California Code, Insurance Code - INS § 11537

(a) A fair and reasonable formula, approved by the commissioner, for determining the equity of each eligible member in the insurer.  The equity shall be based upon an appraisal of the fair value of the insurer by one or more qualified disinterested persons appointed by the insurer with the approval of the commissioner.  Those persons shall consider the assets and liabilities of the insurer and any factors bearing on the value of the mutual insurer.

(b) Each eligible member of the mutual insurer shall be given a preemptive right to acquire his or her proportionate part of all of the proposed capital stock of the insurer, within a designated reasonable period, by applying upon the purchase of such part the amount of his or her equity as determined under the formula described in subdivision (a).

(c) The members entitled to participate in the purchase of stock or distribution of assets shall be limited to all current policyholder members whose policies have been of record for not less than one year prior to the date the board of directors adopted the plan of conversion.

(d) Each member not applying his or her equity upon the purchase price of stock shall elect to receive either a cash payment or a certificate of contribution.  The cash payment shall not be greater than 50 percent of his or her equity as determined by the formula in subdivision (a).  The certificate of contribution shall be in an amount equal to 100 percent of his or her equity, as determined by the formula in subdivision (a), shall bear interest at the rate established in Section 10489.4 for minimum standard valuation of all life insurance policies of more than 20 years' duration issued in the year, and shall be repayable within 10 years or, if necessary under the terms of the plan, later, only on written approval of the commissioner and only out of surplus in excess of an amount established in the plan.  Any member not electing to receive cash or purchase stock shall be deemed to have elected to receive a certificate of contribution.  The stock purchased, cash payment, or certificate of contribution shall constitute full payment and discharge of the member's equity or property interest in the mutual insurer, and, notwithstanding any other provision of law, the member shall have no other rights with respect thereto.

(e) The number of shares to be authorized for the new stock insurer, their par value, and the method for determining the price at which the shares will be offered to eligible members, to the end that the plan, when completed, would provide for the converted insurer paid-in capital and surplus in an amount not less than the minimum paid-in capital and surplus required of a domestic stock insurer upon initial authorization to transact like kinds of insurance.

(f) Provision for the offering to others of shares not purchased by eligible members within the designated period referred to in subdivision (b) at a price not less than the offering price to members.