file the same in his office and issue to the company a certificate of authority, to which shall be attached a certified copy of the articles of incorporation, authorizing it to receive applications for insurance as provided in this Act and to collect premiums thereon, and to issue receipts therefor, which certificate shall expressly state that such company is not authorized to issue policies of insurance or transact any business other than that specifically authorized therein until it has received bona fide. applications for insurance on the lives of at least two hundred individuals for not less than $1000 each, which applications have been approved by a competent physician and on which the first annual premiums at adequate rates have been paid to the company, nor until these facts shall have been fully shown to the Commissioner of Insurance and Banking and he shall have issued to the company a certificate of authority to transact business as a co-operative life insurance company. If this showing is not made within six months after the date upon which such articles of incorporation are filed with the Commissioner of Insurance and Banking, it shall be his duty to cancel the certificate of authority of such company to receive applications for insurance and to notify each incorporator of such action. When the Commissioner of Insurance and Banking shall be notified that any such company has complied with all the foregoing provisions of this Section, he shall make, or cause to be made, at the expense of such company an examination thereof, and if he shall find that the law has been in all respects fully complied with, it shall be his duty to issue to it a certificate of authority to transact the business of a co-operative life insurance company, in accordance with the terms of this Act.

SEC. 2. The business of a co-operative life insurance company shall be controlled and directed by a board of directors consisting of not less than five nor more than nine members who shall be elected annually as provided in this Act, those to serve until the first annual election to be named in the charter, and who shall hold office until their successors `shall be elected and qualified or until they shall be removed for improper practices. Such board of directors shall elect the officers of the company which shall be a president, and such number of vice presidents. as the by-laws may provide, a secretary, a treasurer, a medical director, and such other officers as the by-laws of the company may provide for, and shall fix the compensation of all such officers. The duties of all officers shall be prescribed by the by-laws. The by-laws governing the society until the date of its first annual meeting, as provided by this Act, shall be adopted by the board of directors at their first meeting after the certificate of authority shall be issued authorizing the company to transact the business of a co-operative life insurance company. There shall be an annual meeting of all the policy holders of each co-operative life insurance company at the home office of such company on the second Tuesday in January after it shall have received a certificate of authority to transact the business of life insurance and annually thereafter at which the directors shall be elected for the succeeding year and at which by-laws for the government of the company not inconsistent with the provisions of this Act or with the laws of this State may be adopted, and at which the existing by-laws may be repealed or amended.

At such annual meeting every policy holder shall be entitled to one vote for each $500 of insurance held by him, and any policy holder may execute his proxy authorizing and entitling the holder to exercise his voting powers, unless such proxy shall be revoked previous to such annual meeting. The president, secretary and treasurer shall each give a bond for the protection of the company and its policy holders in amount and with securities to be approved by the Commissioner of Insurance and Banking, conditioned for the faithful performance of their respective duties.

SEC. 3. Co-operative life insurance companies shall invest their funds only in bonds of the State of Texas, or of some county, city, town, school district, or other subdivision, organized, or which may hereafter be organized, and authorized, or which may hereafter be authorized, to issue bonds under the Constitution and laws of this State, or in mortgages upon improved, unincumbered real estate, the title to which is valid, situate within the State of Texas, worth double the amount of the loan thereon exclusive of buildings, unless such buildings are insured in some fire insurance company authorized to transact business under the laws of this State, and the policy or policies transferred to the company, or in not more than one office building located in some city or town of this State in which the home office of such company is located, the actual value of which is not less than the amount invested therein. All moneys of any such company coming into the hands of any officer thereof or subject to his control, when not invested as prescribed in this Section, shall be deposited in the name of such company in some bank or banks in this State which are subject to either State or National regulation and supervision and which have been approved by the Commissioner of Insurance and Banking as depositories therefor. No co-operative life insurance company shall purchase or hold real estate except the building in which it has its home office and the land upon which it stands, or such as it shall acquire in good faith through foreclosure sale or otherwise in satisfaction of debts contracted or loans made in the course of its dealings. Any officer or director of any such company who shall knowingly and wilfully violate or assent to the violation of the provisions of this Section shall be deemed guilty of a felony, and upon conviction thereof shall be punished by imprisonment in the penitentiary for a term of not less than one nor more than five years.

SEC. 4. No co-operative life insurance company shall have the power to borrow money for any purpose other than the payment of death losses. No such company shall have the power to incur any debt on any account except under policies issued by it or for money borrowed to pay death losses, for which any portion of its assets over and above that which may represent or be derived from the expense loading of the premiums collected by it, shall in any event be subject to execution upon a judgment therefor.

SEC. 5. The Commissioner of Insurance and Banking shall annually make valuations of all outstanding policies of co-operative life insurance companies as of December 31st of each year in accordance with the one year preliminary term method based upon the American Experience Table of Mortality and 3 per cent interest per annum.

The net premiums upon all policies issued by any such company shall be computed in accordance with the provisions of this Section and no portion of such net premium collected upon any policy, and no portion of the gross premium collected upon any policy except the expense loading shall ever be used or applied for the payment of any expenses of the company of any kind or character, or for any other purpose than the payment of death losses, surrender values, or lawful dividends to policy holders, loans to policy holders, or for the purposes of such investments of the company as are prescribed in this Act. Any officer, director or employee of any co-operative life insurance company who shall knowingly and wilfully violate the provisions of this Section shall be deemed guilty of a felony, and upon conviction shall be punished by imprisonment in the penitentiary for a term of not less than one nor more than five years.

SEC. 6. Every co-operative life insurance company may maintain and set aside before declaring any dividends to policy holders, in addition to an amount equal to the net value of its policies, computed as required by this Act, a contingency reserve not exceeding the following respective percentage of said net values, to-wit: When said net values are less than one hundred thousand dollars, twenty per centum thereof, or the sum of ten thousand dollars, whichever is the greater; when said net values are greater than one hundred thousand dollars, the percentage thereof measuring the contingency reserve shall decrease one-half of one per cent for each one hundred thousand dollars of said net values up to one million dollars; and thereafter one-half of one per centum for each additional one million dollars; provided, that as the net values of said policies increase and the maximum percentage measuring the contingency reserve decreases such company may maintain the contingency reserve already accumulated hereunder, although for the time being it may exceed the maximum percentage herein prescribed, but may not add to the contingency reserve when the addition will bring it beyond the maximum percentage.

SEC. 7. Every co-operative life insurance company organized under this Act shall make an annual apportionment and accounting of divisible surplus to each policy holder after the end of the second policy year on all policies issued; and each such policy holder shall be entitled to and credited with or paid, in a manner hereafter provided, such a portion of the entire divisible surplus as has been contributed thereto by his policy. Upon the 31st day of December of each year, or as soon thereafter as may be practicable, every such company shall well and truly ascertain the surplus earned by it during such year and after setting aside from such surplus the contingency reserve provided in this Act, it shall apportion to its policies upon which all premiums due and payable for the first two years thereof have been paid the proportion of the remainder of such surplus which has been contributed by each such policy, and shall immediately submit a detailed report of such apportionment under the oath of its president or secretary, to the Commissioner of Insurance and Banking. If such commissioner shall find such apportionment to be equitable and just to the policy holders and to be in accordance with the provisions of this Act he shall approve the same, and it

shall become effective, and if he shall not approve such apportionment he shall make such changes therein as he shall deem equitable and just and necessary to make the same comply with the provisions of this Act, and shall certify such changes to such company, whereupon such apportionment as changed by the commissioner shall become effective. The dividend's declared as aforesaid shall be applied toward the payment of any premium or premiums upon such policy which shall come due more than thirty days after such apportionment shall become effective.

SEC. 8. Co-operative life insurance companies are authorized to transact business only within the State of Texas and shall issue no policies other than whole life or twenty-payment life policies on the annual dividend plan, and the forms of all policies issued by any such company shall be prescribed by the Commissioner of Insurance and Banking, and all such policies shall have plainly printed both on the face and the reverse side thereof the words, "The form of this policy is prescribed by the Commissioner of Insurance and Banking of the State of Texas," and it shall be the duty of the commissioner to revoke the certificate of authority of any company which shall issue any policy except upon such form so prescribed. All such policies may provide for not more than one year preliminary term insurance. No such company shall issue any policy or policies by which it shall be bound for more than five thousand dollars upon any one life at any time when the amount of its total insurance in force is less than ten million dollars.

SEC. 9. No co-operative life insurance company shall enter into any contract of insurance upon the life of any person without having previously made, or caused to be made, a detailed medical examination, prescribed by its medical director and approved by its board of directors, of the insured by a duly qualified and licensed medical practitioner, and without his certificate that the insured was in sound health at the date of examination. Any officer or agent or employee of such company violating the provisions of this Section or effecting or attempting to effect a contract of insurance contrary to the provisions hereof shall be deemed guilty of a misdemeanor, and shall be punished by a fine of not less than one hundred nor more than five hundred dollars or by imprisonment in the county jail for not less than six months or by both such fine and imprisonment.

SEC. 10. The policies issued by a co-operative life insurance company may provide that the premiums thereon may be paid annually, semiannually, quarterly or monthly; and in the event that such premiums are payable other than annually no deduction shall be made from the amounts due on any policy in the event that the death of the policy holder shall occur prior to the completion of a full policy year. It shall be the duty of the company to mail from its home office to each policy holder a notice of the date upon which each premium is to become due at least thirty days prior to such date if the premium is payable annually, semi-annually, or quarterly, and at least ten days prior to such date if the same is payable monthly; provided, that local agents may be authorized and empowered by the board of directors to collect premiums and to give the notice required by this Section.

SEC. 11. After three full years premiums have been paid upon any

policy in a co-operative life insurance company, the owner thereof shall be entitled on proper assignment of such policy and on the sole security thereof to borrow from the company a sum not greater than the reserve value thereof, and apply the same in payment of any premiums due or to become due upon such policy. In the event of default in the payment of any premium after three full years premiums have been paid upon any policy, the owner within one month after any default may elect to accept the value of such policy in cash, or to have the insurance continued in force from the date of default, without future participation and without the right to loans, for its face amount less any indebtedness to the company thereon, or to purchase non-participating paid-up insurance. payable at the same time and on the same conditions as such policy. The cash value will be the reserve at the date of default computed in accordance with the provisions of this Act less such surrender charge as may be provided in the policy, not exceeding 2 per centum of the amount insured thereby and less any existing indebtedness to the company on such policy. Payment of such cash value may be deferred by the company for not exceeding six months after the application therefor is made. The terms for which the insurance will be continued, or the amount of the paid-up policy, will be such as the cash value will purchase as a net single premium at the attained age of the insured according to the American Experience Mortality Table and interest at the rate of 34 per cent per annum. If the owner shall not within one month from such default surrender the policy to the company at its home office for a cash surrender value or paid-up insurance, the company shall continue the insurance as above provided.

SEC. 12. The original certificate of authority to transact the business of a co-operative life insurance company issued to any such company by the Commissioner of Insurance and Banking shall expire on March 1st next succeeding the date of its issuance. Each such company is required to render annually under oath by its president or a vicepresident and its secretary or treasurer, and file not later than February 15th of each year in the office of the Commissioner of Insurance and Banking a statement, in such form and upon such blanks as may be prescribed by the Commissioner of Insurance and Banking, accompanied by a filing fee of ten dollars, showing the condition of the company on the 31st day of December next preceding, which shall include a statement in detail showing the class and character of its assets and liabilities on said date, the amount and character of business transacted, moneys received and disbursed during the preceding calendar year and the number and amount of its policies in force on said date, and such other facts as may be required by the Commissioner of Insurance and Banking. When such annual statement is filed with the Commissioner of Insurance and Banking, upon receipt of a fee of $1.00 (one dollar), if he is satisfied that the company has in all respects complied with the laws of the State, he shall issue a certificate of authority to such company for the year beginning March 1st after the filing of such statement.

SEC. 13. No agent or other person shall solicit or receive applications for insurance in a co-operative life insurance company without a certificate of authority from the Commissioner of Insurance and Bank