40-2b06. Preferred and guaranteed stocks; definitions.

40-2b06

Chapter 40.--INSURANCE
Article 2b.--INVESTMENTS BY LIFE INSURANCE COMPANIES

      40-2b06.   Preferred and guaranteed stocks; definitions.Any life insurance company heretofore or hereafter organized under anylaw of this state may invest by loans or otherwise, with the directionor approval of a majority of its board of directors or authorizedcommittee thereof, any of its funds, or any part thereof in preferredstocks of, or stocks guaranteed by, a corporation incorporated under thelaws of the United States of America, or of any state, district, insularor territorial possession thereof, or of the Dominion of Canada, or anyprovince thereof; in an amount not to exceed 25% of itsadmitted assets as shown by the company's last annual report, as filedwith the state commissioner of insurance, or a more recent quarterlyfinancial statement as filed with the commissioner, on a form prescribed bythe national association of insurance commissioners, within 45 daysfollowing the end of the calendar quarter to which the interim statementpertains, and which meets the followingqualifications:

      (a)   All bonds or other evidences of indebtedness and preferredstocks shown on the last published annual statement of the issuingcorporation, if any, senior to the preferred stock acquired must beeligible as investments under K.S.A. 40-2b05or 40-2b06, and amendments thereto, as of the date of acquisition;

      (b)   if cumulative preferred, not in arrears as to dividends, or ifnoncumulative, has paid full dividends in each of the last threeyears;

      (c)   sinking fund payments are on a current basis;

      (d)   if net earnings available for fixed charges for the mostrecently completed three fiscal year period is at least equal to 1 1/4times the aggregate fixed charges, plus fullcontingent interest and preferred dividend requirements of the preferredstock under consideration and those on a parity therewith or having apriority thereto, for the same period; and

      (e)   the corporation must have been in existence for a period of notless than five years.

      (f) (1)   "Fixed charges" shall include actual interestincurred in each year on funded and unfunded debt; and

      (2)   "net earnings" shall mean income, before deducting interest onfunded and unfunded debt, and after deducting operating and maintenanceexpenses, depreciation and depletion and all taxes, including incometaxes. Extraordinary, nonrecurring items of income or expenses shall beexcluded.

      History:   L. 1972, ch. 179, § 6; L. 1983, ch. 156, § 6;L. 1987, ch. 160, § 9; July 1.