Utah Admin. Code R590-116-4 - Valuation of Assets

An insurer's assets shall be valued as follows:

(1) Bonds.

(a)

(i) Each obligation with a fixed term and rate, if not in default on principal or interest, shall be valued:

(A) at the par value, if purchased at par; or

(B) at the value to par at maturity and to yield, in the meantime, the effective rate of interest at which the purchase was made, if purchased above or below par.

(ii) For valuation purposes, the purchase price may not be higher than actual market value at the date of acquisition, including brokerage and any other related fee.

(b) A bond may not be carried at a value greater than the call price at which the entire issue may be called.

(c)

(i) An obligation subject to amortization under the published findings of the NAIC shall be carried at its amortized value.

(ii) An obligation that does not qualify for amortization under the published findings of the NAIC shall be carried at its market value or book value, whichever is lower.

(d) A demand deposit or certificate of deposit in a solvent bank or savings and loan institution shall be valued at the account or certificate balance.

(i) A negotiable certificate of deposit with a maturity term of less than three years shall be valued at face value.

(ii) A negotiable certificate of deposit with a maturity term of more than three years shall be valued at face value or market value, whichever is less.

(e) An obligation of an insurance subsidiary shall be valued in accordance with Subsection 31A-17-401(3)(a) and Section R590-116-5.

(2) Equipment Trust Certificates.

(a) An equipment trust certificate subject to amortization under the published findings of the NAIC shall be carried at the certificate's amortized value.

(b) An equipment trust certificate that is not listed as qualified for amortization under the published findings of the NAIC shall be carried at a value not to exceed the certificate's proportionate part of the aggregate principal amount of the equipment obligations outstanding times 70% of the net depreciated value of the equipment pledged.

(3) Loans Secured By Real Estate Interest.

(a) A loan, other than a purchase money mortgage , that is adequately secured by a real estate interest and is not in default on principal or interest, shall be valued at the unpaid principal balance if the acquisition was at par.

(b) A mortgage loan acquired at a premium or at a discount shall be valued at amortized cost as follows:

(i) for a Federal Housing Administration (FHA) or Veterans Administration (VA) mortgage:

(A) a premium shall be amortized and discounts accrued over a five -year period from date of acquisition ; and

(B) a company may adjust the asset value to its face amount, but any excess of aggregate permissive amortized value, cost of mortgage less repayment of principal, adjusted for amortization of premium and accrual of discounts on a five -year basis, shall be treated as a nonadmitted asset; and

(ii) for a mortgage other than an FHA or VA Mortgage:

(A) the book value of a real estate mortgage acquired at a premium shall be reported at a value reflecting any write-off of the premium over a three -year period from date of acquisition; and

(B) a real estate mortgage purchased at a discount shall be carried at the amortized value.

(c) Premium amortization or discount accretion as required in Subsection (3)(b) shall be on the straight-line method of computation.

(d) An adequately secured purchase money mortgage shall be valued at the unpaid principal balance of the lien reduced by a reserve for unrealized gain on the sale of real estate; the reserve shall maintain the same proportionate relationship between the unpaid principal balance as the original gain on the sale bore to the original note principal balance.

(e) For a loan that is in default or in foreclosure proceedings, the carrying value may be adjusted for additional expenses, such as taxes, insurance, and legal fees, incurred to protect the investment or to obtain clear title to the property.

(i) If a cost is recoverable from the ultimate disposition of the property, the cost may be added to the carrying value of the mortgage loan.

(ii) A cost that cannot reasonably be expected to be recovered shall be expensed when incurred.

(f) A loan with any of the following provisions may be valued, at the option of the commissioner, at a discounted value that approximates the market value of the loan at the valuation date:

(i) a payment other than in equal installments;

(ii) a payment period less often than annually; or

(iii) interest below a conventional rate of return on the date the loan is granted.

(4) Loans Secured By Pledged Securities Or Evidences Of Debt Eligible For Investment Under Section 31A-18-105.

(a) A loan that is adequately secured by a pledge of securities or evidence of debt eligible for investment under Section 31A-18-105 shall be valued at par, if the acquisition was at par.

(b) A loan acquired at a premium or at a discount shall be valued at the unpaid principal balance or cost, whichever is less.

(5) Preferred and Guaranteed Stocks.

(a) A company that maintains a mandatory securities valuation reserve shall value preferred or guaranteed stock in good standing at cost.

(b) A company that does not maintain a mandatory securities valuation reserve shall value preferred or guaranteed stock in good standing at market value.

(c) Preferred or guaranteed stock not in good standing shall be valued at market value.

(i) Market value, as used for valuation of preferred or guaranteed stock, means in accordance with the values listed in Valuation of Securities .

(ii) A security traded on a registered national securities exchange but not listed in Valuation of Securities may establish market value at the most recent published trade value.

(iii) A security not listed in Valuation of Securities and not actively traded on a major stock exchange shall have a market value that the insurer can justify to the commissioner.

(d) Preferred or guaranteed stock of an insurance subsidiary shall be valued under Subsection 31A-17-401(3)(a) and Section R590-116-5.

(6) Common Stock.

(a) Common stock shall be valued at market value.

(i) Market value, as used for valuation of common stocks, means in accordance with the values listed in Valuation of Securities .

(ii) A security traded on a registered national securities exchange but not listed in Valuation of Securities may establish market value at the most recent published trade value.

(iii) A security not listed in Valuation of Securities and not actively traded on a registered national securities exchange shall have a market value that the insurer can justify to the commissioner.

(b) Common stock of an insurance subsidiary shall be valued under Subsection 31A-17-401(3)(a).

(7) Real Estate.

(a) An investment in real estate shall be valued at not more than the reasonable cost of the property plus capitalized permanent improvements less depreciation spread evenly over the life of the property or, at the option of the company, less depreciation computed on any basis permitted under the Internal Revenue Code and regulations.

(b) Property acquired in satisfaction of a debt shall be valued at its fair market value or the amount of debt, including interest, taxes, and expenses incurred as cost in foreclosure, whichever is less.

(8) Loans Upon the Security of the Insurer's Own Policies. A loan upon the security of the insurer's own policies shall be valued at the unpaid loan balance or the policy reserve securing the loan, whichever is less.

(9) Financial Futures Contracts. A financial futures contract, if approved by department rule, shall be valued in the manner set forth by the commissioner.

(10)

(a) Investment in Foreign Securities. A foreign security permitted under Subsection 31A-18-105(11) shall be valued as follows:

(i) if the value of the security is listed in Valuation of Securities, the market value shall be the listed value; or

(ii) if the value of the security is not listed in Valuation of Securities, the security shall have a market value that the insurer can justify to the commissioner.

(b) If the security is payable in a foreign currency, the value shall reflect the currency exchange rate.

(11) Separate Account Assets. Each separate account asset shall have a value as required under Subsection 31A-18-102(4).

Notes

Utah Admin. Code R590-116-4

Amended by Utah State Bulletin Number 2022-02, effective 1/10/2022