Utah Admin. Code R590-116-5 - Valuation of a Security Other Than Common Stock Issued by an Insurance Subsidiary

The following provisions supplement Subsection 31A-17-401(3)(a) in controlling the way assets of an insurance subsidiary are valued on the books of the parent insurer.

(1) A parent insurer may attribute value to the security of an insurance subsidiary only if a dividend or interest is being paid and payment is anticipated to continue.
(2) The value of a security other than common stock issued by an insurance subsidiary is the lesser of:
(a) the present value of future income to be derived under the security; or
(b) the amount the parent would receive following liquidation of the subsidiary with payment, in full, of each creditor and holder with senior priority.
(3) The present discounted value of future income under Subsection (2)(a) shall be determined as follows:

NPV = ((CF1)/((1 + i)1)) + ((CF2)/((1 + i)2)) + (CF3)/((1 + 3)3)) + ... ((CFn)/((1 + i)n))

NPV = Net present value

CF = Cash flow

i = Assumed interest rate per period

n = Number of periods

If cash flows remain constant, the following formula may be used:

NPV = CF(1-(1 / (1 + i)n) / i)

(4) The interest rate used shall be Moody's AA Bond rate for a security of substantially equal duration, or another rate that can be justified by the insurer and is accepted by the commissioner.


Utah Admin. Code R590-116-5
Amended by Utah State Bulletin Number 2022-02, effective 1/10/2022

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