| (11) Past performance. For purposes of this paragraph,
the annual growth under an annuity equals the growth rate credited
by the insurance company to the death benefit for the year. The applicant
must submit separate historical yield tables or graphs reflecting
the annual rate of growth in the death benefit, expressed as a percentage
for each year of the most recent five-year period, under:
(A) previously issued annuities similar to the form
of annuity proposed to be issued by the insurance company in the proposed
conversion, to the extent such annuities were in existence in those
periods; and
(B) annuities sold by the insurance company in this
state during the most recent five-year period for the purpose of funding
new prepaid funeral contracts.
(12) Form of assignment. The applicant must submit
a copy of the form of assignment, if any, to be used in assigning
annuity rights or proceeds to the post-conversion permit holder.
(13) Qualifications of post-conversion permit holder.
With respect to the post-conversion permit holder, the applicant must
submit:
(A) if the proposed post-conversion permit holder is
not also the insurance company, a copy of the post-conversion permit
holder's most recent annual financial statements and the most current
year-to-date financial statements;
(B) a list of all previous conversions in this state
accepted by the post-conversion permit holder and, with respect to
each conversion, the date of the order approving the conversion and
the date that the converted prepaid contracts were formally transferred
to the post-conversion permit holder;
(C) a summary of the number and aggregate purchase
price of all prepaid contracts administered by the post-conversion
permit holder as of the end of the immediately preceding calendar
year;
(D) a description of how the prepaid contracts to be
converted will be administered by the post-conversion permit holder,
including a description of activities or functions, other than delivery
of funeral services and merchandise by the designated funeral provider,
that will be outsourced and the contractor that will perform such
activities or functions; and
(E) if any contractor named in response to subparagraph
(D) of this paragraph directly or indirectly controls, is controlled
by, or is under common control with the post-conversion permit holder,
a summary of the contracting relationship for each of the preceding
three fiscal years that includes a description of the services performed
and the compensation paid by the post-conversion permit holder.
(14) Qualifications of insurance company. With respect
to the insurance company, the applicant must submit:
(A) a letter from the insurance company addressed to
the department, dated not more than 60 days prior to the date the
application is filed, representing that the insurance company is in
good standing and currently authorized to conduct the business of
insurance in this state;
(B) to the extent available, a list of the current
financial strength ratings of the insurance company determined by
A.M. Best Company, Standard & Poor's, Wiess Research, Duff &
Phelps, and Moody's Investors Service; and
(C) a list of all previous conversions in this state
that were funded by the insurance company and, with respect to each
conversion, the date of the order approving the conversion and the
date that trust funds were formally transferred to the insurance company.
(15) Notice to purchasers. The applicant must submit
the proposed form of public notice required by subsection (e)(2) of
this section and each proposed letter regarding the proposed conversion
to be sent to purchasers from the applicant, the post-conversion permit
holder, or the insurance company, for approval by the department.
The proposed form of notification letter from the applicant must:
(A) briefly and fairly disclose the terms of the proposed
conversion in a manner that is not misleading and that enables the
purchaser to understand the terms of the proposed conversion and the
impact on the purchaser and the purchaser's contract;
(B) conspicuously disclose, by means of bolded type
within a bordered text box or another method acceptable to the department,
the purchaser's right under Finance Code, §154.204(b), to decline
the conversion and remain in the existing trust-funded funeral benefit
arrangement by filing a written request with the department within
60 days;
(C) inform the purchaser that a copy of the specifications
page of the funding annuity is available upon request, if such notice
is not contemporaneously provided by the insurance company in a separate
letter;
(D) advise the purchaser that questions or complaints
regarding the prepaid contract or the proposed conversion may be directed
to the Texas Department of Banking, 2601 North Lamar Boulevard, Austin,
Texas 78705; 1-877-276-5554 (toll free);
(E) disclose that the prepaid funeral guaranty fund
will no longer guarantee performance of the prepaid contract after
conversion, that a successor funeral provider may not agree to provide
the previously selected funeral services and merchandise for the same
price specified in the prepaid contract with the original funeral
provider, and at the option of the applicant, disclose as an aid for
comparison that payment of the funding annuity, but not performance
of the contract itself, will be guaranteed by the Texas Life, Accident,
Health, and Hospital Service Insurance Guaranty Association after
conversion (provided that, if approved by the department, such disclosure
will not be deemed a violation of Insurance Code, §463.451);
(F) not contain promotional statements or claims that
express subjective rather than objective views of the merits or benefits
of conversion;
(G) if the prepaid contract allows the contract beneficiary
to be changed and the annuity contract does not allow the annuitant
to be changed, disclose that the prepaid contract beneficiary may
no longer be changed after the funding annuity is issued; and
(H) explain any change in federal income taxation related
to cancellation and maturity resulting from the conversion that is
anticipated to affect the purchaser.
(16) Pre-conversion summary. The applicant must submit
a pre-conversion summary pertaining to each prepaid contract to be
converted, determined as of a date no earlier than 30 days prior to
the date the application is filed, with totals for all prepaid contracts
to be converted, if applicable, addressing each of the following categories:
(A) name and, if available, date of birth of the purchaser;
(B) date of contract;
(C) contract purchase price;
(D) paid-in principal;
(E) unpaid principal balance, if any;
(F) accumulated earnings;
(G) cancellation benefit due to the purchaser, assuming
cancellation were to occur on the calculation date;
(H) amount eligible to be withdrawn from the trust
fund by the applicant upon death of the contract beneficiary, assuming
death were to occur on the calculation date;
(I) amount retained by the applicant under Finance
Code, §154.252; and
(J) the guaranteed minimum interest rate to be applied
to the death benefit calculated as if the date of the application
were the date of the commissioner's order of approval.
(17) Pro forma post-conversion summary. The applicant
must submit a pro forma post-conversion summary pertaining to each
prepaid contract as if converted, determined as of the same date as
the pre-conversion summary, with totals for all prepaid contracts,
if applicable, addressing each of the following categories:
(A) name of annuitant;
(B) contract purchase price;
(C) paid-in principal;
(D) unpaid principal balance, if any;
(E) the amount of transferred trust funds applied to
the premium for the annuity;
(F) amount retained by the applicant under Finance
Code, §154.252;
(G) cash surrender value of each annuity, assuming
the annuity were to be surrendered on the calculation date;
(H) death benefit under each annuity, assuming death
were to occur on the calculation date; and
(I) the guaranteed minimum interest rate to be applied
to the death benefit, including the actual calculation as determined
under paragraph (9)(A) of this subsection.
(18) Voluntary cancellation of permit. If the applicant
will not sell trust-funded prepaid contracts or administer previously
sold trust-funded prepaid contracts after the conversion, the applicant
must submit a completed form to voluntarily cancel its trust-funded
permit. The applicant's voluntary cancellation will not be processed
unless the conversion is approved, and will not be effective until
the department completes the close-out examination of the applicant.
Cont'd... |
