2006 Legislation
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HOUSE BILL NO. 652 – Insurance co, goodwill/trade name

HOUSE BILL NO. 652

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Bill Status



H0652...........................................................by BUSINESS
INSURANCE COMPANIES - Amends existing law relating to assets and
liabilities of insurance companies to permit domestic insurance companies
to treat goodwill, trade names and other like intangible assets as allowed
assets consistent with the industry's accounting standards in any
determination of the financial conditions of an insurer.
                                                                        
02/10    House intro - 1st rdg - to printing
02/13    Rpt prt - to Bus
03/02    Rpt out - rec d/p - to 2nd rdg
03/03    2nd rdg - to 3rd rdg
03/06    3rd rdg - PASSED - 62-0-8
      AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
      Bedke, Bilbao, Black, Block, Bolz, Bradford, Cannon, Chadderdon,
      Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge,
      Field(18), Field(23), Garrett, Hart, Harwood, Henbest, Henderson,
      Jaquet, Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews,
      McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Nonini,
      Pasley-Stuart, Pence, Raybould, Ringo, Roberts, Rusche, Rydalch,
      Sali, Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen,
      Smith(30), Smith(24), Smylie, Snodgrass, Wood, Mr. Speaker
      NAYS -- None
      Absent and excused -- Bell, Boe, Brackett, Ring, Sayler, Stevenson,
      Trail, Wills
    Floor Sponsor - Collins
    Title apvd - to Senate
03/07    Senate intro - 1st rdg - to Com/HuRes
03/15    Rpt out - rec d/p - to 2nd rdg
03/16    2nd rdg - to 3rd rdg
03/20    3rd rdg - PASSED - 33-0-2
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough,
      Langhorst, Little, Lodge, Malepeai, McGee, McKenzie, Pearce,
      Richardson, Schroeder, Stegner, Stennett, Werk, Williams
      NAYS -- None
      Absent and excused -- Marley, Sweet
    Floor Sponsor - Werk
    Title apvd - to House
03/21    To enrol
03/22    Rpt enrol - Sp signed
03/23    Pres signed - To Governor
03/24    Governor signed
         Session Law Chapter 207
         Effective: 07/01/06

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 652
                                                                        
                                   BY BUSINESS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO ASSETS AND LIABILITIES OF INSURANCE  COMPANIES;  AMENDING  SECTION
  3        41-603,  IDAHO CODE, TO PERMIT DOMESTIC INSURANCE COMPANIES TO TREAT GOOD-
  4        WILL, TRADE NAMES AND OTHER LIKE INTANGIBLE ASSETS AS ALLOWED ASSETS  CON-
  5        SISTENT  WITH  THE INDUSTRY'S ACCOUNTING STANDARDS IN ANY DETERMINATION OF
  6        THE FINANCIAL CONDITION OF AN INSURER AND TO MAKE TECHNICAL CORRECTIONS.
                                                                        
  7    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  8        SECTION 1.  That Section 41-603, Idaho Code, be, and the  same  is  hereby
  9    amended to read as follows:
                                                                        
 10        41-603.  ASSETS  NOT  ALLOWED. In addition to assets impliedly excluded by
 11    the provisions of section 41-601, Idaho Code, of this chapter,  the  following
 12    expressly shall not be allowed as assets in any determination of the financial
 13    condition of an insurer:
 14        (1)  Good  will,  trade  names and other like intangible assets, except as
 15    expressly permitted and as prescribed by the national association of insurance
 16    commissioners' accounting practices and procedures.
 17        (2)  Advances to officers (other than policy  loans)  whether  secured  or
 18    not,  and advances to employees, agents and other persons on personal security
 19    only.
 20        (3)  Stock of such insurer, owned by it, or any material equity therein or
 21    loans secured thereby, or any material proportionate interest  in  such  stock
 22    acquired  or  held  through  the  ownership  by such insurer of an interest in
 23    another firm, corporation or business unit.
 24        (4)  Furniture, fixtures, furnishings, safes, vehicles (except  as  autho-
 25    rized  in  paragraph (12), section 41-601, Idaho Code), libraries, stationery,
 26    literature, and other equipment, machines, and supplies (other than data proc-
 27    essing and accounting  systems  authorized  under  section  41-601(11),  Idaho
 28    Code),  except  in the case of title insurers such materials and plants as the
 29    insurer is expressly authorized to invest in under  section  41-726,  of  this
 30    Idaho Ccode, and except, in the case of any insurer, such personal property as
 31    the  insurer  is  permitted  to  hold pursuant to chapter 7, title 41, of this
 32    Idaho Ccode, or which is reasonably necessary for the maintenance  and  opera-
 33    tion  of real estate lawfully acquired and held by the insurer other than real
 34    estate used by it for home office, branch office and similar purposes.
 35        (5)  The amount, if any, by which the aggregate book value of  investments
 36    is  carried  in  the  ledger assets of the insurer exceeds the aggregate value
 37    thereof as determined under this code.

Statement of Purpose / Fiscal Impact


                                
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                      STATEMENT OF PURPOSE

                            RS 15847

"Goodwill" is typically defined as a company's inherent financial
value over and above the company's net book value of its assets and
liabilities.  Section 41-603, Idaho Code, currently requires that
Idaho-domiciled insurance companies treat goodwill as a non-
admitted asset.  This restriction on the treatment of goodwill
(1) is out of date with current business practices in other
industries; (2) is contrary to current uniform accounting practices
for insurance companies as adopted by the National Association of
Insurance Commissioners (NAIC); and (3) hampers efforts by Idaho
insurance companies that seek to acquire or merge with other
insurance companies.  An acquisition is intended to bring new
business to the state of Idaho and thereby generate more job growth
to manage and operate the acquired business.  In many acquisitions,
there is usually inherent value in the acquired company, i.e.,
goodwill.  As a result of the operation of Section 41-603, Idaho
Code, upon the acquisition of goodwill of another insurance
company, an Idaho domestic insurer must make direct reduction in
capital and surplus upon acquisition.  This puts Idaho companies at
a competitive disadvantage when making acquisitions.  This bill is
intended to make Idaho law consistent with uniform insurance
company accounting practices and to place Idaho insurers on an even
footing with insurers domiciled in other states when making
acquisitions.



                           FISCAL NOTE

None.




Contact
Name:     John Mackey
          United Heritage Financial Services 
Phone:    (208) 322-2685


STATEMENT OF PURPOSE/FISCAL NOTE                             H 652