Article 54p. 54

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

interest

method

less

impairment

and unrecoverable

amount or at valuation representing their fair market

value. If the Commissioner finds that in view of the

character of investments of any insurer authorized to do

business in this country it would be prudent for such

insurer to establish a special reserve for possible losses or

fluctuations in the values of its investments, he may

require such insurer to establish such reserve, reasonable

in amount, and include a report thereon in any statement

or report of the financial condition of such insurer. The

Commissioner may, in connection with any examination

or required financial statement of an authorized insurer,

require such insurer to furnish him complete financial

statements and audited report of the financial condition

of any corporation of which the securities are owned

wholly or partly by such insurer and may cause an

examination to be made of any subsidiary or affiliate of

such insurer as appropriate to specific investments as

provided

in

appropriate

circulars

issued

by

the

Commissioner.

(c) Investments in equity of an insurance company

shall be valued as follows:

(1) Listed stocks shall be valued at market value and

periodically adjusted to reflect market changes through a

special valuation account to reflect their realizable value

when sold;

(2) Unlisted stocks shall be valued at adjusted book

value based on the latest unqualified audited financial

statements of the company which issued such stocks;

and

(3) Stocks of a corporation under the control of the

insurer shall be valued using the equity method which is

the cost plus or minus the share of the controlling

company in the earnings or losses of the controlled

company after acquisition of such stocks.

(d) The stock of an insurance company shall be valued

at the lesser of its market value or its book value as shown

by its last approved audited financial statement or the

last report on examination, whichever is more recent. The

book value of a share of common stock of an insurance

company shall be ascertained by dividing (1) the amount

of its capital and surplus less the value of all of its

preferred stock, if any, outstanding, by (2) the number of

shares of its common stock issued and outstanding.

Notwithstanding the foregoing provisions, an insurer

may, at its option, value its holdings of stock in a

subsidiary insurance company in an amount not less than

acquisition cost if such acquisition cost is less than the

value determined as hereinbefore provided.

(e) Real estate acquired by foreclosure or by deed in

lieu thereof, in the absence of a recent appraisal deemed

by the Commissioner to be reliable, shall not be valued at

an amount greater than the unpaid principal of the

defaulted loan at the date of such foreclosure or deed,

together with any taxes and expenses paid or incurred by

such insurer at such time in connection with such

acquisition, and the cost of additions or improvements

thereafter paid by such insurer and any amount or

amounts

thereafter

paid

by

such

insurer

or

any

assessments levied for improvements in connection with

the property.

(f)

Purchase

money

mortgages

received

on

dispositions of real property held pursuant to Section 208

shall be valued in an amount equivalent to ninety percent

(90%) of the value of such real property. Purchase money

mortgages

received

on

disposition

of

real

property

otherwise

held

shall

be

valued

in

an

amount

not

exceeding ninety percent (90%) of the value of such real

property as determined by an appraisal made by an

appraiser at or about the time of disposition of such real

property.

(g) The stock of a subsidiary of an insurer shall be

valued on the basis of the greater of:

(1) The value of only such of the assets of such

subsidiary as would constitute lawful investments for the

insurer if acquired or held directly by the insurer; or

(2)

Such

other

value

determined

pursuant

to

standards and cumulative limitations, contained in a

regulation to be promulgated by the Commissioner.

(h) Notwithstanding any provision contained in this

section or elsewhere in this chapter, if the Commissioner

finds that the interests of policyholders so permit or

require, he may permit or require any class or classes of

insurers authorized to do business in this country to value

their investments or any class or classes thereof as of any

date heretofore or hereafter in accordance with any

applicable valuation or method.

SECTION 215. It shall be the duty of the officers of the

insurance company to report within the first fifteen (15)

days of every month all such investments as may be

made by them during the preceding month, and the

Commissioner may, if such investments or any of them

seem injudicious to him, require the sale or disposal of

the

same.

The

report

shall

also

include

a

list

of

investments sold or disposed of by the company during

the same period.

TITLE 5 Reserves

SECTION 216. Every life insurance company, doing

business

in

the

Philippines,

shall

annually

make

a

valuation

of

all

policies,

additions

thereto,

unpaid

dividends, and all other obligations outstanding on the

thirty-first day of December of the preceding year. All

such valuations shall be made according to the standard

adopted

by

the

company,

as

prescribed

by

the

Commissioner

in

accordance

with

internationally

accepted actuarial standards, which standard shall be

stated in its annual report.

Such standard of valuations shall be according to a

standard table of mortality with interest to be determined

by the Insurance Commissioner. When the preliminary

term basis is used, the term insurance shall be limited to

the first policy year.

The results of such valuations shall be reported to the

Commissioner on or before the thirtieth day of April of

each year accompanied by a sworn statement of a

designated company officer and stating the methods

and assumptions used in arriving at the values reported.

SECTION 217. The aggregate net value so ascertained

of the policies of such company shall be deemed its

reserve liability, to provide for which it shall hold funds in

secure investments equal to such net value, above all its

other

liabilities;

and

it

shall

be

the

duty

of

the

Commissioner, after having verified, to such an extent as

he may deem necessary, the valuation of all policies in

force, to satisfy himself that the company has such

amount in safe legal securities after all other debts and

claims against it have been provided for.

The reserve liability for variable contracts defined in

Section 238 shall be established in accordance with

actuarial procedures that recognize the variable nature of

the benefits provided, and shall be approved by the

Commissioner.

SECTION

218.

Every

life

insurance

company,

conducted on the mutual plan or a plan in which

policyholders are by the terms of their policies entitled to

share in the profits or surplus shall, on all policies of life

insurance

heretofore

or

hereafter

issued,

under

the

conditions of which the distribution of surplus is deferred

to a fixed or specified time and contingent upon the

policy being in force and the insured living at that time,

annually ascertain the amount of the surplus to which all

such policies as a separate class are entitled, and shall

annually apportion to such policies as a class the amount

of the surplus so ascertained, and carry the amount of

such

apportioned

surplus,

plus

the

actual

interest

earnings and accretions to such fund, as a distinct and

separate liability to such class of policies on and for which

© Compiled by RGL

54 of 211