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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 this30 Idaho C code, 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 this32 Idaho C code, 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.
REPRINT REPRINT REPRINT REPRINT REPRINT 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