Texas Attorney General Opinion: C-630 Page: 2 of 6
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Hon. William M. King, page 2 (C-630)
Your second question relates to whether a life
insurance corporation may pay dividends out of its earned
surplus to policyholders.
The.'Texas Business Corporation Act, Article 2.01,
Sec. B(4)(d) and Article 9.14, Sec. A, excludes insurance
companies of every type and character that operate under
the insurance laws of this State, except to the extent that
the insurance laws of this State contain no provision in
regard to some of the matters provided in the Texas Business
Corporation Act.
Those portions of the Texas Insurance Code controlling
payment of dividends by insurance companies are as follows:
Article 3.11 provides:
"No life insurance company shall declare or
pay dividends to its policy holders, except from
the expense loading and profits made by such com-
pan; provided, however, any such company not
showing a profit may pay dividends on its participa-
ting policies from the expense loading on such
policies. . . .No such company shall declare or
pay any dividends to its stockholders, except
from the earned surplus of said company, as
defined in, and in the manner authorized or
provided by the Texas Business Corporation Act.
. . ." (Emphasis added.)
Article 3.01, Sec. 11, provides:
"The 'profits' of a company are that
portion of its funds not required for the
payment of losses and expenses, nor set
apart for any other purpose required by
law.
Article 21.31 provides:
"It shall not be lawful for any insurance
company organized under the laws of this State
to make any dividend, except from surplus profits
arising from its business, n estimating. such
profits, there shall be reserved therefrom the
lawful reserve on all unexpired risks and also
the amount of unpaid losses, whether adjusted or-3057-
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Texas. Attorney-General's Office. Texas Attorney General Opinion: C-630, text, March 3, 1966; (https://texashistory.unt.edu/ark:/67531/metapth269049/m1/2/: accessed April 26, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.