California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 4 - Insurer Securities Permits › Article 13 - Forms and Addenda › Section 2613.04 - Application by Domestic Corporation for Organizational Permit

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
The following form represents a composite of several
					 acceptable applications by domestic California corporations for organizational
					 permits. Use herein for illustrative purposes of certain components of a plan
					 of operation should not be regarded as an expression by this department of a
					 preference in operational details.
BEFORE THE DEPARTMENT OF INSURANCE OF THE STATE OF
					 CALIFORNIA
In the Matter of the Application of
)
FILE NO. ___________________________
ABC LIFE INSURANCE COMPANY,
)
San Francisco, California
)
FILED
							 ___________________________
)
For a Permit Authorizing Applicant
)
APPLICATION FOR
to see and issue its Securities
)
ORGANIZATIONAL PERMIT
___________________________
)
TO THE INSURANCE COMMISSIONER OF THE STATE OF
					 CALIFORNIA:
ABC LIFE INSURANCE COMPANY, a newly organized California
					 corporation with its home office temporarily at No. 1 Market Street, San
					 Francisco, California, was incorporated January 2, 1964, for the purpose of
					 transacting a life insurance business (including the disability supplements
					 described in Insurance Code Sections
					 10271 and
					 106), and
					 to that end applies for a permit authorizing it to see and issue 80,000 shares
					 of its $10.00 per value capital stock at a price of $50.00 per share, cash,
					 lawful money of the United States so as to capitalize itself in order that it
					 may be eligible to apply for an receive a certificate of authority authorizing
					 it to transact the classes of life and disability insurance in the State of
					 California.
In support of this application, Applicant attaches the
					 following exhibits and by these references incorporates them herein and makes
					 them a part of this application, and alleges:
I
Exhibit A is a copy of Applicant's articles of
					 incorporation filed with the Honorable Secretary of State at Sacramento on
					 January 2, 1964, originally certified by his Deputy to be a true copy of the
					 same on file in his office.
II
Exhibit B is a copy of Applicant's by-laws certified by the
					 original signature of Applicant's secretary and attested by its corporate seal
					 to be a true copy of the by-laws currently in force.
III
The names and addresses of applicant's officers and
					 directors are as follows:
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
___________________________
IV
Biographies of Applicant's officers, directors and key
					 managerial personnel are attached hereto, marked Exhibit C-1 through C-11 and
					 by this reference are incorporated herein and made a part hereof. Each of said
					 biographies is on the Departmental form required by Paragraph B of Section
					 2605.01 and found in Section
					 2613.07 I.S.P.R. and is signed by
					 the individual concerned and certified by him under penalty of perjury to be
					 true and correct.
V
If its stock is sold successfully and Applicant is fully
					 capitalized according to its plan as hereinafter set forth, and if Applicant is
					 granted a Certificate of Authority by the Insurance Commissioner in response to
					 due application therefor, Applicant intends to transact the usual business of a
					 life insurer in the manner, with the means, and to the extent hereinafter shown
					 and demonstrated by the exhibits attached hereto. In further elaboration of its
					 plan of operation, Applicant alleges as follows:
A. Applicant can obtain adequate office
				  quarters on the 15th floor of No. 1 Market Street, in the City of San
				  Francisco, Applicant will retain (if it is successful in its stock sales and in
				  obtaining a certificate of authority) the firm of White and Black as consulting
				  actuaries who will supervise the setting up of Applicant's books and records
				  and the operation of Applicant's internal office procedure, accounting and
				  financial reporting until Applicant develops sufficient skilled personnel of
				  its own to take over these functions.
B. Applicant will operated on the American
				  Agency System through individual life and disability agents compensated by
				  commissions in the usual manner, such agents to be supervised by general agents
				  and home office personnel.
C.
				  Applicant intends to transact only through duly licensed life and disability
				  agents and will, if it is granted a certificate of authority by the Insurance
				  Commissioner, initially appoint only experienced agents. It expects to recruit
				  such agents from among the personal friends and acquaintances of its officers,
				  directors, and key managerial personnel who have extensive acquaintance in the
				  life insurance industry.
D. A
				  sample General Agent's Contract form, and sample Agent's Contract form, each
				  complete with commission schedules, are attached hereto, marked Exhibits D-1
				  and D-2, respectively.
E. Applicant
				  expects to develop its business from the following sources: from such leads as
				  its agents and others connected with the company can furnish; from vital
				  statistics publicized in the press; from automobile registration lists, and
				  other merchandising information that can be obtained readily; and by cold
				  canvassing.
F. Applicant expects
				  its agents to sell policies only by personal interview and advertising through
				  the press; no solicitation by mail is planned. Agents will not be provided with
				  "canned" sales talks; rather, agents will be instructed to sell directly from
				  the policy or policies concerned. Applicant will use no "gimmicks" or trick
				  devices in the sale of its policies.
G. No institutional advertising is presently
				  planned; and any and all advertising proposed to be used by general agents or
				  individual agents must first be submitted to and approved by the Company, as
				  may be seen by reference to the contracts alluded to in paragraph D above. It
				  is expected that Applicant ultimately will develop and provide its agents with
				  certain brochures, advertising, and sales kits, all of which will be patterned
				  after those employed by the Red, White and Blue Life Insurance Company of
				  Sacramento, California, which Applicant is informed and believes, and therefore
				  alleges, is a nationally known, reputable life insurer whose advertising
				  conforms with all applicable California laws.
H. Applicant has reserved the right to
				  supervise and control the sales techniques employed by its agents and general
				  agents; reference may be made to the contract forms attached hereto as Exhibits
				  D-1 and D-2.
I. Death claims will
				  be paid either by mail or by local agents of Applicant upon receipt at
				  Applicant's home office of acceptable proof of death of a policyholder; no
				  compensation for such service will be paid to Applicant's agents. Claims under
				  the disability supplements to individual life policies will be handled through
				  Applicant's home office.
J. The
				  salaries Applicant initially proposes to pay its officers are set forth in a
				  schedule, marked Exhibit E, attached hereto. Directors will receive no salaries
				  or fees for attending meetings during the first two years; however, it is
				  proposed that their traveling expenses, if any, will be paid.
K. Applicant's investments will be managed by
				  its Executive Vice-President who, as may be seen by referring to his biography
				  in Exhibit C to this application, has had extensive experience in the
				  investment field and is himself a financier of substantial means. Said
				  individual is fully familiar with Insurance Code Sections
				  1153,
				  1153.5,
				  1170-
				  1202 and
				  with California Administrative Code Sections
				  2279 to and including 2283, such
				  investment duties will be part of said officer's regular duties and will entail
				  no extra compensation.
L. No
				  officer, director, trustee, investment committee member, medical director, or
				  actuary of the company, will receive directly or indirectly a commission on any
				  business written for this Applicant.
M. Applicant has a procedure for ascertaining
				  whether there will be any conflict of interest between the business of the
				  Company and the private interests of its officers and directors. This consists
				  of a confidential questionnaire answered under oath in writing by each such
				  officer and director. A copy of the form thereof marked Exhibit F is attached
				  hereto. Said questionnaire inquiries into all relevant financial business,
				  stock and property interests and corporate directorships which might be
				  affected within the scope of Insurance Code Section
				  1101 by any
				  and all business which the Company transacts or will transact.
VI
Applicant's leading policy form is attached hereto as
					 Exhibit G. It is a non-standard reducing term policy with a return-of-premium
					 clause and a rider providing double indemnity for accidental death of either
					 the policyholder or his beneficiary.
There is attached hereto, marked Exhibit H, an actuarial
					 computation made and signed by a Fellow of the Society of Actuaries computing
					 the reserves under Applicant's leading policy, Exhibit G, and demonstrating the
					 actuarial soundness of the rates attached thereto.
Other policies which Applicant expects to sell initially
					 are attached hereto, marked Exhibits I-1 and I-2. They are standard policies
					 with no novel provisions.
VII
There is attached hereto, marked Exhibit J, a financial
					 projection, based on reasonable and practicable assumptions as to volume of
					 business expected to be transacted year by year, showing separately (1) all
					 elements of income, (2) all elements of estimated expense, including reserves
					 and premium taxes, and (3) unassigned surplus at the end of each year. Such
					 projection assumes that 70 per cent of Applicant's business will be transacted
					 on its leading policy, Exhibit G, and 15 per cent each on policy forms I-1 and
					 I-2. There are separate exhibits attached hereto, marked Exhibits K and L,
					 showing respectively the revenue expected to be developed under policies I--1
					 and I-2. Based on the actuarial results of the three policies from the business
					 reasonably expected to be written, and adjusted for the volume to be written on
					 each policy, the projection marked Exhibit J shows, at the end of the eighth
					 year of production, that Applicant should make a small net gain from
					 operations, excluding capital gains and losses. There will be no dividends to
					 policyholders. Last said exhibit also shows that such net gain should increase
					 during the ninth and tenth years of operation. It also shows that Applicant's
					 net expenditure of surplus should not exceed $2,400,000 during its first eight
					 years of operation and that it will, therefore, based on these estimates, be in
					 a solvent condition at all times up to and including the end of its eighth year
					 of operation, retaining its paid-in capital unimpaired at all times and at all
					 times during the first five years of its operation having an unassigned surplus
					 of not less than $500,000 and not less than $250,000 at all times after its
					 first five years of operation. Such results are expected to be obtained without
					 the sale of additional stock at any time during the period covered by said
					 financial projection.
VIII
Attached hereto as Exhibit M are copies of the bids of
					 three reinsurers, together with their sample contracts and an actuarial
					 analysis of such bids. Applicant has tentatively elected to accept the
					 reinsurance arrangements offered by XYZ Reinsurance Company. Its contract, if
					 entered into, will embody the terms set forth in its sample contract included
					 in Exhibit M.
IX
Applicant expects to sell stock through the personal
					 solicitation of Applicant's President, Vice-President, and Agency Director, all
					 of whom have had prior experience in selling insurance securities, as may be
					 seen by reference to their biographies included in Exhibit C to this
					 application. No commission will be paid to those individuals for selling the
					 shares of Applicant's capital stock. Applicant's organizers, officers and
					 original directors have executed an agreement conforming to Section
					 2613.08 I.S.P.R. whereby they
					 agree to purchase 14,000 shares of applicant's capital stock for$700,000 cash,
					 lawful money of the United States, before any shares are offered to the public.
					 Said agreement, marked Exhibit N, is attached hereto and is by this reference
					 incorporated herein and made a part hereof. It is expected that the remainder
					 of Applicant's total stock offering of $4,000,000 will be purchased by members
					 of the general public.
X
Applicant proposes to sell 80,000 shares of its $10.00 par
					 value capital stock at a price of $50.00 per share. All expenses of
					 incorporation, organization, promotion and stock selling, including, but not
					 limited to governmental filing fees, legal fees, and actuarial fees from
					 incorporation up to and including the obtaining of a certificate of authority
					 from the Insurance Commissioner, if such certificate of authority is issued in
					 response to due application therefor, will not exceed 10 per cent of the total
					 amount paid for Applicant's capital stock. A detailed analysis of the expected
					 fees, costs and expenses is attached hereto as Exhibit O.
XI
As of the date of this application, Applicant has no assets
					 and no liabilities. A pro forma balance sheet showing Applicant's estimated
					 paid-in capital, liabilities, unassigned surplus and surplus to policyholders
					 as of the commencement of business is attached hereto as Exhibit P. Said
					 balance sheet is compiled on the basis of the following assumptions: that the
					 sale of Applicant's shares will be completed as planned; that Applicant will
					 apply for and receive a certificate of authority; and that Applicant's Board of
					 Directors will vote to pay, and the Treasurer will pay, all duly supported
					 expense vouchers presented by the organizers and promoters.
XII
An originally signed letter of acceptance by ABC Bank and
					 Trust Company of San Francisco agreeing to act as impound agent herein is
					 attached hereto, marked Exhibit Q-1. A copy of said bank's agreement with
					 applicant is marked Exhibit Q-2.
XIII
A draft of a prospectus which Applicant desires to use in
					 the sale of its stock is attached hereto, marked Exhibit R. Applicant herewith
					 submits the same for the Insurance Commissioner's authorization in the permit
					 applied for. A copy of the proposed stock subscription form is attached hereto,
					 marked Exhibit S. At the present time, Applicant does not plan to use any other
					 written description of the stock proposed to be sold or any other written
					 solicitation for the purchase thereof.
XIV
Attached hereto, marked Exhibits T-1 and T-2, are certified
					 true copies of the minutes of the organizational meeting of Applicant's Board
					 of Directors and of a special meeting of its Board authorizing the proposed
					 stock sale and this application, respectively.
XV
Applicant expects to complete the sale of stock
					 contemplated by this application in a period of six months from the date the
					 permit is issued. No stock will be sold except within the state of California,
					 and there will be no registration with the Securities and Exchange
					 Commission.
* * *
WHEREFORE, Applicant respectfully requests that the
					 Insurance Commissioner grant its application for a permit, extending six months
					 from the date of issue thereof, authorizing Applicant to sell 14,000 shares of
					 its capital stock to the persons described in Paragraph IX hereof, at $50 per
					 share cash, and to sell not to exceed 66,000 shares of its $10.00 par value
					 capital stock at a price of $50.00 per share, cash, lawful money of the United
					 States, to the general public in this state; and requests that the proposed
					 prospectus and the subscription form attached to this application be authorized
					 for use by Applicant.
Dated at __________, California, this __________ day of
					 __________, 19__________.
ABC LIFE INSURANCE COMPANY
(Seal)
By
___________________________
___________________________
Secretary
President
(Verification as in Section
							 2603.10, supra)