Chap. 91.—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, so as, among other things, to permit additional investments,
to specify certain powers of domestic life insurance companies, and to provide
for the issuance in certain cases of authorizations to foreign life insurance
companies. [H B 16]

Approved March 2, 1942

I. Be it enacted by the General Assembly of Virginia, That an
act entitled “An act to regulate investments of domestic life insurance
companies.”, approved March twenty-six, nineteen hundred and thirty-
two, as heretofore amended, be amended and re-enacted, 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 thous-
and 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, munici-
pality 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 requirements applicable thereto, such obli-
gations 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 juris-
diction of such governmental unit or from adequate special revenues
pledged or otherwise appropriated or by such law required to be pro-
vided for the purpose of such payment, but not including any obligations
payable solely out of special assessments on properties benefited by local
improvements ;

(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 hun-
dred 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 investments 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 aiter deducting proper
charges for replacements, depreciation 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 investing
company’s assets ; ,

(d) In adequately secured equipment trust certificates or other
adequately secured instruments evidencing an interest in railroad trans-
portation 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 transportation equip-
ment 5
(e) In the bonds, debentures or notes of any solvent institution
incorporated under the laws of the United States, or of any state thereot
(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 replace-
ments, depreciation and obsolescence, has not failed in any one of the
three fiscal years next preceding such investment, to have earned a sum
applicable to interest on its outstanding indebtedness equal at least t
twice the amount of interest due for that year, or where in the case o
new issues such earnings applicable to interest are equal to at least twice
the amount of pro forma annual interest on such institution’s obligation:
after giving effect to such new financing, and where the total investmen
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’:
assets ;

(f) In bonds secured by first mortgage upon terminal, depot ot
tunnel property, including lands, buildings and appurtenances, used ir
the service of transportation by one or more railroad corporations the
bonds, debentures or notes of which are eligible as investments under
either sub-section (c) or sub-section (e) of this section, provided that
such bonds be the direct obligation of, or that payment of principal and
interest thereof be guaranteed by endorsement by, or guaranteed by en-
dorsement which guaranty has been assumed by, one or more railroad
corporations whose bonds, debentures or notes are eligible as investments
under either sub-section (c) or sub-section (e) of this section; when the
guarantee or assumption of guarantee is by two or more railroad cor-
porations it shall be joint and several as to each; !

(g) In 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 pre-
ceding such investment, to have earned a sum applicable to dividends
on such preferred stock equal at least to three times the amount of divj-
dends 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 requirements after giving
effect to such new financing, and where the bonds, debentures or notes,
if any, of such institution, are eligible as investments under the pro-
visions 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; ae :

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

(1) 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 Housine Ad,
cH. 91] — ACTS OF ASSEMBLY 111

ministrator 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 ;

(j) In loans secured by mortgages (including security deeds, ven-
dors’ 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 ;

(k) 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 ; , |

(1) 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 ac-
quire in the United States, and not to exceed in amount the investing
company’s obligations in such foreign country; —

-(m)_ 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 ;

(n) In real estate used or held for home office purposes, or re-
quisite for convenient accommodation in the transaction of its business,
or acquired in satisfaction of debts previously owing to the investing com-
pany in the transaction of its business, or acquired at sales on judgments
or decrees obtained for such debts, or upon foreclosure of mortgage loans
owned by it, or acquired where necessary or convenient for the purpose of
enhancing the sale value of real property theretofore owned by it, or
acquired in part payment of the consideration of the sale of other real
property owned by it if such transaction shall effect a net reduction in the
amount in dollars of the company’s investment in real property ;

(o) In real estate acquired by the company on or before December
thirty-first, nineteen hundred and forty-four, for the purpose of im-
proving the same to provide decent, safe and sanitary dwelling accommo-
dations for persons of low and moderate income, which will tend to re-
lieve the emergency in the housing situations in large cities and their
environs, such real estate to be located in a state (including in the term
“state” the District of Columbia) in which the company is doing the
business of life insurance, and in or within ten miles of a city (including
in the term “city” the District of Columbia) in the United States having
a population according to the last preceding United States census of one
hundred thousand or more; and in the erection on such real estate of
apartment, tenement and other dwelling houses, not including hotels,
comprising buildings sufficient for the accommodation of not less than
two hundred and not more than twenty-five hundred families, and in
conjunction therewith in the erection of buildings for the accommodation
of retail stores, shops, offices and other community services reasonably
incident to said apartment, tenement and other dwelling houses. The
total investments of any company under this sub-section (0) shall not
exceed ten per centum of its assets. No investment shall be made by any
company pursuant to this sub-section (0) which will cause such com-
pany’s investment in all real property owned by it to exceed fifteen per
centum of its assets or when all real property owned by such company
equals or exceeds fifteen per centum of its assets. Except as hereinafter
provided, no such company may invest in real estate for any such housing
project, or begin the erection of houses or other improvements for any
such housing project, before and until the company has applied for and
secured from the State Corporation Commission an authorization there-
for. The application shall contain the name of the city in or adjacent to
which the real estate lies, a description of the proposed improvement
thereof, a statement or estimate of the cost of such real estate and im-
provements, and such other information with reference to the proposed
investment and the investing company as the commission may require.
Such authorization may be granted if the Commission shall find that the
investment is in accordance with the provisions of this sub-section (o) and
will not endanger the ability of the company to meet its obligations, and
that in any one city or county the maximum number of apartment, tene-
ment and other dwelling houses to be provided pursuant to such authoriza-
tion, or provided and to be provided pursuant to such authorization and
any other authorizations granted under the provisions of this sub-section
(0), shall not be sufficient for the accommodation of more than twenty-
five hundred families. If any such company prior to the date when this
amendment takes effect has invested in real estate for any such housing
project or begun the erection of improvements for any such housing proj-
ect and its application for authorization shall be made within sixty days
aiter the effective date of this act its application shall be deemed to have
been made in due time and authorization issued pursuant thereto shall
legalize the said investments as if issued prior to the making of the same.
When any such company invests in real estate pursuant to this sub-section
(0) it shall within five years from the date upon which it acquired such
real estate sell and dispose of the same unless within that period it sub-
stantially completes such a housing project thereon in accordance with
description or amendments thereof filed with the commission; but the
commission may in its discretion extend such period of five years for such
further period or periods as the circumstances of the case may require.
When any such company prior to the date when this amendment takes ef-
fect has invested in real estate for any such housing project or begun the
erection of improvements for any such housing project and thereafter
fails to secure authorization therefor from the commission it shall within
five years from the date upon which it acquired such real estate sell and
dispose of the same; but the commission may in its discretion extend
such period for such further period or periods as the circumstances of
the case may require. The commission may issue to any foreign life in-
surance company making application therefor in conformity with any
provision of this sub-section (0) which is applicable to a domestic life
cH. 91] ACTS OF ASSEMBLY 113

insurance company on authorization for an investment pursuant to this
sub-section (0) in this state, as herein provided ;

(p) In real estate acquired for the purpose of leasing the same
to any person for a period of not less than thirty years or in real estate
already leased for an unexpired period of not less than thirty years,
under an agreement (1) that the lessee shall at his own cost erect, or
whereunder the lessee has at his own cost already erected, thereon free of
liens a building or other improvements costing an amount at least equal
to the value of the said real estate exclusive of improvements, (2) that
the said improvements shall remain on the said property during the
period of the lease with provision that at the termination of the lease
the ownership of such improvements free of liens shall vest in the owner
of the real estate, and (3) that during the term of the lease the tenant
shall pay all taxes and assessments levied on or against the said real
estate, including improvements, shall keep and maintain the said im-
provements in good repair and shall provide and maintain for the benefit
of the lessor fire insurance on such improvements at least equal to the
insurable value of the improvements, or at least equal to the amount
invested by the lessor in such real estate, whichever is less. Real estate
acquired pursuant to the provisions of this sub-section (p) shall not be
treated as an investment hereunder unless and until the improvements
herein required shall have been constructed and the lease agreement
entered into in accordance with the terms of this sub-section; but if the
lessee be a corporation the bonds, debentures, notes or preferred stock of
which are eligible as investments under either sub-section (e) or sub-
section (g) of this section, the requirements of this sub-section (p) as
to the erection of improvements by the lessee and the vesting of owner-
ship of such improvements in the owner of the real estate shall not be
applicable. Nor shall real estate acquired pursuant to this sub-section
(p) be treated as an investment hereunder in an amount exceeding the
amount actually invested reduced each year by equal decrements suff-
cient to write off completely the investment at the normal termination
of the lease. The total investments of any company under this sub-section
(p) shall not exceed three per centum of its assets. No investment shali
be made by any company pursuant to this sub-section (p) which will
cause such company’s investment in all real property owned by it to
exceed fifteen per centum of its assets or when all real property owned
by such company equals or exceeds fifteen per centum of its assets.

Section 2. All real estate acquired for home office purposes or
requisite for convenient accommodation in the transaction of the com-
pany’s business shall be sold and disposed of within ten years after the
same shall have ceased to be necessary for the present or future ac-
commodation of its business, and all other real estate acquired under the
provisions of sub-section (n) 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 Commis-
sion that its interest will suffer materially by the forced sale thereof ; in
which event the time for sale may be extended 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. Nothing in this act shall be deemed to prohibit a domestic life in-
surance 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 owned
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 before
July first, nineteen hundred and forty-two, unless it has procured or 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 five years; but nothing herein contained shall be
deemed to prevent any such company from protecting its interests where
circumstances 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 are
not of the classes authorized by this act shall be disposed of as soon as
practicable. In no case are they to be held for a period exceeding five
years. Subject to the provisions of section two, nothing in this act shall
be construed as affecting the legality or requiring the sale of an invest-
ment made after the effective date of this act if in accordance with this
act at the time of the making of such investment. Nothing in this act
shall be deemed to prohibit a company from renewing or extending a
real estate loan for the original or a lesser amount where a shrinkage in
value of the property securing the same would cause the indebtedness
to exceed sixty-six and two-thirds per centum of the value thereof, nor
to prohibit a company from accepting as part payment for real estate
sold by it a mortgage or lien thereon for more than sixty-six and two-
thirds per centum of the 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
taxes 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
cus, 91, 92] ACTS OF ASSEMBLY 115

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.

Section 7. Any company may, subject to any applicable limitations
and restrictions set forth in this act, own, hold, maintain, manage, oper-
ate, lease, sell and convey any property acquired by such company pursu-
ant to or as permitted by this act.

_ 2. An emergency exists and this act is in force from its passage.