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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
]]]] 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.
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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