40-2b07. Common stocks; call options.
40-2b07
40-2b07. Common stocks; call options.Any life insurance company organized under any lawof this state may invest by loans or otherwise, with the direction or approvalof a majority of its board of directors or authorized committee thereof,any of its funds, or any part thereof in the common stock of any corporationorganized and doing business under the laws of the United States or anystate, or of the District of Columbia, or of the Dominion of Canada orany province of the Dominion of Canada, in an amount, based upon cost, notexceeding 15% of its admitted assets or not exceeding the combined capitaland surplus, whichever is the lesser, as shown by the company's last annualreport as filed with the state commissioner of insurance or a more recentquarterly financial statement as filed with the commissioner, on a formprescribed by the national association of insurance commissioners, within45 days following the end of the calendar quarter to which the interimstatement pertains. Such life insurance company may write exchange traded, covered calloptions on shares it owns and may purchase call options forthe sole purpose of closing out a position taken previously with respectto one or more options having been written. The purchase of a call optionfor any reason other than as a closing transaction and the writing of naked(uncovered) call options are hereby prohibited. Investments in common stocksand the writing of call options shall be further limited as follows:
(a) The obligations, if any, shown on the lastpublishedannual statement of such corporation must be eligible for investment underK.S.A. 40-2b05, and amendments thereto;
(b) cash dividends have been paid during each of the last threeyears preceding the date of acquisition;
(c) the stock is registered with a national securities exchangeregulatedunder the securities exchange act of 1934, as amended, or is regularly tradedon a national or regional basis;
(d) the company shall have earnings in three of the last five yearsprecedingthe date of acquisition;
(e) at no time shall an insurance company invest in more than 5%of thetotal number of the outstanding shares of any one suchcorporation, nor an amount more than 2% of the investing insurance company'sadmitted assets in shares of any one such corporation, determined on thebasis of the cost of such shares to the insurance company at time of purchase;
(f) stock owned by an insurance company that is obligated underan unexpiredwritten call option shall be valued at the lesser of the striking priceor current market value. For the purposes of this subsection, "strikingprice" means the price per share, exclusive of selling costs, the companywould receive should the call option be exercised by the holder;
(g) the provisions of subsections (b) and (d) shall not apply if at thetime of acquisition:
(1) The issuing corporation has net assets of $10,000,000 or more;
(2) the issuing corporation has a net worth of $1,000,000 or more; and
(3) the issuing corporation has an aggregate market value of $500,000,000 ormore.
History: L. 1972, ch. 179, § 7; L. 1978, ch. 172, § 2; L. 1983,ch. 156, § 7;L. 1987, ch. 160, § 10;L. 1995, ch. 22, § 2; July 1.