MARVIN MANDEL, Governor                          613

to shareholder affiliates shall be reasonable in relation to the in-
surer's outstanding liabilities and adequate to its financial needs.

(b) Any such material transaction which, after notice and an
opportunity to be heard, is found to be not in conformity with sub-
section (a) shall constitute a violation of this subtitle, and in addi-
tion to the penalties contained in Section 500, may be set aside and
rescinded at the initiative of the Commissioner or otherwise under
applicable law.

(e) (B) For purposes of this subtitle, in determining whether an
insurer's assets and surplus as regards policyholders are reasonable
in relation to the insurer's outstanding liabilities and adequate to
its financial needs, the following factors, among others, shall be con-
sidered:

(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 busi-
ness;

(4) the extent of the geographical dispersion of the insurer's
insured risks;

(5)    the nature and extent of reinsurance of the insurer's risks;

(6)    the quality, diversification, and liquidity of the insurer's in-
vestment portfolio;

(7)    the recent past and projected future trends in the size of
the insurer's surplus as regards policyholders;

(8)    the surplus as regards policyholders maintained by other,
comparable insurers? and;

(9)    the financial position of the insurer when IN THE LIGHT OF
investments in and other transactions with affiliated persons are
excluded from assets.

Every insurance company shall give the Department not less than
thirty days advanced notice of the proposed declaration by its direc-
tors of any extraordinary dividend or distribution to stockholders

which together with those made within the preceding 12 months

exceed in value the lesser of 10% of the insurer's surplus as regards
policyholders as of the 31st day of December next preceding, or

100% of the net income for the 12 month period ending the 31st

day of December next preceding. Such notice period shall com-

mence to run from the date of receipt of such notice by the Depart-

ment. Any such dividend declared within the thirty day notice pe-
riod, or declared without first giving such notice to the Department,
shall be invalid and shall confer no rights or benef