (48 Stat. 74, 15 U.S.C. 77a et seq.); or (ii) the Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. 78a et seq.). An insurer required to file financial statements under this paragraph may satisfy the request by providing the department with the most recent parent corporation financial statements filed with the SEC. (4.2) Statements that the insurer's board of directors oversees corporate governance and internal controls and that the insurer's officers or senior management have approved, implemented and continue to maintain and monitor corporate governance and internal control procedures. (5) Any other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the department. (6) Other necessary or appropriate information as required by the department by regulation. (c) All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement. (d) No information need be disclosed on the registration statement filed pursuant

to subsection (b) if such information is not material for the purposes of this section. Unless the department by regulation or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, investments or guarantees involving one- half of one per centum (0.5%) or less of an insurer's admitted assets as of the thirty- first day of December next preceding shall not be deemed material for purposes of this section. (e) Subject to section 1405(b), each registered insurer shall report to the department all dividends and other distributions to shareholders within five (5) business days following the declaration thereof and at least ten (10) days, commencing from the date of receipt by the department, prior to payment thereof. The report shall include a schedule setting forth all dividends or other distributions made within the previous twelve (12) months, including any dividends or other distributions approved by the department to be paid out of other than unassigned surplus pursuant to section 337.8. (f) Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, where such information is reasonably necessary to enable the insurer to comply with the provisions of this article. (g) The department shall terminate the registration of any insurer which demonstrates that it no longer is a member of an insurance holding company system. (h) The department may require or allow two or more affiliated insurers subject to registration hereunder to file a consolidated registration statement. (i) The department may allow an insurer which is authorized to do business in this Commonwealth and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection (a) and to file all information and material required to be filed under this section. (j) The provisions of this section shall not apply to any insurer, information or transaction if and to the extent that the department by regulation or order shall exempt the same from the provisions of this section. (k) Any person may file with the department a disclaimer of affiliation with any authorized insurer or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurer as well as the basis for disclaiming such affiliation. A disclaimer of affiliation is deemed granted unless the department notifies the filing party the disclaimer is disallowed within thirty (30) days following receipt of a complete disclaimer. In the event of disallowance, the disclaiming party may request an administrative hearing

under the provisions of 2 Pa.C.S. (relating to administrative law and procedure), which must be granted. If the commissioner approves the disclaimer or if the disclaimer is deemed approved, the disclaiming party is relieved of the duty to register under this section. (l) The failure to file a registration statement, any summary of the registration statement or enterprise risk report required by this section within the time specified for such filing shall be a violation of this section.

 991.1405. Standards and management of an insurer within an insurance holding company system (a)(1) Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to all of the following standards: (i) The terms shall be fair and reasonable. (ii) Charges or fees for services performed shall be reasonable. (iii) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied and all cost-sharing or expense allocation arrangements must be formalized in writing and authorized by the board of directors of the domestic insurer. (iv) The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties. (v) The insurer's surplus as regards policyholders after any material transaction with an affiliate and after any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (2) The following transactions involving a domestic insurer and any person in its insurance holding company system, including an amendment or modification of affiliate agreements previously filed under this section that are subject to materiality standards contained in subparagraphs (i), (ii), (iii), (iv) and (v), may not be entered into unless the insurer has notified the department in writing of its intention to enter into such transaction at least thirty (30) days prior thereto or such shorter period as the department may permit and the department has not disapproved it within such period: (i) Sales, purchases, exchanges, loans or extensions of credit, guarantees, investments, pledges of assets or assets to be received by the domestic insurer as contributions to its surplus, provided that, as of the thirty-first day of December next preceding, such transactions are equal to or exceed the lesser of three per centum (3%) of the insurer's admitted assets or twenty-five per centum (25%) of surplus as regards policyholders. (ii) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial

part, are to be used to make loans or extensions of credit to, to purchase assets of or to make investments in any affiliate of the insurer making such loans or extensions of credit provided that, as of the thirty-first day of December next preceding, such transactions are equal to or exceed the lesser of three per centum (3%) of the insurer's admitted assets or twenty-five per centum (25%) of surplus as regards policyholders. (iii) Reinsurance agreements or modifications thereto, including: (A) agreements where the reinsurance premium or the projected reinsurance premium in any of the next three twelve-month periods equals or exceeds five per centum (5%) of the insurer's surplus as regards policyholders as of the thirty-first day of December next preceding; (B) agreements where the change in the insurer's liabilities or any transfer of assets required to fund the transaction in any of the next three twelve-month periods equals or exceeds twenty-five per centum (25%) of the insurer's surplus as regards policyholders as of the thirty-first day of December next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer. Nothing in this paragraph shall affect or limit the requirements and applicability of section 3 of the act of July 31, 1968 (P.L. 941, No. 288), entitled "An act providing for reporting to the Insurance Commissioner by domestic insurance companies, associations, or exchanges, of certain conveyances of interests in the assets of such companies, associations, or exchanges"; or (C) reinsurance pooling agreements. (iv) Any material transactions, specified by regulation, which the department determines may adversely affect the interests of the insurer's policyholders. (v) Management agreements, service contracts, tax allocation agreements, guarantees and cost-sharing arrangements. The notice for amendments or modifications must include the reasons for the change and the financial impact on the domestic insurer. Nothing in this paragraph shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law. (2.1) Within thirty (30) days after termination of an agreement previously filed in accordance with paragraph (2), a domestic insurer shall provide notice of the termination to the department.

 (3) A domestic insurer may not enter into transactions which are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the department determines that such separate transactions were entered into over any twelve-month period for such purpose, it may exercise its authority under section 1410. (4) The department, in reviewing transactions pursuant to paragraph (2), shall consider whether the transactions comply with the standards set forth in paragraph (1) and whether they may adversely affect the interests of policyholders. The department may retain at the insurer's expense any attorneys, actuaries, accountants and other experts not otherwise a part of the department's staff as may be reasonably necessary to assist the department in reviewing the transaction. (5) The department shall be notified within thirty (30) days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds ten per centum (10%) of such corporations' voting securities. (b)(1) No domestic insurer shall pay any extraordinary dividend to its shareholders until: (i) thirty (30) days after the commissioner has received written notice from the insurer of the declaration of the dividend and has not within such period disapproved the payment; or (ii) the commissioner shall have approved the payment within such thirty-day period. (2) For purposes of this subsection, an extraordinary dividend is any dividend or other distribution which, together with other dividends and distributions made within the preceding twelve (12) months, exceeds the greater of: (i) Ten per centum (10%) of such insurer's surplus as regards policyholders as shown on its last annual statement on file with the commissioner; or (ii) The net income of such insurer for the period covered by such statement, but shall not include pro rata distributions of any class of the insurer's own securities. (c)(1) Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to assure its separate operating identity consistent with this article.

 (2) Nothing herein shall preclude a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property or services with one or more other persons under arrangements meeting the standards of subsection (a)(1). (3)(i) Not less than one-third of the directors of a domestic insurer shall be persons who are not officers or employes of such insurer or of any entity controlling, controlled by or under common control with such insurer and who are not beneficial owners of a controlling interest in the voting stock of such insurer or any such entity. At least one such person must be included in any quorum for the transaction of business at any meeting of the board of directors. (ii) Not less than one-third of the members of each committee of the board of directors of any domestic insurer shall be persons who are not officers or employes of such insurer or of any entity controlling, controlled by or under common control with such insurer. At least one such person must be included in any quorum for the transaction of business at any meeting of each committee. (4) The board of directors of a domestic insurer shall establish a committee comprised solely of directors who are not officers or employes of the insurer or of any entity controlling, controlled by or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or any such entity. The committee shall have responsibility for recommending the selection of independent certified public accountants and reviewing the insurer's financial condition, the scope and results of the independent audit and any internal audit. The committee may also have the responsibilities described in paragraph (4.1) if one or more committees described in paragraph (4.1) are not separately established. (4.1) The board of directors of a domestic insurer shall establish one or more committees comprised solely of directors who are not officers or employes of the insurer or of any entity controlling, controlled by or under common control with the insurer. The committee or committees shall have responsibility for recommending candidates to be nominated by the board of directors, in addition to any other nominations by voting shareholders or policyholders, for election as directors by voting shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer and recommending to the board of directors the selection and compensation of the principal officers. (5) The provisions of paragraphs (3), (4) and (4.1) shall not apply to a domestic insurer if the person controlling such insurer is an insurer, an attorney in fact for a reciprocal exchange, a mutual insurance holding company or a publicly held corporation having a board of directors and committees thereof which already meet the requirements of paragraphs (3), (4) and (4.1). (d) For purposes of this article, in determining whether an insurer's surplus as

regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered: (1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria. (2) The extent to which the insurer's business is diversified among the several lines of insurance. (3) The number and size of risks insured in each line of business. (4) The extent of the geographical dispersion of the insurer's insured risks. (5) The nature and extent of the insurer's reinsurance program. (6) The quality, diversification and liquidity of the insurer's investment portfolio. (7) The recent past and projected future trend in the size of the insurer's surplus as regards policyholders. (8) The surplus as regards policyholders maintained by other comparable insurers considering the factors set forth in paragraphs (1) through (7). (9) The adequacy of the insurer's reserves. (10) The quality and liquidity of investments in affiliates. The department may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in its judgment such investment so warrants. (11) The quality of the insurer's earnings and the extent to which the reported earnings include extraordinary items.

 991.1406. Examination (a) Subject to the limitation contained in this section and in addition to the powers which the department has under law relating to the examination of insurers, the department shall also have the power to examine an insurer registered under section 1404 and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by: (1) the ultimate controlling person; (2) an entity or combination of entities within the insurance holding company system; or (3) the insurance holding company system on a consolidated basis. (a.1) The department may order an insurer registered under section 1404 to produce records, books or other information papers in the possession of the insurer or its affiliates as are reasonably necessary to ascertain the financial condition of the insurer or to determine compliance with this article. (a.2) To ascertain the financial condition of the insurer, including the enterprise risk to the insurer by: (1) the ultimate controlling person; (2) an entity or combination of entities within the insurance holding company system; or (3) the insurance holding company system on a consolidated basis, the department may order an insurer registered under section 1404 to produce information not in the possession of the insurer if the insurer can obtain access to the information under a contractual relationship, a statutory obligation or other method. If the insurer may not obtain the information requested by the department, the insurer shall provide the department a detailed explanation of the reason the insurer may not obtain the information and the identity of the holder of information. If the insurer fails to comply with this subsection or the department determines that the detailed explanation is without merit, the department may suspend or revoke the insurer's license or require the insurer to pay an administrative penalty of one thousand dollars ($ 1,000) per day until the information is produced. The proceeding for suspension, revocation or imposition of a penalty shall be conducted pursuant to 2 Pa.C.S. (relating to administrative law and procedure). (b) The department may retain at the registered insurer's expense such attorneys, actuaries, accountants and other experts not otherwise a part of the department's

staff as shall be reasonably necessary to assist in the conduct of the examination under subsections (a), (a.1) and (a.2). Any persons so retained shall be under the direction and control of the department and shall act in a purely advisory capacity. (c) Each registered insurer producing for examination records, books and papers pursuant to subsections (a), (a.1) and (a.2) shall be liable for and shall pay the expense of such examination as provided for in Article IX of the act of May 17, 1921 (P.L. 789, No. 285), known as "The Insurance Department Act of one thousand nine hundred and twenty-one." (d) If the insurer fails to comply with an order issued under this section, the department has the power to examine the insurer's affiliates to obtain the information necessary to determine an insurer's compliance with this section. The department also has the power to: (1) issue subpoenas; (2) administer oaths; and (3) examine under oath any person as to any matter pertinent to determining compliance with this section. Upon the failure or refusal of a person to obey a subpoena, the department may petition a court of competent jurisdiction and, upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. When subpoenaed, a person shall attend as a witness at the place specified in the subpoena. Witnesses shall be paid the same fees and mileage as are paid to witnesses in the courts of this Commonwealth. Fees, mileage and expense necessarily incurred in securing the attendance and testimony of witnesses shall be itemized, charged against and paid by the person being examined.

 991.1406. Examination (a) Subject to the limitation contained in this section and in addition to the powers which the department has under law relating to the examination of insurers, the department shall also have the power to examine an insurer registered under section 1404 and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by: (1) the ultimate controlling person; (2) an entity or combination of entities within the insurance holding company system; or (3) the insurance holding company system on a consolidated basis. (a.1) The department may order an insurer registered under section 1404 to produce records, books or other information papers in the possession of the insurer or its affiliates as are reasonably necessary to ascertain the financial condition of the insurer or to determine compliance with this article. (a.2) To ascertain the financial condition of the insurer, including the enterprise risk to the insurer by: (1) the ultimate controlling person; (2) an entity or combination of entities within the insurance holding company system; or (3) the insurance holding company system on a consolidated basis, the department may order an insurer registered under section 1404 to produce information not in the possession of the insurer if the insurer can obtain access to the information under a contractual relationship, a statutory obligation or other method. If the insurer may not obtain the information requested by the department, the insurer shall provide the department a detailed explanation of the reason the insurer may not obtain the information and the identity of the holder of information. If the insurer fails to comply with this subsection or the department determines that the detailed explanation is without merit, the department may suspend or revoke the insurer's license or require the insurer to pay an administrative penalty of one thousand dollars ($ 1,000) per day until the information is produced. The proceeding for suspension, revocation or imposition of a penalty shall be conducted pursuant to 2 Pa.C.S. (relating to administrative law and procedure). (b) The department may retain at the registered insurer's expense such attorneys, actuaries, accountants and other experts not otherwise a part of the department's

staff as shall be reasonably necessary to assist in the conduct of the examination under subsections (a), (a.1) and (a.2). Any persons so retained shall be under the direction and control of the department and shall act in a purely advisory capacity. (c) Each registered insurer producing for examination records, books and papers pursuant to subsections (a), (a.1) and (a.2) shall be liable for and shall pay the expense of such examination as provided for in Article IX of the act of May 17, 1921 (P.L. 789, No. 285), known as "The Insurance Department Act of one thousand nine hundred and twenty-one." (d) If the insurer fails to comply with an order issued under this section, the department has the power to examine the insurer's affiliates to obtain the information necessary to determine an insurer's compliance with this section. The department also has the power to: (1) issue subpoenas; (2) administer oaths; and (3) examine under oath any person as to any matter pertinent to determining compliance with this section. Upon the failure or refusal of a person to obey a subpoena, the department may petition a court of competent jurisdiction and, upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. When subpoenaed, a person shall attend as a witness at the place specified in the subpoena. Witnesses shall be paid the same fees and mileage as are paid to witnesses in the courts of this Commonwealth. Fees, mileage and expense necessarily incurred in securing the attendance and testimony of witnesses shall be itemized, charged against and paid by the person being examined.

 991.1409. Injunctions and certain prohibitions (a) Whenever it appears to the department that any insurer or any director, officer, employe or agent thereof has committed or is about to commit a violation of this article or of any regulation or order issued by the department hereunder, the department may apply to the Commonwealth Court for an order enjoining such insurer or such director, officer, employe or agent thereof from violating or continuing to violate this article or any such regulation or order, and for such other equitable relief as the nature of the case and the interest of the insurer's policyholders, creditors and shareholders or the public may require. (b) No security which is the subject of any agreement or arrangement regarding acquisition, or which is acquired or to be acquired, in contravention of the provisions of this article or of any regulation or order issued by the department hereunder may be voted at any shareholder's meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding, but no action taken at any such meeting shall be invalidated by the voting of such securities unless the action would materially affect control of the insurer or unless the courts of this Commonwealth have so ordered. If an insurer or the department has reason to believe that any security of the insurer has been or is about to be acquired in contravention of the provisions of this article or of any regulation or order issued by the department hereunder, the insurer or the department may apply to the Commonwealth Court to enjoin any offer, request, invitation, agreement or acquisition made in contravention of section 1402, or any regulation or order issued by the department thereunder to enjoin the voting of any security so acquired, to void any vote of such security already cast at any meeting of shareholders and for such other equitable relief as the nature of the case and the interest of the insurer's policyholders, creditors and shareholders or the public may require. (c) In any case where a person has acquired or is proposing to acquire any voting securities in violation of this article or any regulation or order issued by the department hereunder, the Commonwealth Court may, on such notice as the court deems appropriate, upon the application of the insurer or the department seize or sequester any voting securities of the insurer owned directly or indirectly by such person and issue such order with respect thereto as may be appropriate to effectuate the provisions of this article. (d) Notwithstanding any other provisions of law, for the purposes of this article, the situs of the ownership of the securities of domestic insurers shall be deemed to be in this Commonwealth.

 991.1408. Regulations The department may, in the manner provided by law, promulgate the regulations, and may issue such orders as are necessary to carry out this article.

 991.1410. Sanctions (a) A person failing to file any registration statement or any summary of the registration statement or enterprise risk report as required by this article or by regulation shall be required to pay a penalty not to exceed two hundred ($ 200) dollars for each day's delay. The maximum penalty under this section is twenty-five thousand ($ 25,000) dollars. (b) Every director or officer of an insurance holding company system who knowingly violates, participates in or assents to or who knowingly shall permit any of the officers or agents of the insurer to engage in transactions or make investments which have not been properly reported or submitted pursuant to section 1404(a) or 1405(a)(2) and (b) or which violate this article shall pay, in their individual capacity, a civil forfeiture of not more than twenty-five thousand ($ 25,000) dollars per violation, after notice and hearing before the department. In determining the amount of the civil forfeiture, the department shall take into account the appropriateness of the forfeiture with respect to the gravity of the violation, the history of previous violations and such other matters as justice may require. (c) Whenever it appears to the department that any insurer subject to this article or any director, officer, employe or agent thereof has engaged in any transaction or entered into a contract which is subject to section 1205 and which would not have been approved had such approval been requested, the department may order the insurer to cease and desist immediately any further activity under the transaction or contract. After notice and hearing the department may also order the insurer to void any such contracts and restore the status quo if such action is in the best interest of the policyholders, creditors or the public. (d) Whenever it appears to the department that any insurer or any director, officer, employe or agent thereof has committed a wilful violation of this article, the department may cause criminal proceedings to be instituted in the common pleas court for the county in which the principal office of the insurer is located or, if such insurer has no such office in this State, then in any other court having jurisdiction against such insurer or the responsible director, officer, employe or agent thereof. Any insurer which wilfully violates this article may be fined not more than one hundred thousand ($ 100,000) dollars. Any individual who wilfully violates this article may be fined in his individual capacity not more than fifty thousand ($ 50,000) dollars or be imprisoned for not more than one (1) to three (3) years, or both. (e) Any officer, director or employe of an insurance holding company system who wilfully and knowingly subscribes to or makes or causes to be made any false statements or false reports or false filings with the intent to deceive the department in the performance of its duties under this article shall, upon conviction, be

sentenced to pay a fine of one hundred thousand ($ 100,000) dollars or to imprisonment for not more than three (3) years, or both. Any fines imposed shall be paid by the officer, director or employe in his individual capacity. (f) Whenever it appears to the department that a person has committed a violation of this article that prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for placing the insurer under an order of supervision in accordance with section 511 of the act of May 17, 1921 (P.L. 789, No. 285), known as "The Insurance Department Act of 1921."

 991.1412. Recovery (a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the statutory liquidator appointed under such order shall have a right to recover on behalf of the insurer: (i) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions, other than the distributions of shares of the same class of stock, paid by the insurer on its capital stock; or (ii) any payment in the form of a bonus, termination settlement or extraordinary lump sum salary adjustment made by the insurer or its subsidiaries to a director, officer or employe, where the distribution or payment pursuant to this subsection is made at any time during the one year preceding the petition for liquidation, conservation or rehabilitation, as the case may be, subject to the limitations of subsections (b), (c) and (d). (b) No such distribution shall be recoverable if the parent or affiliate shows that when paid such distribution was lawful and reasonable and that the insurer did not know and could not reasonably have known that such distribution might adversely affect the ability of the insurer to fulfill its contractual obligations. (c) Any person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time such distributions were paid shall be liable up to the amount of distributions or payments under subsection (a) such person received. Any person who otherwise controlled the insurer at the time such distributions were declared shall be liable up to the amount of distributions he would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable. (d) The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds. (e) To the extent that any person liable under subsection (c) of this section is insolvent or otherwise fails to pay claims due from it pursuant to that subsection, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from such parent corporation or holding company or person who otherwise controlled it.

991.1411. Receivership Whenever it appears to the department that any person has committed a violation of this article which so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders or the public, the department may proceed, in the manner provided by law, to take possession of the property of such domestic insurer and to conduct the business thereof.

 991.1413. Revocation, suspension or nonrenewal of insurer's license Whenever it appears to the department that any person has committed a violation of this article which makes the continued operation of an insurer contrary to the interests of policyholders or the public, the department may, after giving notice and an opportunity to be heard, determine to suspend, revoke or refuse to renew such insurer's license or authority to do business in this Commonwealth for such period as it finds is required for the protection of policyholders or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law.

Ch. 25

INSURANCE HOLDING COMPANY SYSTEMS

31 25.1

CHAPTER 25. RULES AND PROCEDURAL REQUIREMENTS FOR INSURANCE HOLDING COMPANY SYSTEMS
Sec.

25.1. 25.2. 25.325.7. 25.8. 25.9. 25.10. 25.11. 25.12. 25.13. 25.14. 25.15. 25.16. 25.17. 25.18. 25.19. 25.20. 25.21. 25.22. 25.23.

Definitions. [Reserved]. [Reserved]. Waivers. [Reserved]. [Reserved]. Expenses of experts and consultants. Formsgeneral requirements. Formsincorporation by reference, summaries and omissions. Formsinformation unknown or unavailable and extension of time to furnish. Formsadditional information and exhibits. Acquisition of controlstatement filings. Annual registration of insurersstatement filing. Summary of registrationstatement filing. Alternative and consolidated registrations. Disclaimers and termination of registration. Transactions subject to prior noticenotice filing. All dividends and other distributions. Adequacy of surplus.
Authority

The provisions of this Chapter 25 issued under sections 214 and 216 of The Insurance Department Act of 1921 (40 P. S. 52 and 54), unless otherwise noted. Source The provisions of this Chapter 25 adopted June 12, 1968, unless otherwise noted. Cross References This section cited in 31 Pa. Code 21.29 (relating to qualified or restricted stock options; acceptance of general tender offers).

25.1. Definitions.
(a) The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: ActThe Insurance Company Law of 1921 (40 P. S. 341991.1718). CommissionerThe Insurance Commissioner of the Commonwealth. CorporationA corporation organized under a law of the Commonwealth or under the laws of another state, or having an office or transacting business in this Commonwealth. DepartmentThe Insurance Department of the Commonwealth.

25-1
(281679) No. 323 Oct. 01

31 25.2

GENERAL PROVISIONS

Pt. I

Executive officerA chief executive officer, chief operating officer, chief financial officer, president, treasurer, secretary, controller and other individual performing functions corresponding to those performed by the foregoing officers under whatever title. NAICThe National Association of Insurance Commissioners. SurplusTotal assets less total liabilities as calculated and reported in accordance with the annual statement instructions and accounting practices and procedures manual prescribed by the NAIC or as otherwise required by the Commissioner for annual financial statements filed with the Department. Ultimate controlling personA person which is not controlled by another person. An ultimate controlling person may be one or more of the following: individual, corporation, limited liability company, partnership, association, joint stock company, trust, unincorporated organization, or any similar entity or combination of the foregoing who controls another person. (b) Unless the context otherwise requires, other terms found in this chapter are used as defined in Article XIV of the act (40 P. S. 991.1401991.1413).
Authority The provisions of this 25.1 amended under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8) Source The provisions of this 25.1 amended September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245443) to (245444).

25.2. [Reserved].
Source The provisions of this 25.2 amended September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; reserved August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial page (245444).

25.325.7. [Reserved].
Source The provisions of these 25.325.7 reserved September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216. Immediately preceding text appears at serial pages (7603) to (7605) and (72763).

25.8. Waivers.
This chapter does not constitute a waiver by the Department of its authority, for the purpose of examining into the affairs of a corporation proposing to acquire or offering to acquire voting securities of an insurer or a person which controls an insurer, to have free access to its books and papers which relate to its business,

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and to the books and papers kept by any of its agents. The Department may summon, and administer the oath to, and examine as witnesses, the directors, officers and agents of the person and other persons, relative to its affairs, transactions and condition.
Authority The provisions of this 25.8 amended under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413). Source The provisions of this 25.8 amended September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216. Immediately preceding text appears at serial page (72763).

25.9. [Reserved].
Source The provisions of this 25.9 adopted February 27, 1969; reserved September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216. Immediately preceding text appears at serial pages (72763) to (72764).

25.10. [Reserved].
Source The provisions of this 25.10 adopted October 1, 1971, effective October 2, 1971, 1 Pa.B. 1925; reserved September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216. Immediately preceding text appears at serial pages (72764), (7608) to (7611) and (72765).

25.11. Expenses of experts and consultants.

(a) Under sections 1402(f)(3) and 1405(a)(4) of the act (40 P. S. 991.1402(f)(3) and 991.1405(a)(4)), the Department may retain attorneys, actuaries, accountants and other experts not otherwise a part of the Departments staff as may be reasonably necessary to assist the Department in the evaluation of a filing under this chapter. The Department will provide the person filing with written notice of the engagement of an outside expert, including the experts name, the terms of engagement and a cost estimate, and will consider any possible cost-saving alternatives suggested by the person filing. (b) The cost of experts retained by the Department will be charged to and paid by the person filing the statements or a designee of the person acceptable to the Department. (c) The Department will require hourly charges for experts retained by the Department be comparable to prevailing rates for the services. (d) In addition to hourly charges, the Department will require that charges for travel, lodging and food expenses of experts retained by the Department be comparable to prevailing rates for similar services and made in accordance with provisions set forth in letters of engagement.

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Authority

Pt. I

The provisions of this 25.11 amended under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.11 adopted July 30, 1982, effective July 31, 1982, 12 Pa.B. 2382; amended September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245445) to (245446).

25.12. Formsgeneral requirements.

(a) Forms AE located in Appendix A are intended to be guides in the preparation of the statements required by sections 14021405 of the act (40 P. S. 991.1402991.1405). They are not intended to be blank forms which are to be filled in. The forms filed shall contain the numbers and captions of all items, but the text of the items may be omitted if the answers are prepared in a manner that indicates clearly the scope and coverage of the items. Instructions, whether appearing under the items of the form or elsewhere therein, shall be omitted. Unless expressly provided otherwise, if an item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made. (b) Two copies of Forms A and E and one copy of Forms BD, including exhibits and other papers and documents filed as a part thereof, shall be filed with the Commissioner by personal delivery, mail, facsimile or other form of electronic transmission acceptable to the Department. At least one copy shall be signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of a person is affixed under a power of attorney or other similar authority, a copy of the power of attorney or other authority shall also be filed with the form. (c) One of the filed copies of Form A shall be available for public inspection as of the date the initial filing is made; except that copies of personal financial statements of nonpublicly held ultimate controlling persons shall be given confidential treatment. Form A filings also may contain or reference other materials that are confidential, proprietary or privileged under statute, regulation, case law, administrative or court order, or other authority. If a person filing a Form A wishes to assert that materials included or referenced within the filing are confidential, proprietary or privileged and should not be available for public inspection, the person shall notify the Department at the time the initial filing is made as follows: (1) Identify the specific information, document, report or other material that is asserted to be confidential, proprietary or privileged. (2) State the basis upon which the assertion of confidentiality, proprietary or privilege is premised.

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(3) Identify the person to whom inquiries regarding the issue of confidential treatment should be directed. (4) Submit one copy of the filing with the materials asserted to be confidential, proprietary or privileged physically separate from the remainder of the filing, or as otherwise instructed by the Department. (d) Forms shall be prepared on 8 1/2 inches x 11 inches paper and preferably bound at the top or the top left-hand corner. Exhibits and financial statements, unless specifically prepared for the filing, may be submitted in their original size. Copies of forms, financial statements or exhibits shall be clear, easily readable and suitable for photocopying. Debits in credit categories and credits in debit categories shall be designated so that they are clearly distinguishable on photocopies. (e) Forms shall be completed in the English language and monetary values shall be stated in United States currency. If a financial statement, exhibit or other paper or document filed with the form is in a foreign language, it shall be accompanied by a translation into the English language and monetary value shown in a foreign currency normally shall be converted into United States currency utilizing the conversion rate in effect as of the financial statement date.
Authority The provisions of this 25.12 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.12 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245446) to (245447).

25.13. Formsincorporation by reference, summaries and omissions.

(a) Information required in Form A, B, D or E located in Appendix A may be incorporated by reference as provided in this subsection if the incorporation would not make the information provided in the form incomplete, unclear or confusing. Information required by an item in Form A, B, D or E may be incorporated by reference in answer or partial answer to another item. Information contained in a financial statement, annual report, proxy statement, statement filed with a governmental authority or another document may be incorporated by reference in answer or partial answer to an item in Form A, B, D or E if the document or paper is filed as an exhibit to the form. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the Commissioner which were filed within the immediately preceding 3 years need not be attached as exhibits if there has been no change in the information already on file. References to information contained in exhibits or in documents

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already on file shall clearly identify the material and shall specifically indicate that the material is to be incorporated by reference in answer to the item. (b) If an item requires a summary or outline of the provisions of a document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to the brief statement, the summary or outline may incorporate by reference particular parts of an exhibit or document currently on file with the Commissioner which was filed within the immediately preceding 3 years and may be qualified in its entirety by that reference. When two or more documents required to be filed as exhibits are substantially identical in all material respects, except as to the parties thereto, the dates of execution or other details, a copy of only one of the documents needs be filed with a schedule identifying the omitted documents and setting forth the material details in which the omitted documents differ from the document which is filed.
Authority The provisions of this 25.13 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of the Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.13 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial page (245447).

25.14. Formsinformation unknown or unavailable and extension of

time to furnish. (a) Information required need be given only insofar as it is known or reasonably available to the person filing the form. If required information is unknown and not reasonably available to the person filing, either because the obtaining thereof would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the person filing, the information may be omitted, subject to the following conditions. The person filing shall: (1) Give information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof. (2) Include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of an affiliation with the person within whose knowledge the information rests and stating the result of a request made to that person for the information. (b) If it is impractical to furnish required information, document or report at the time it is required to be filed, there may be filed with the Commissioner a separate document: (1) Identifying the information, document or report in question. (2) Stating why the filing thereof at the time required is impractical.

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(3) Requesting an extension of time for filing the information, document or report to a specified date. The request for extension shall be deemed granted unless the Commissioner within 30 days after receipt thereof denies the request.
Authority The provisions of this 25.14 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law (40 P. S. 459.8). Source The provisions of this 25.14 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial page (245448).

25.15. Formsadditional information and exhibits.

(a) In addition to the information expressly required to be included in Forms AE located in Appendix A, the person filing shall provide further material information, if any, as necessary for the completion or clarity of the information expressly required in the form. The person filing may also file exhibits as desired in addition to those expressly required by the form. The exhibits shall be marked to indicate clearly the subject matters to which they refer. The Commissioner may require the person filing the form to provide additional information as may be necessary to determine compliance with the act. (b) Changes to Form A, B, C, D or E shall include on the top of the first page the phrase: Change No. (insert number) to and shall indicate the date of the change and not the date of the original filing.
Authority The provisions of this 25.15 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law (40 P. S. 459.8). Source The provisions of this 25.15 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245448) to (245449).

25.16. Acquisition of controlstatement filings.

(a) A person required to file a statement under section 1402 of the act (40 P. S. 991.1402) shall furnish the required information on Form A located in Appendix A as prescribed by this chapter. If the information requirements in section 1403(c)(2) and the criteria in section 1403(d)(2) of the act (40 P. S. 991.1403(c)(2) and 991.1403(d)(2)) (relating to the competitive impact of an

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acquisition in this Commonwealth) apply to a Form A filing, the person shall also furnish the required information on Form E located in Appendix A as prescribed by this chapter. (b) A person filing a request under section 1402(g) of the act for an exemption from section 1402 of the act is not required to file a Form A as prescribed by this chapter but shall provide information deemed by the Commissioner as necessary to determine that an offer, request, invitation, agreement or acquisition does either of the following: (1) Has not been made or entered into for the purpose and will not have the effect of changing or influencing the control of a domestic insurer. (2) Otherwise is not comprehended within the purposes of section 1402 of the act. (c) A person required to file a preacquisition notification under section 1403(b) of the act for an acquisition not subject to a Form A filing under section 1402 of the act shall file Form E as prescribed by this chapter. (d) Under section 1403(c)(2) of the act the Department may require material and information in addition to the information required by Form E as reasonably necessary to determine whether the proposed acquisition, if consummated, would exceed the competitive standard of section 1403(d) of the act. The additional information required may include an opinion of an economist as to the competitive impact in this Commonwealth of an acquisition that would exceed the competitive standard of section 1403(d) of the act. The opinion shall be obtained by the person filing the form and shall be accompanied by a summary of the economists education and experience indicating the economists ability to render an informed opinion. (e) Under section 1402(d) of the act, a person shall file with the Department and send to the insurer an amendment disclosing a material change in the information furnished on Forms A and E within 2 business days after the person learns of the change. If the acquiring person is not an individual, a material change includes changes in directors, executive officers or owners of 10% or more of the voting securities of the acquiring person. In addition, the person shall file with the Department and send to the insurer within 5 business days an amendment disclosing a change other than a material change in the information furnished on Forms A and E arising after the date on which the form was filed but before a determination is made on the filing. (f) If the person being acquired is deemed to be a domestic insurer under section 1402(a)(2) of the act, the name of the domestic insurer on the first page of Forms A and E shall be indicated as follows: ABC Insurance Company, a subsidiary of XYZ Holding Company. (g) If a person deemed to be a domestic insurer under section 1402(a)(2) of the act is being acquired, references to the insurer in Forms A and E shall refer to both the domestic subsidiary insurer and the person being acquired.

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Authority

31 25.17

The provisions of this 25.16 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law (40 P. S. 459.8). Source The provisions of this 25.16 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial page (245449)

25.17. Annual registration of insurersstatement filing.

(a) An insurer required to file an annual registration statement under section 1404 of the act (40 P. S. 991.1404) shall furnish the required information on Form B as prescribed by this chapter. (b) Under section 1404(a) of the act, an insurer shall file a Form B located in Appendix A within 15 days after becoming subject to registration and annually thereafter by March 31 of each year. If the Commissioner approves a merger or acquisition of control, the domestic insurer being acquired shall file a properly completed Form B within 15 days of the end of the month in which the merger or acquisition is consummated. (c) An amendment to Form B shall be filed within 15 days after the end of a month in which there is a material change to the information provided in the annual registration statement, including changes in officers or directors listed in Item 4 of Form B. An amendment to Form B is not required if a material change has been reported as a dividend, other distribution to shareholders, or other transaction under 25.21 and 25.22 (relating to transactions subject to prior notice notice filing; and all dividends and other distributions), and there has been no change in the reported information. (d) Amendments shall be filed in the Form B format with only items which are being amended reported. Each amendment shall include at the top of the first page Amendment No. (insert number) to Form B for (insert year of most recent filing) and shall indicate the date of the amendment and not the date of the original filing.
Authority The provisions of this 25.17 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.17 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245449) to (245450).

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25.18. Summary of registrationstatement filing.

An annual registration statement filed under section 1404 of the act (40 P. S. 991.1404) shall include the information required on Form C located in Appendix A as prescribed by this chapter. A copy of Form C shall be filed in any jurisdiction in which an insurer is authorized to do business, if requested by the chief insurance regulatory official of the jurisdiction.
Authority The provisions of this 25.18 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.18 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial page (245450).

25.19. Alternative and consolidated registrations.

(a) Under section 1404(i) of the act (40 P. S. 991.1404(i)) an insurer authorized to do business in this Commonwealth may file a registration statement on behalf of an affiliated insurer which is required to register under section 1404 of the act. A registration statement may include information regarding an insurer in the insurance holding company system even if the insurer is not authorized to do business in this Commonwealth. In lieu of filing a registration statement on Form B located in Appendix A, an insurer authorized to do business in this Commonwealth may file a copy of the registration statement or similar report which it is required to file in its state of domicile, if: (1) The statement or report contains substantially similar information required to be furnished on Form B. (2) The filing insurer is the principal insurance company in the insurance holding company system. (b) The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact. An insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer shall set forth a brief statement of facts to substantiate the filing insurers claim that it, in fact, is the principal insurer in the insurance holding company system. (c) With the prior approval of the Commissioner, an unauthorized insurer may follow any of the procedures which could be done by an authorized insurer under subsection (a). (d) An insurer may take advantage of the provisions of section 1404(h) or (i) of the act without obtaining the prior approval of the Commissioner. The Com-

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missioner reserves the right to require individual filings if the Commissioner deems that the filings are necessary in the interest of clarity, ease of administration or the public good.
Authority The provisions of this 25.19 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.19 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245450) to (245451).

25.20. Disclaimers and termination of registration.

(a) A disclaimer of affiliation or a request for termination of registration under section 1404(g) and (k) of the act (40 P. S. 991.1404(g) and (k)) claiming that a person does not, or will not upon the taking of some proposed action, control another person, referred to as the subject, within this chapter, shall contain the following information: (1) The number of authorized, issued and outstanding voting securities of the subject. (2) With respect to the person whose control is denied and the affiliates of that person, the number and percentage of shares of the subjects voting securities which are held of record or known to be beneficially owned, and the number of the shares concerning which there is a right to acquire, directly or indirectly. (3) The material relationships and bases for affiliation between the subject and the person whose control is denied and the affiliates of that person. (4) A statement explaining why the person should not be considered to control the subject. (b) A request for termination of registration shall be deemed to have been granted unless the Department, within 30 days after receipt of the request, notifies the registrant otherwise.
Authority The provisions of this 25.20 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.20 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245451) to (245452).

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25.21. Transactions subject to prior noticenotice filing.

(a) An insurer required to give notice of a proposed transaction under section 1405(a)(2) of the act (40 P. S. 991.1405(a)(2)) shall furnish the required information on Form D located in Appendix A as prescribed by this chapter. (b) The insurer shall file an amendment to Form B reporting changes in the information furnished on Form D, including a change in the effective date of the transaction, within 15 days after the end of a month in which the transaction is effectuated. (c) An insurer may not enter into a proposed transaction if a material change occurs in the information furnished on Form D unless the insurer has filed an amended Form D with the Department at least 30 days prior to entering into the transaction, or a shorter period the Department may permit, and the Department has not disapproved the amended transaction within that time period.
Authority The provisions of this 25.21 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.21 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial page (245452). Cross References This section cited in 31 Pa. Code 25.17 (relating to annual registration of insurersstatement of policy).

25.22. All dividends and other distributions.

(a) Under section 1404(e) of the act (40 P. S. 991.1404(e)) a registered insurer is required to report to the Department all dividends and other distributions to shareholders within 5 business days following the declaration thereof and at least 10 days, commencing from the date of receipt by the Department, prior to payment thereof. The report shall include the information set forth in section 1404(e) of the act and subsection (c)(1)(5). The information set forth in subsection (c)(5) is not required for dividends other than dividends reported under section 1405(b) of the act (40 P. S. 991.1405(b)) and dividends and other distributions filed under section 337.8 of the act (40 P. S. 459.8). (b) Under section 337.8 of the act a domestic insurance company, association or exchange may pay dividends and other distributions to shareholders only out of unassigned funds as defined in section 337.8(e) of the act or upon approval of the Commissioner. Information filed with the Commissioner under section 337.8 of the act shall include the information set forth in subsection (c)(1)(5).

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(c) Requests for approval of extraordinary dividends or another extraordinary distribution to shareholders under section 1405(b) of the act shall include the following: (1) The amount of the proposed dividend or other distribution. (2) The date established for payment of the dividend or other distribution. (3) A statement as to whether the dividend or other distribution 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) A copy of the calculations determining that the proposed dividend or other distribution is or is not extraordinary. The work paper shall include the following information with respect to the domestic insurer: (i) The amounts, dates and form of payment of all dividends and other distributions made within the previous 12 consecutive months ending on the date fixed for payment of the proposed dividend and commencing on the day after the same day of the same month in the last preceding year. (ii) Surplus, total capital and surplus, as of the 31st day of December next preceding. (iii) The net income for the 12-month period ending the 31st of December next preceding. (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 or other distribution approval is submitted. (6) A statement demonstrating the transactions compliance with section 1405(d) of the act by describing the effect of the proposed dividend or other distribution upon the insurers surplus and the reasonableness of surplus in relation to the insurers outstanding liabilities and the adequacy of surplus relative to the insurers financial needs. (d) Reports of dividends and other distributions under this section shall include on the top of the first page the phrase: Notice of Dividend or Other Distribution and the name of the insurer. (e) The insurer shall report changes in information furnished under subsection (c) within 15 days after the end of a month in which the dividend or other distribution is paid. If the dividend or other distribution is required to be reported on Form B located in Appendix A, the insurer shall report the changes as an amendment to Form B. If the dividend or other distribution is not subject to a Form B filing, the report of changes shall state on the top of the first page the phrase: Change No. (insert number) to, and shall include the date of the change, date of declaration, amount paid, payment date, form of payment and the nature of and reason for the change. (f) An insurer may not pay a dividend or other distribution under sections 337.8 or 1405(b) of the act (40 P. S. 459.8 and 991.1405(b)) if a material change occurs in the information reported under this section unless the insurer

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has filed an amended report with the Department at least 30 days prior to paying the dividend or other distribution, or a shorter period the Department may permit, and the Department has not disapproved the amended report within that time period.
Authority The provisions of this 25.22 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.22 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245452) to (245453). Cross References This section cited in Pa. Code 25.17 (relating to annual registration of insurersstatement of policy).

25.23. Adequacy of surplus.

The factors in section 1405(d) of the act (40 P. S. 991.1405(d)) to be considered in determining whether an insurers surplus is reasonable in relation to the insurers outstanding liabilities and adequate to its financial needs are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurers surplus, no single factor is necessarily controlling. The Commissioner will consider the net effect of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the Commissioner will consider the extent to which each of these factors varies from company to company. In determining the quality and liquidity of investments in subsidiaries, the Commissioner will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.
Authority The provisions of this 25.23 issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this 25.23 adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial page (245453).

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INSURANCE HOLDING COMPANY SYSTEMS APPENDIX A FORM A

31

STATEMENT REGARDING THE ACQUISITION OF CONTROL OF OR MERGER WITH A DOMESTIC INSURER (Name of Domestic Insurer) BY: (Name of Acquiring Person (Applicant)) Filed with the Insurance Department of the Commonwealth of Pennsylvania Dated: Name, title, address and telephone number of individual to whom notices and correspondence concerning this form should be addressed: Item 1. Insurer and Method of Acquisition State the name, NAIC code number and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired. Item 2. Identity and Background of the Applicant A. State the name and address of the applicant seeking to acquire control over the insurer. B. If the applicant is not an individual, state the nature of its business operations for the past five (5) years or for such lesser period as the person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicants subsidiaries. C. Furnish a chart or listing clearly presenting the identities and the interrelationships among the applicant and all affiliates of the applicant. No affiliate need be identified if its total assets are equal to less than 1/2 of 1% of the total assets of an ultimate controlling person affiliated with the applicant. Indicate in the chart or listing the percentage of voting securities of each person which is owned or controlled by the applicant or by any other person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of control. As to each person specified in the chart or listing indicate the type of organization (e.g. corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings and the date when commenced. Item 3. Identity and Background of Individuals Associated with the Applicant Furnish a biographical affidavit for (1) the applicant if the applicant is an individual or (2) all persons who are directors, executive officers or owners of 10% or more of the voting securities of the applicant if the applicant is not an indi-

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vidual. Biographical affidavits filed with the Department within the immediately preceding 3 years need not be included if there has been no change in the information already on file. Biographical affidavits shall be signed in the original and shall include the following: A. Name and business address. B. Present principal business activity, occupation or employment including position and office held and the name, principal business and address of any corporation or other organization in which employment is carried on. C. Material occupations, positions, offices or employment during the last five (5) years, giving the starting and ending date of each and the name, principal business and address of any business corporation or other organization in which each occupation, position, office or employment was carried on. If any occupation, position, office or employment required licensing by or registration with any Federal, state or municipal governmental agency, indicate that fact, the current status of the licensing or registration, and an explanation of any surrender, revocation, suspension or disciplinary proceedings in connection therewith. D. Whether or not the person has ever been convicted in a criminal proceeding (excluding minor traffic violations) during the last ten (10) years and, if so, give the date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case. The Department will accept copies of original, signed biographical affidavits filed with the chief insurance regulatory official of another jurisdiction if the following conditions are met: (1) The identity of the chief insurance regulatory official holding the original affidavit and the date of the original filing are provided in this statement. (2) The original affidavit was filed within the immediately preceding three years. (3) There has been no change in the information required in the affidavit. Item 4. Nature, Source and Amount of Consideration A. Describe the nature, source and amount of funds or other considerations used or to be used in effecting the merger or other acquisition of control. If any part of the same is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any, between the borrower, and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes and security arrangements relating thereto. B. Explain the criteria used in determining the nature and amount of the consideration.

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C. If the source of the consideration is a loan made in the lenders ordinary course of business and if the applicant wishes the identity of the lender to remain confidential, the applicant must specifically request that the identity be kept confidential. Item 5. Future Plans of Insurer Describe any plans or proposals which the applicant may have to declare an extraordinary dividend, to liquidate the insurer, to sell its assets to or merge it with any person or persons or to make any other material change in its business operations or corporate structure or management. Item 6. Voting Securities to be Acquired State the number of shares of the insurers voting securities which the applicant, its affiliates and any person listed in Item 3 plan to acquire, and the terms of the offer, request, invitation, agreement or acquisition, and a statement as to the method by which the fairness of the proposal was arrived at. Item 7. Ownership of Voting Securities State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates or any person listed in Item 3. Item 8. Contracts, Arrangements, or Understandings with Respect to Voting Securities of the Insurer Give a full description of any contracts, arrangements or understandings with respect to any voting security of the insurer in which the applicant, its affiliates or any person listed in Item 3 is involved, including, but not limited to, 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 person with whom such contracts, arrangements or understandings have been entered into. Item 9. Recent Purchases of Voting Securities Describe any purchases of any voting securities of the insurer by the applicant, its affiliates or any person listed in Item 3 during the twelve (12) calendar months preceding the filing of this statement. Include in the description the dates of purchase, the name of the purchasers, and the consideration paid or agreed to be paid therefor. State whether any shares so purchased are hypothecated. Item 10. Recent Recommendations to Purchase Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates or any person listed in Item 3, or by anyone

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Pt. I

based upon interviews or at the suggestion of the applicant, its affiliates or any person listed in Item 3 during the twelve (12) calendar months preceding the filing of this statement. Item 11. Agreements with Broker-Dealers Describe the terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender and the amount of any fees, commissions or other compensation to be paid to brokerdealers with regard thereto. Item 12. Financial Statements and Exhibits A. Financial statements and exhibits shall be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached. B. The financial statements shall include the annual financial statements of the persons identified in Item 2(c) for the preceding five (5) fiscal years (or for such lesser period as the applicant and its affiliates and any predecessors thereof shall have been in existence), and similar information covering the period from the end of the persons last fiscal year, if that information is available. Statements may be prepared on either an individual basis, or, unless the Commissioner otherwise requires, on a consolidated basis if consolidated statements are prepared in the usual course of business. The annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that the statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements need not be certified, provided they are based on the Annual Statement of that person filed with the insurance department of the persons domiciliary state and are in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of that state. C. If the acquiring person is an individual, the Department may require the filing of Federal income tax returns in lieu of audited financial statements. Any returns filed shall be given confidential treatment and shall not be subject to subpoena and shall not be made public by the Department or any other person. D. File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material relating thereto, any proposed employment, consultation, advisory or management contracts concerning the insurer, annual reports to the stockholders of the insurer and the applicant for the last two fiscal years, and any additional documents or papers required by this chapter.

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Item 13. Signature and Certification Signature and certification required as follows: SIGNATURE Pursuant to the requirements of Section 1402 of the act has caused this application to be duly signed on its behalf in the City of and State of on the day of , . (SEAL) Name of Applicant BY (Name) Attest: (Signature of Officer) (Title) CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached , , for and on behalf of application dated ; that (s)he is the of such
(Title of Officer)

(Title)

(Name of Applicant)

company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath)

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GENERAL PROVISIONS FORM B

Pt. I

INSURANCE HOLDING COMPANY SYSTEM ANNUAL REGISTRATION STATEMENT Filed with the Insurance Department of the Commonwealth of Pennsylvania by (Name of Registrant) on behalf of the following insurance companies: Name Address

NAIC Code Number State of Domicile Date: , Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed: Item 1. Identity and Control of Registrant Furnish the exact name of each insurer registering or being registered (hereinafter called the Registrant), the home office address and principal executive offices of each; the date on which each Registrant became part of the insurance holding company system; and the method(s) by which control of each Registrant was acquired and is maintained. Item 2. Organizational Chart Furnish a chart or listing clearly presenting the identities of and interrelationships among all affiliated persons within the insurance holding company system. No affiliate need be shown if its total assets are equal to less than 1/2 of 1% of the total assets of an ultimate controlling person within the insurance holding company system unless it has assets valued at or exceeding $5,000,000. The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in the chart or listing indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile. Item 3. Ultimate Controlling Person As to an ultimate controlling person in the insurance holding company system furnish the following information: A. Name. B. Home office address. C. Principal executive office address. D. The organizational structure of the person, i.e., corporation, partnership, individual, trust, etc. E. The principal business of the person.

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F. The name and address of any person who holds or owns 10% or more of any class of voting security, the class of the security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned. G. If court proceedings involving a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings and the date when commenced. Item 4. Biographical Information Furnish the following information for the directors and executive officers of an ultimate controlling person in the form of biographical affidavits signed in the original: the individuals name and address, 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 years. Biographical affidavits filed with the Department within the immediately preceding 3 years need not be included if there has been no change in the information already on file. The Department will accept copies of original, signed biographical affidavits filed with the chief insurance regulatory official of another jurisdiction if the following conditions are met: (1) The identity of the chief insurance regulatory official holding the original affidavit and the date of the original filing are provided in this statement. (2) The original affidavit was filed within the immediately preceding 3 years. (3) There has been no change in the information required in the affidavit. Item 5. Transactions and Agreements Briefly describe the following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year, including extraordinary dividends and other material transactions reported under 25.21 and 25.22 of this chapter, between the Registrant and its affiliates: A. Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the Registrant or of the Registrant by its affiliates; B. Purchases, sales or exchanges of assets; C. Transactions not in the ordinary course of business, including contributions of assets to Registrant; D. Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the Registrants assets to liability, other than insurance contracts entered into in the ordinary course of the Registrants business; E. All management agreements, service contracts and all cost-sharing arrangements; F. Reinsurance agreements; G. Dividends and other distributions to shareholders; H. Consolidated tax allocation agreements; and

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Pt. I

I. Any pledge of the Registrants stock and/or of the stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system. Sales, purchases, exchanges, loans or extensions of credit, investments or guarantees involving one-half of 1% or less of the Registrants admitted assets as of the 31st day of December next preceding shall not be deemed material and need not be disclosed. The description shall be in a manner as to permit the proper evaluation thereof by the Commissioner, and shall include at least the following: the effective date, nature and purpose of the transaction, the nature and amounts of any payments or transfers of assets between the parties, the identity of all parties to the transaction, and relationship of the affiliated parties to the Registrant. Item 6. Litigation or Administrative Proceedings A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which an ultimate controlling person or any of its directors or executive officers was a party or of which the property of an ultimate controlling person or any of its directors or executive officers is or was the subject; give the names of the parties and the court or agency in which the litigation or proceeding is or was pending: A. Criminal prosecutions or administrative proceedings by any government agency or authority which may be relevant to the trustworthiness of any party thereto; and B. Proceedings which may have a material effect upon the solvency or capital structure of an ultimate controlling person including, but not necessarily limited to, bankruptcy, receivership or other corporate reorganizations. Item 7. Statement Regarding Plan or Series of Transactions The insurer shall furnish a statement that transactions entered into since the filing of the prior years annual registration statement are not part of a plan or series of like transactions, the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur. Item 8. Financial Statements and Exhibits A. Financial statements and exhibits should be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached. B. The financial statements shall include the annual financial statements of any ultimate controlling person in the insurance holding company system as of the end of the persons latest fiscal year. Financial statements are required for an ultimate controlling person who is an individual as well as for a corporation or other type of business organization.

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If a holding company system includes more than one ultimate controlling person, annual financial statements are required for each ultimate controlling person unless the Commissioner, in the Commissioners discretion, finds that annual financial statements for one or more of the ultimate controlling persons are not necessary to carry out the act. If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent that information is available. Financial statements may be prepared on either an individual basis, or unless the Commissioner otherwise requires, on a consolidated basis if the consolidated statements are prepared in the usual course of business. Unless the Commissioner otherwise permits, the annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that the statements present fairly the financial position of an ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If an ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the Annual Statement of the insurer filed with the chief insurance regulatory official of the insurers domiciliary jurisdiction and are in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of that jurisdiction. Any ultimate controlling person who is an individual may file personal financial statements that are reviewed rather than audited by an independent public accountant. The review shall be conducted in accordance with standards for review of personal financial statements published in the Personal Financial Statements Guide by the American Institute of Certified Public Accountants. Personal financial statements shall be accompanied by the independent public accountants Standard Review Report stating that the accountant is not aware of any material modifications that should be made to the financial statements in order for the statements to be in conformity with generally accepted accounting principles. C. Exhibits shall include copies of the latest annual reports to shareholders of an ultimate controlling person and proxy material used by an ultimate controlling person; and any additional documents or papers required by this chapter. Item 9. Form C Required A Form C, Summary of Registration Statement, must be prepared and filed with this Form B. Item 10. Signature and Certification

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Pt. I

Signature and certification required as follows: SIGNATURE Pursuant to the requirements of Section 1404 of the act, the Registrant has caused this annual registration statement to be duly signed on its behalf in the and State of on the day of , City of . (SEAL) Name of Registrant BY (Name) Attest: (Signature of Officer) (Title) CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached , , for and on behalf of annual registration statement dated ; that (s)he is the of such com
(Title of Officer)

(Title)

(Name of Company)

pany and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath)

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INSURANCE HOLDING COMPANY SYSTEMS FORM C SUMMARY OF REGISTRATION STATEMENT

31

Filed with the Insurance Department of the Commonwealth of Pennsylvania by (Name of Registrant) on behalf of the following insurance companies: Name NAIC Code Number Address State of Domicile

, Date: Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed: Furnish a brief description, including a reference to any amendments filed in the intervening year, of all items in the current annual registration statement which represent changes from the prior years annual registration statement. The description shall include the date and dollar amount of each change, identify any previous filings as a result of the change by amendment number or by type and date of filing, be in a manner as to permit the proper evaluation thereof by the Commissioner, and shall include specific references to Item numbers in the annual registration statement and to the terms contained therein. Changes occurring under Item 2 of Form B, insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where the changes are ones which result in ownership or holdings of ten (10) percent or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest. Changes occurring under Item 4 of Form B need only be included where: an individual is, for the first time, made a director or executive officer of an ultimate controlling person; a director or executive officer terminates his or her responsibilities with an ultimate controlling person; or in the event an individual is named president of an ultimate controlling person. If a transaction disclosed on the prior years annual registration statement has been changed, the nature of the change shall be included. If a transaction disclosed on the prior years annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction. The insurer shall furnish a statement that transactions entered into since the filing of the prior years annual registration statement are not part of a plan or series of like transactions whose purpose it is to avoid statutory threshold amounts and the review that might otherwise occur. SIGNATURE AND CERTIFICATION Signature and certification required as follows: SIGNATURE

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Pt. I

Pursuant to the requirements of Section 1404 of the act, the Registrant has caused this summary of registration statement to be duly signed on its behalf in and State of on the day of the City of , . (SEAL) Name of Registrant By Attest: (Signature of Officer) (Title) CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached , , for and on behalf of summary of registration statement dated ; that (s)he is the of such company
(Title of Officer)

(Name)

(Title)

(Name of Company)

and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath)

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Filed with the Insurance Department of the Commonwealth of Pennsylvania by (Name of Registrant) on behalf of the following insurance companies: Name Address NAIC Code Number State of Domicile Date: , Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed: Item 1. Identity of Parties to Transaction Furnish the following information for each of the parties to the transaction: A. Name. B. Home office address. C. Principal executive office address. D. The organizational structure, i.e. corporation, partnership, individual, trust, etc. E. A description of the nature of the parties business operations. F. Relationship, if any, of other parties to the transaction to the insurer filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer seeking approval, or by the insurer filing the notice in the affiliated parties. G. If the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction. Item 2. Description of the Transaction Furnish the following information for each transaction for which notice is being given: A. A statement as to whether notice is being given under Section 1405(a)(2)(i), (ii), (iii), or (iv) of the act. B. A description of the nature and purpose of the transaction, including the anticipated immediate and long-term effect of the transaction on the financial condition of the insurer. C. The proposed effective date of the transaction. Item 3. Sales, Purchases, Exchanges, Loans, Extensions of Credit, Guarantees, Investments, Pledges of Assets or Contributions to Surplus Furnish a brief description of the amount and source of funds, securities, property or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, investment, or pledge of assets, including assets to be received by the domestic insurer as a contribution to its surplus; whether any provision exists for purchase by the insurer filing notice, by any party to the transaction, or by any affiliate of the insurer filing notice; a description of the terms of any

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securities being received, if any; and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost and its fair market value, together with an explanation and supporting documentation of the basis for valuation. If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under the loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest. If the transaction involves an investment, guarantee or other arrangement, state the time period during which the investment, guarantee or other arrangement will remain in effect, together with any provisions for extensions or renewals of the investments, guarantees or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurers surplus and the insurers accounting treatment. No notice need be given if the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the loan, extension of credit or guarantee is less than 5% of the insurers admitted assets or 25% of its surplus as of the 31st day of December next preceding. Item 4. Loans or Extensions of Credit to a Non-Affiliate If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of or make investments in any affiliate. Describe the amount and source of funds, securities, property or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of and supporting documentation for the basis of valuation. Furnish a brief statement as to the effect of the transaction upon the insurers surplus. No notice need be given if the loan or extension of credit is one which equals less than 5% of the insurers admitted assets or 25% of its surplus as of the 31st day of December next preceding. Item 5. Reinsurance If the transaction is a reinsurance agreement or modification thereto, as described by Section 1405(a)(2)(iii) of the act, furnish a description of the known and/or estimated amount of liability to be ceded and/or assumed in each calendar

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year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and nonaffiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurers affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurers surplus. No notice need be given for reinsurance agreements or modifications thereto if the reinsurance premium is less than 5% of the insurers surplus as of the 31st day of December next preceding; or the change in the insurers liabilities or any transfer of assets required to fund the transaction equals or exceeds 25% of the insurers surplus as of the 31st day of December next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer. Item 6. Signature and Certification Signature and certification required as follows: SIGNATURE Pursuant to the requirements of Section 1405 of the act, has caused this notice to be duly signed on its behalf in the City of and State of on the day , . of (SEAL) Name of Applicant By Attest: (Signature of Officer) (Title) CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached , , for and on behalf of notice dated ; that (s)he is the of such
(Title of Officer)

(Name)

(Title)

(Name of Applicant)

company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath)

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Pt. I

PRE-ACQUISITION NOTIFICATION STATEMENT OF THE POTENTIAL COMPETITIVE IMPACT OF A PROPOSED MERGER OR ACQUISITION (Name of Insurer) BY: (Name of Acquiring Persons) Filed with the Insurance Department of the Commonwealth of Pennsylvania Date: Name, title, address and telephone number of person completing this statement: Item 1. Name and Address State the names and addresses of acquiring persons. Item 2. Name and Addresses of Affiliated Persons State the names and addresses of the persons affiliated with those listed in Item 1. Describe their affiliations. Item 3. Nature and Purpose of Proposed Merger or Acquisition State the nature and purpose of the proposed merger or acquisition. Item 4. Nature of Business State the nature of the business performed by each of the persons identified in response to Item 1 and Item 2. Item 5. Market and Market Share State specifically what market and market share the persons identified in Item 1 and Item 2 currently enjoy in this Commonwealth in each insurance market which, under section 1403(b)(2)(v) of the act (40 P. S. 1403(b)(2)(v)), causes the proposed merger or acquisition not to be exempted from Article XIV of the act. Provide historical market and market share data for each person identified in Item 1 and Item 2 for the past 5 years, or for the number of years the person and any predecessors thereof have been transacting business if less than 5 years, and identify the source of the data. For purposes of this item, market means direct written insurance premium in this Commonwealth for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this Commonwealth. Item 6. Signature and Certification Signature and certification required as follows: SIGNATURE Pursuant to the requirements of Section 1402 of the act has caused this application to be duly signed on its behalf in the City of and State of on the day of , . (SEAL)

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Name of Applicant BY (Name) Attest: (Signature of Officer) (Title)

(Title)

(Name of Applicant)

CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached , , for and on behalf of application dated ; that (s)he is the of such company
(Title of Officer)

and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath)
Authority The provisions of this Appendix A issued under The Insurance Company Law of 1921 (40 P. S. 991.1401991.1413); amended under section 337.8 of The Insurance Company Law of 1921 (40 P. S. 459.8). Source The provisions of this Appendix A adopted September 3, 1993, effective September 4, 1993, 23 Pa.B. 4216; amended August 10, 2001, effective August 11, 2001, 31 Pa.B. 4406. Immediately preceding text appears at serial pages (245454) to (245468). Cross References This appendix cited in 31 Pa. Code 25.12 (relating to formsgeneral requirements); 31 Pa. Code 25.13 (relating to formsincorporation by reference, summaries and omissions); 31 Pa. Code 25.15 (relating to formsadditional information and exhibits); 31 Pa. Code 25.16 (relating to acquisition of controlstatement filings); 31 Pa. Code 25.17 (relating to annual registration of insurersstatement filing); 31 Pa. Code 25.18 (relating to summary of registrationstatement filing); 31 Pa. Code 25.19 (relating to alternative and consolidated registrations); 31 Pa. Code 25.21 (relating to transactions subject to prior noticenotice filing); and 31 Pa. Code 25.22 (relating to all dividends and other distributions).

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