33-2-818. Corporate bonds and debentures. (1) An insurer may invest in bonds, debentures, notes, and other evidences of indebtedness issued, assumed, or guaranteed by any solvent institution existing under the laws of the United States of America or of Canada or any state or province thereof, which are not in default as to principal or interest and which are secured by adequate collateral and bear fixed interest and if during each of any 3, including either of the last 2, of the 5 fiscal years next preceding the date of acquisition by the insurer the net earnings of the issuing, assuming, or guaranteeing institution available for its fixed charges, as hereinafter defined, shall have been not less than 1 1/4 times the total of its fixed charges for such year. In determining the adequacy of collateral security, not more than one-third of the total value of such required collateral shall consist of common stock.
     (2) An insurer may invest in secured and unsecured obligations of such institutions, other than obligations described in subsection (1), bearing interest at a fixed rate, with mandatory principal and interest due at specified times, if the net earnings of the issuing, assuming, or guaranteeing institution available for its fixed charges for a period of 5 fiscal years next preceding the date of acquisition by such insurer have averaged per year not less than 1 1/2 times its average annual fixed charges applicable to such period and if during either of the last 2 years of such period such net earnings have been not less than 1 1/2 times its fixed charges for such year.
     (3) An insurer may invest in adjustment, income, or other contingent interest obligations of such institutions if the net earnings of the issuing, assuming, or guaranteeing institution available for its fixed charges for a period of 5 fiscal years next preceding the date of acquisition by the insurer shall have averaged per year not less than 1 1/2 times the sum of its average annual fixed charges and its average annual maximum contingent interest applicable to such period and if during either of the last 2 years of such period such net earnings shall have been not less than 1 1/2 times the sum of its fixed charges and maximum contingent interest for such year.
     (4) Within the meaning of this section, the term "net earnings available for fixed charges" means net income after deducting operating and maintenance expenses, taxes other than federal income taxes, depreciation, and depletion but excluding extraordinary nonrecurring items of income or expense appearing in the regular financial statements of the issuing, assuming, or guaranteeing institutions. The term "fixed charges" shall include interest on funded and unfunded debt, amortization of debt discount, and rentals for leased properties.

     History: En. Sec. 111, Ch. 286, L. 1959; R.C.M. 1947, 40-3114.