Chap. 311.—An ACT to amend and re-enact an act entitled ‘‘An act to regulate in-
vestments of domestic life insurance companies.’’, approved March 26, 1932,
as heretofore amended. [S B 268]

Approved March 28, 1940

1. Beit enacted by the General Assembly of Virginia, That an
act entitled “‘an act to regulate investments of domestic life insurance
companies.’’, approved March twenty-sixth, nineteen hundred and
thirty-two, as heretofore amended, be amended and re-enacted so as
to read as follows:

Section 1. No domestic stock life insurance company shall invest
its funds or assets, exclusive of its capital in excess of one hundred
thousand dollars and its surplus in excess of fifty thousand dollars,
nor shall any domestic mutual life insurance company invest its funds
Or assets except

(a) In bonds, or other evidences of indebtedness, not in default
as to principal or interest, which are valid and legally authorized
obligations issued, assumed or guaranteed by the United States of
America or by any state thereof or by any territory or possession of
the United States or by the District of Columbia or by any county,
city, town, village, municipality or district therein or by any political
subdivision thereof or by any civil division or public instrumentality
of one or more of the foregoing, if, by statutory or other legal require-
ments applicable thereto, such obligations of such civil division or
public instrumentality are payable, as to both principal and interest,
from taxes levied or by such law required to be levied upon all taxable
property or all taxable income within the jurisdiction of such govern-
mental unit or from adequate special revenues pledged or otherwise
appropriated or by such law required to be provided for the purpose
of such payment, but not including any obligations payable solely
out of special assessments on properties benefited by local improve-
ments; :

(b) In bonds of the Dominion of Canada or of any province
thereof or of any municipality thereof having a population of at least
one hundred thousand, or bonds fully guaranteed as to payment of
principal and interest by the Dominion of Canada, provided said
bonds are payable both as to principal and interest in lawful money
of the United States of America, and provided that the total invest-
ments under this sub-section (b) shall not exceed ten per centum of
the investing company’s assets;
(c) In interest bearing bonds of any solvent institution which is
incorporated under the laws of the United States, or of any state
thereof, or the Dominion of Canada or any province thereof, where
such bonds are secured by adequate security or collateral at least
two-thirds in value of which security or collateral shall be other than
common stock, and where such corporation has not during any time
within five years next preceding such investment defaulted in the
payment of interest on such bonds, and where for the five fiscal years
preceding said investment the average net annual income of such
corporation, before interest charges but after taxes, including income
taxes, and after deducting proper charges for replacements, deprecia-
tion and obsolescence, has been at least one and one-half times the
average annual interest for the same period on such issue of bonds,
on prior obligations and on obligations of equal rank, or where in the
case of issuance of new bonds such average net annual income for
the five years preceding such investment has been at least one and
one-half times the pro forma annual interest on the new bonds, on
prior obligations and on bonds of equal rank, and where the total
investment in any one issue of bonds under this sub-section (c) does
not exceed two per centum of the investing company’s assets, and
where such bonds, if issued by a Canadian corporation, are payable
both as to principal and interest in lawful money of the United States,
and where the total investments under this sub-section (c) in bonds
of Canadian corporations do not exceed ten per centum of the in-
vesting company’s assets;

(d) In adequately secured equipment trust certificates or other
adequately secured instruments evidencing an interest in railroad
transportation equipment, wholly or in part within the United States,
and a right to receive determined portions of rental, purchase or other
fixed obligatory payments for the use or purchase of such transporta-
tion equipment;

(e) In the bonds, debentures or notes of any solvent institution
incorporated under the laws of the United States, or of any State
thereof (though such bonds, debentures or notes be not secured, as
provided by sub-section (c) of this section) where such institution,
after taxes, including income taxes, and after deducting proper
charges for replacements, depreciation and obsolescence, has not
failed in any one of the three fiscal years next preceding such invest-
ment, to have earned a sum applicable to interest on its outstanding
indebtedness equal at least to twice the amount of interest due for
that year, or where in the case of new issues such earnings applicable
to interest are equal to at least twice the amount of pro forma annual
interest on such institution’s obligations after giving effect to such
new financing, and where the total investment in any one issue of
bonds, debentures or notes under sub-section (c) of this section does
not exceed two per centum of the investing company’s assets;

(f) Preferred stock of any solvent institution incorporated under
the laws of the United States, or of any State thereof, where such
institution has not failed in any one of the three fiscal years next
preceding such investment, to have earned a sum applicable to
dividends on such preferred stock equal at least to three times the
amount of dividends due in that year, or where in case of issuance of
new preferred stock such earnings applicable to dividends are equal
at least to three times the amount of pro forma annual dividend re-
quirements after giving effect to such new financing, and where the
bonds, debentures or notes, if any, of such institution, qualify as a
lawful investment under the provisions of sub-section (e) of this
section, and where the total investment in any one issue of such
preferred stock does not exceed one per centum of the investing
company’s assets;

(¢) In stocks guaranteed by any solvent institution incorporated
under the laws of the United States, or any State thereof where the
guaranteeing corporation has not failed in any one of the three fiscal
years next preceding such investment to have earned a sum applicable
to interest on outstanding indebtedness and dividends on all guar-
anteed stocks equal to at least twice the amount of interest and
guaranteed dividends due for that year, and where the total invest-
ment in any one issue of such guaranteed stock does not exceed one
per centum of the investing company’s assets;

(h) In loans secured by mortgages (including security deeds,
vendors’ liens and deeds of trust) in fee on improved unencumbered
real estate in the District of Columbia or in any State of the United
States where the amount of any such loan does not exceed sixty-six
and two-thirds per centum of the fair market value of the real estate
securing same as determined by at least two competent and impartial
appraisers; or in mortgage loans guaranteed or insured by the Federal
Housing Administrator under the terms of an Act of Congress of
the United States of June twenty-seventh, nineteen hundred and
thirty-four, entitled the ‘National Housing Act’’ as heretofore or
hereafter amended;

(i) In loans secured by mortgages (including security deeds,
vendor’s liens and deeds of trust) upon leaseholds for a term of ninety-
nine years or longer on improved unencumbered real estate in the
District of Columbia or in any State of the United States where the
amount loaned on such leasehold does not exceed fifty per centum of
the fair market value of the leasehold estate, as determined by at
least two competent and impartial appraisers, and only where at least
fifty years of the term is unexpired;

(j) In loans to any policyholder upon the security of the value
of his policy, the amount of which loan does not exceed the lawful
reserve which is held thereon:

(k) In securities in conformity to the laws of a foreign country
(including possessions of the United States) in which it may be doing
business, such foreign securities to be substantially of the same kinds,
classes and investment grades as such company is allowed by law to
acquire in the United States, and not to exceed in amount the in-
vesting company’s obligations in such foreign country;

(1) In loans upon the pledge of any of the aforesaid securities in
an amount which does not exceed eighty per centum of the market
value thereof;
(m) In real estate used or held for home office purposes, o:
requisite for convenient accommodation in the transaction of it.
business, or acquired in satisfaction of debts previously owing to the
investing company in the transaction of its business, or acquired a
sales on judgments or decrees obtained for such debts, or upon fore
closure of mortgage loans owned by it, or acquired where necessary}
or convenient for the purpose of enhancing the sale value of real prop:
erty theretofore owned by it, or acquired in part payment of the
consideration on the sale of other real property owned by it if suck
transaction shall effect a net reduction in the amount in dollars o:
the company’s investment in real property.

Section 2. All real estate acquired for home office purposes 01
requisite for convenient accommodation in the transaction of the
company’s business shall be sold and disposed of within ten years
after the same shall have ceased to be necessary for the present o1
future accommodation of its business, and all other real estate ac-
quired under the provisions of sub-section (m) of section one hereof
shall be sold and disposed of within ten years after the company shall
have acquired title to the same, and it shall not hold such property
for a longer period unless it shall procure a certificate from the State
Corporation Commission that its interest will suffer materially by
the forced sale thereof; in which event the time for sale may be ex-
tended for such period or periods as the commission may from time
to time direct in such certificate. As to real estate purchased prior
to July first, nineteen hundred and thirty-four, the periods herein
provided shall not commence to run until that date. N othing in this
act shall be deemed to prohibit a domestic life insurance company
from acquiring or holding legal title to real property as security for
loans made in good faith.

Section 3. Any domestic life insurance company which shall own
on July first, nineteen hundred and thirty-two, any stocks, bonds,
notes or other evidences of indebtedness, or loans upon the security
thereof, which are not included in section one hereof, shall dispose of
such stocks, bonds, notes or other evidences of indebtedness or loans
within five years from such date, unless it shall procure a certificate
from the State Corporation Commission that its interest will suffer
materially by a forced sale; in which event the time for the sale may
be extended to such time as the State Corporation Commission shall
direct in such certificate, but in no event to exceed an additional
period of ten years; but nothing herein contained shall be deemed to
prevent any such company from protecting its interests where cir-
cumstances render it necessary to accept reorganization securities,
where the plan of reorganization and the securities are approved in
writing by the commission. Any securities so accepted and which
re not of the classes authorized by this act shall be disposed of as
oon as practicable. In no case are they to be held for a period ex-
eeding five years. Subject to the provisions of section two, nothing
n this act shall be construed as affecting the legality or requiring the
ale of an investment made after the effective date of this act if in
iccordance with this act at the time, of the makine of such invest.
nent. Nothing in this act shall be deemed to prohibit a company
rom renewing or extending a real estate loan for the original or a
esser amount where a shrinkage in value of the property securing
he same would cause the indebtedness to exceed sixty-six and two-
hirds per centum of the value thereof, nor to prohibit a company
rom accepting as part payment for real estate sold by it a mortgage
xc lien thereon for more than sixty-six and two-thirds per centum of
he sale price of such real estate.

Section 4. No domestic life insurance company shall invest in
securities subjecting it to assessment, other than for taxes.

Section 5. In the construction and application of this act, ease-
ments, rights of way, joint driveways, party wall agreements, current
-axes and assessments not delinquent, restrictions as to building, use
and occupancy if there is not a right of re-entry or forfeiture for
violation and instruments reserving mineral, oil or timber rights shall
not be deemed to be prior liens or encumbrances, nor shall leases
under which rents are reserved to the owner of the real estate be
deemed prior liens or encumbrances.

Section 6. Nothing in sections one, two and three of this act
shall be construed to prevent a domestic stock life insurance company
from investing or keeping invested in such manner as its board of
directors may determine its capital in excess of one hundred thousand
dollars and its surplus in excess of fifty thousand dollars. Such
excess capital and excess surplus of such company may be invested
in such property, real or personal, as the board of directors, in its
discretion, may deem best for the interests of the company.