Life Insurance Housing Projects 9781512818604

Table of contents :
Foreword
Preface
Contents
List of Tables
Chapter 1. Introductory
Chapter 2. Statutory Restrictions
Chapter 3. Relationship to Basic Investment Objectives
Chapter 4. Development of Housing Investments
Chapter 5. Projects Developed with Government Aid
Chapter 6. Projects Developed without Government Aid
Chapter 7. Social and Operational Factors
Chapter 8. Summary and Conclusions
Appendix A
Appendix B
Bibliography
Index

Citation preview

UNIVERSITY OF PENNSYLVANIA PRESS PUBLICATION

THE S. S. HUEBNER FOUNDATION FOR INSURANCE EDUCATION Lectures LIFE

INSURANCE TRENDS

THE

BENEFICIARY

LIFE

INSURANCE TRENDS

INVESTMENT

OF

AND

IN L I F E

LIFE

PROBLEMS

INSURANCE

AT

MID-CENTURY

INSURANCE

ACCIDENT

AND SICKNESS

PENSIONS:

PROBLEMS

FUNDS

INSURANCE

AND

TRENDS

Studies AN

A N A L Y S I S OF

GOVERNMENT

AN

ANALYSIS

GROUP

THE

ECONOMIC

GROUP LIFE

OF

THEORY

LIFE OF

LIFE

INSURANCE

RISK, A N D

ANNUITIES

INSURANCE

HOUSING

INSURANCE

PROJECTS

INSURANCE

LIFE I N S U R A N C E HGUSING PROJECTS By R O B E R T E . SCHULTZ, Associate Professor University

of Finance

of Southern

Published

PH.D.

and

Insurance

California

for

THE S. 5. HUEBNER FDUNDATIDN FGR INSURANCE EDUCATION University of Pennsylvania

Copyright

1956

T h e S. S. H u e b n e r Foundation for Insurance Education University of Pennsylvania

Library of Congress Catalogue Card No. 56-5578 Manufactured in the United States of America

T H E S. S. H U E B N E R F O U N D A T I O N F O R INSURANCE E D U C A T I O N T h e S. S. Huebner Foundation for Insurance Education was created in 1940, under the sponsorship of the American Life Convention, the Life Insurance Association of America (then the Association of Life Insurance Presidents), and the Institute of Life Insurance, and operated under a deed of trust until 1955 at which time it was incorporated as a Pennsylvania non-profit corporation. Its primary purpose is to strengthen and encourage insurance education at the collegiate level. Its activities take three principal forms: a) T h e providing of fellowships and scholarships to teachers in accredited colleges and universities of the United States and Canada, or persons who are contemplating a teaching career in such colleges and universities, in order that they may secure preparation at the graduate level for insurance teaching and research. b) T h e publication of research theses and other studies which constitute a distinct contribution directly or indirectly to insurance knowledge. c) T h e collection and maintenance of an insurance library and other research materials which are made available through circulating privileges to teachers in accredited colleges and universities desirous of conducting research in the insurance field. Financial support for the Foundation is provided by contributions from more than one hundred life insurance companies and proceeds from the sale of Foundation publications. T h e program of activities is under the general direction of a Board of Trustees representing the life insurance institution. Actual operation of the Foundation has been delegated to the University of Pennsylvania under an administrative plan submitted by the University and approved by the Board of Trustees. T h e University discharges its responsibilities through an Administrative Board consisting of six officers and faculty members of the University of Pennsylvania and three academic persons associated with other institutions. Active management of the Foundation is entrusted to an Executive Director, appointed by the University of Pennsylvania. vi

BOARD OF T R U S T E E S Leroy A. Lincoln, Chairman

Chairman of the Board, Metropolitan Life Insurance Company

Harrison L. Amber

President, Berkshire Life Insurance Company

Harold J. Cummings

President, Minnesota Mutual Life Insurance Company

Edmund M. McConney

President, Bankers Life Company

Ray D. Murphy

President, Equitable Life Assurance Society of the U.S.

Adolph A. Rydgren

Chairman of the Board, Continental American Life Insurance Company

Eldon Stevenson, Jr.

President, National Life & Accident Insurance Company

Frank F. Weidenborner

Vice President, Guardian Life Insurance Company of America

ADMINISTRATIVE BOARD

S. S. Huebner, Honorary Chairman Harry J . Loman, Chairman Dan M. McGill, Executive Director C. Canby Balderston Edison L. Bowers

Charles C. Center C. A. Kulp

vii

Roy F. Nichols Edwin B. Williams

FOREWORD O n e of the objectives of T h e S. S. H u e b n e r Foundation for Insurance Education which is being implemented on an increasingly broader scale is the enrichment of insurance literature through the publication of research findings that make a significant contribution to insurance knowledge. T h i s objective is being achieved through two series of publications, designated as "Huebner Foundation Lectures" and " H u e b n e r Foundation Studies." T h e first series comprises a compilation of addresses by eminent authorities on selected insurance topics of continuing interest, while the second presents the results of thorough research in specific areas. T h i s particular volume is the fifth in the "Studies" series and the fourth stemming directly from the Foundation's program of graduate fellowships and scholarships. It represents the doctoral dissertation of Robert E. Schultz, written while he was preparing for an insurance educational career under a Foundation fellowship grant. It presents the results of a painstaking investigation of all major housing developments undertaken by legal reserve life insurance companies in the United States, encompassing a period of thirty years. T h e study sought to ascertain whether this type of investment has measured up to the expectations of those who have regarded housing projects as a particularly promising outlet for life insurance funds. T h e author examined the statutory limitations and restrictions on life insurance housing investments and probed into the social and technical problems encountered by the companies in the construction and management of housing projects. He assembled and analyzed a voluminous body of detailed operating data to determine the financial returns on such investments. T h e volume should prove to be an invaluable source of reference on the experience of life insurance companies with housing projects during the first thirty years of investment activity in that area. A native of California and a veteran of World W a r II, Dr. Schultz received both the B.S. and M.B.A. degrees from the University of Southern California, the former in 1948 and the latter ix

X

FOREWORD

in 1949. At the conclusion of his work at the University of Southern California, he was awarded a Huebner Foundation fellowship and studied at the University of Pennsylvania for the next three years, receiving his PH.D. degree in 1952. In the fall of 1952, he returned to the University of Southern California as an Assistant Professor of Finance and Insurance in the School of Commerce. He is presently an Associate Professor at that institution. DAN M .

Executive

Philadelphia January, 1956

MCGILL

Director

PREFACE T h e placement of funds by life insurance companies in investments of an equity nature has always been made with a very substantial degree of caution. T h e basic investment medium of life insurance companies has been, and still is, that of creditor obligations. Therefore, it is not surprising to find only a small proportion of life insurance company funds invested in the equity ownership of housing developments. T h e first such investments were made in the 1920's, but it was not until 1938 that any major investment of this nature was carried out. Thus, such investments have a rather brief history and today account for only a small segment of the assets of the life insurance industry. Nevertheless, aggregate investment in housing projects by life insurance companies approaches the $500 million mark and involves legal and social implications that are worthy of careful consideration. It is hoped that this volume which covers the experience of all major housing projects together with an examination of the legal, economic and social implications will provide a single source of reference regarding investment in this field. Unbounded appreciation must be expressed to the many people who aided in the preparation of this volume. Dr. William A. Berridge of the Metropolitan Life Insurance Company and Mr. Mendes Hershman of the New York Life Insurance Company read the entire manuscript and offered valuable suggestions and information. Mr. F. H. Ecker of the Metropolitan Life Insurance Company and several of his associates, Mr. Willis Satterwaite of T h e Penn Mutual Life Insurance Company, Dr. James J . O'Leary of the Life Insurance Association of America, Mr. John Jewett of T h e Prudential Insurance Company of America and several of his associates, and Mr. A. C. Windolf, Bankers National Life Insurance Company aided tremendously with specific sections of the volume. This volume was written under the guidance of Dr. G. Wright Hoffman, and the author wishes to express appreciation for his aid and inspiration. Professors S. S. Huebner, C. M. Kahler, C. K. Knight, C. A. Kulp, and Dan M. McGill, all members of the xi

xii

PREFACE

Insurance Department of the University of Pennsylvania, read the manuscript and offered many valuable and constructive ideas. T h e late Dr. David McCahan, then Executive Director of the S. S. Huebner Foundation for Insurance Education, was a source of many helpful suggestions. Mrs. Mary Drever Hyde, formerly administrative assistant in the Huebner Foundation, rendered edi torial assistance in the preparation of the manuscript, while Miss Mildred A. Brill, present administrative assistant in the Huebner Foundation, handled the final details of publication. Of course, none of those who read the manuscript is responsible for any errors that may appear. T h e deepest gratitude also is extended to my wife for her assistance in the mechanical preparation of the manuscript. T h e financial assistance provided by the S. S. Huebner Foundation for Insurance Education which made the writing and publication of this volume possible is gratefully acknowledged. R O B E R T E . SCHULTZ.

Los Angeles January, 1956

CONTENTS CHAPTER

PACE

FOREWORD

ix

PREFACE

xi

LIST OF T A B L E S

XV

1. INTRODUCTORY

1

Significance of Life Insurance Housing Investments The Object of the Investigation Scope Organization 2. STATUTORY RESTRICTIONS

2 3 3 4 5

Historical Perspective Legal Criteria for Equity Investments Investment as a Necessary and Proper Function of a Life Insurance Company Sovereignty of a State over Its Real Estate Rule of Comity A State's Right to Impose Investment Standards on Foreign Companies Classification of States with Respect to Restrictions 3. RELATIONSHIP TO BASIC INVESTMENT OBJECTIVES

Safety of Principal Bonds Mortgages Stocks Real Estate Yield Liquidity

5 9 9 10 10 12 12 16

17 17 18 19 20 21 21

D E V E L O P M E N T OF HOUSING INVESTMENTS

Period from 1921 through 1930 Period from 1931 through 1940 Period from 1941 through 1952 5. PROJECTS DEVELOPED WITH G O V E R N M E N T A I D

Description and Development of Slums Slum Clearance Legislation and Redevelopment Projects Chellis Austin, Douglass, and Harrison Developments Acquisition of Land and Construction of the Projects Occupancy Experience Expenses Yield Amortization Further Slum Clearance Legislation Stuyvesant Town and Riverton Developments

xiii

25

25 28 33 40

41 42 45 45 45 47 48 48 50 53

xiv

CONTENTS Acquisition of Land and Construction of the Projects Capital Structure of the Redevelopment Companies Occupancy Expenses Yield Amortization Current Slum Clearance Development under Illinois Law Lake Meadows Development Summary of Slum Clearance Legislation

6.

PROJECTS D E V E L O P E D WITHOUT G O V E R N M E N T A I D

Size of the Investment Legal Restrictions Controlling the Amount of Investment Location of Housing Developments Location by State Selection of a Project Site Operating Experience Occupancy Expenses T h e Concept of Depreciation and Amortization Amortization Rates Yield 7 . SOCIAL AND O P E R A T I O N A L FACTORS

Factors Opposing Investment in Housing Investment Aspects Gross Income Net Income Managerial Aspects Management Facilities Tenant Problems Factors Favoring Investment in Housing Social Service Investment Aspects Public Relations and Goodwill Advertising 8 . S U M M A R Y AND CONCLUSIONS

Legal Limitations and Restrictions Basic Investment Standards Operational Experience Social and Technical Aspects Conclusions APPENDIX

53 56 56 56 56 58 58 59 61 63

63 61 66 66 67 69 70 70 72 74 78 85

85 85 86 88 89 89 89 92 92 91 95 96

96 97 98 99 100

A

An Abstract of All the Statutory Provision of Insurance Codes and State Constitutions Pertaining to Real Estate Investment by Life Insurance Companies for the Forty-Eight States and the District of Columbia through December 31, 1952

103

APPENDIX Β

Financial Experience for Housing Developments Purchased or Constructed by Life Insurance Companies as of December 31, 1952

134

BIBLIOGRAPHY

146

INDEX

151

LIST DF TABLES 1. Admitted Assets of United States Legal Reserve Life Insurance Companies, 1920-52

2

2. Distribution of Assets of United States Life Insurance Companies for 1952

17

3. Average Rate of Interest or Dividend Return on Bonds, Stocks, and Mortgages for Selected Legal Reserve Life Insurance Companies for the Ten-Year Period, 1945-52

22

4. Total Income and T o t a l Disbursements for All United States Life Insurance Companies from 1921-52

24

5. Real Estate Owned by United States Life Insurance Companies, 1921-30

26

6. Real Estate Owned by United States Life Insurance Companies, 1931-40

29

7. Comparative Data on the Prudential's Three Newark Housing Developments

31

8. Statistical Summary of Parkchester

32

9. Statistical Summary of Stuyvesant T o w n

34

10. Number and Cost of Housing Projects Constructed or Purchased during the Twelve-Year Period, 1941-52

35

11. Net Investment Earnings for United States Legal Reserve Life Insurance Companies

37

12. Percentage of Occupancy for Chellis Austin and Douglass-Harrison

46

13. Relationship of T o t a l Expenses to Gross Income

47

14. Net Profit and Rate of Return before Amortization

49

15. Rate of Amortization for Chellis Austin and DouglassHarrison

50

16. Stuyvesant T o w n Corporation Income Debentures

57

17. Riverton Corporation Income XV Debentures

57

xvi

LIST

OF

TABLES

18. T h e A m o u n t a n d R e l a t i o n s h i p of T o t a l R e a l Estate, I n c o m e - P r o d u c i n g R e a l Estate, a n d U n a i d e d H o u s i n g t o T o t a l A d m i t t e d Assets, D e c e m b e r 31, 1952

65

19. L o c a t i o n of U n a i d e d H o u s i n g P r o j e c t s

68

20. B r e a k d o w n of O p e r a t i n g E x p e n s e s

71

21. A m o r t i z a t i o n of P r o j e c t s w i t h a T o t a l Cost of Less t h a n $1 M i l l i o n

75

22. A m o r t i z a t i o n of P r o j e c t s with a T o t a l Cost b e t w e e n $1 M i l l i o n a n d $5 M i l l i o n

76

23. A m o r t i z a t i o n of P r o j e c t s w i t h a T o t a l Cost over $5 Million

77

24. R e t u r n o n Book V a l u e b e f o r e a n d a f t e r A m o r t i z a t i o n

79

2'i. R e t u r n o n Book V a l u e b e f o r e a n d a f t e r A m o r t i z a t i o n

81

26. R e t u r n on Book V a l u e b e f o r e a n d a f t e r A m o r t i z a t i o n

82

27. E x p e n s e s a n d I n c o m e b e f o r e A m o r t i z a t i o n f o r S u n n y s i d e

87

28. C o m b i n e d Yield f r o m H o u s i n g P r o j e c t s P u r c h a s e d C o n s t r u c t e d by L i f e I n s u r a n c e C o m p a n i e s

99

or

Chapter 1 INTRODUCTORY

At the close of 1952 the admitted assets of life insurance companies in the U n i t e d States totaled $73 billion, 1 and two of the three largest private institutions in America were life insurance companies. 2 T h i s vast size, of itself, would create a substantial investment problem if the life insurance industry had only to be concerned with the reviewing and managing of previously invested funds. T h e actual problem facing the m a n a g e m e n t of life insurance companies, however, is far more complicated. I n addition to the m a n a g e m e n t of previously invested funds, the yearly growth in assets, which has averaged $3.5 billion f r o m 1940 to 1952, and the reinvesting of funds from m a t u r i n g securities have m a d e the search for investment outlets increasingly urgent. T a b l e 1 illustrates the growth in total admitted assets which the life insurance industry has experienced since 1920. T h e need for investment outlets that will yield a rate of ret u r n commensurate with that assumed in c o m p u t a t i o n of premiums a n d reserves on insurance and annuity contracts, a n d at the same time satisfy the necessary safety and legal r e q u i r e m e n t s has forced companies to locate new sources of investment outlets. Among these new investment media is income-producing real estate. 3 Income-producing real estate may be divided into two 1 Institute of Life Insurance, Life Insurance Fact Book 195) (New York: Institute of Life Insurance, 1953), p. 54. 2 T h e three largest private institutions in the United States, in order, are: T h e Metropolitan Life Insurance Company ($11.6 billion), T h e Bell System ($10.7 billion), and T h e Prudential Insurance Company of America ($10.2 billion). ( M o o d y ' s Manual of Investments American and Foreign, 195), T h e Public Utility Securities volume and the Banks—Insurance Companies Investment Trusts—Real Estate Finance and Credit Companies volume. [New York: Moody's Investors Service, 1953].)

' Housing developments have long been utilized as investment outlets by European insurance companies. " O n e of the methods by which E u r o p e a n insurance companies participate in real estate finance is the o u t r i g h t purchase 1

2

LIFE

INSURANCE

HOUSING

PROJECTS

distinct types: residential real estate, and commercial and industrial real estate. This study deals exclusively with residential real estate held by life insurance companies, which in 1952 comprised approximately 32 per cent of the total real estate held by life insurance companies for investment purposes. TABLE

1

A D M I T T E D ASSETS O F U N I T E D S T A T E S L E G A L R E S E R V E L I F E INSURANCE COMPANIES,

1920-52 (000,000 omitted) Tear

Amount

1920 1925 1930 1935 1940 1945 1950 1952

t 7,320 11,538 18,880 23,216 30,802 44,797 64,020 73,375

S o u r c e : Institute of Life I n s u r a n c e , Lift Insvramct Fact Bock 1953 (New Y o r k : I n s t i t u t e of Life I n s u r a n c e ,

1953).

Significance of Life Insurance Housing Investments Although investment in residential real estate currently accounts for less than 1 per cent of the total admitted assets of the life insurance industry, the dollar value of this type of asset exceeded $455 million at the close of 1952, practically all of the investment taking place since 1938. Combined housing projects of all United States life insurance companies provided, at the close of 1952, living accommodations for approximately 200,000 people, or enough for a city the size of Salt Lake City, Tulsa, or Hartford. One project alone provides living accommodations equal to a city the size of Reno, Nevada, or Newport, Rhode Island.* or construction, and subsequent direct operation, of housing and other realty. Direct investment in urban real estate has been an important outlet for funds of French insurance companies for upwards of 110 years. Among Italian and Austrian companies, owned real estate is likewise an important asset, as it is too for Swedish insurance organizations" (Corliss L. Parry, "European Insurance Companies and Real Estate: With Particular Reference to Housing," The Journal of Land and Public Utility Economics, Vol. XXVI [August, 1940]). ' T h e Metropolitan's project, Parkchester, has a population of approximately 42,000.

INTRODUCTORY

3

T h i s type of investment is important not only because of the financial sums involved b u t because of social implications. Clean a n d desirable housing accommodations tend to reduce disease, the volume of crime, and in general produce a more wholesome environment.® The Object

of the

Investigation

T h e underlying objective of this investigation is to determine the extent to which life insurance companies can invest in housing developments. T h e r e are four distinct aspects of the problem: the legal limitations a n d restrictions placed u p o n the investment of life insurance f u n d s by state statutory provisions; the basic investment standards which govern the long-run placement of life insurance f u n d s in any asset; the social and technical problems that are peculiar to an equity investment in housing; and the actual investment experience that life insurance companies have had from their housing projects. Scope T h i s study is limited to housing developments completely owned and managed by U n i t e d States legal reserve life insurance companies. T h e terms "housing project" or "housing developm e n t " are used herein to include equity investments in apartments, tenements, or other dwelling units, excluding hotels, b u t including accommodations for retail stores, shops, offices, and other service and recreational facilities connected with such projects. Mortgage holdings on residences or apartments are excluded from the scope of this study, as well as the purchase of bonds of either federal or state housing authorities, which are legal investments for life insurance companies, since the purchase of either real estate mortgages or housing authority bonds are not equity investments. T h e time period covered is from 1922, when the first housing project was undertaken by a life insurance company, through 1952. 8 Social considerations were a prime motivating factor in the construction of the first housing development by a United States life insurance company. (Interview with Mr. F. H. Ecker, Honorary Chairman of the Board, Metropolitan Life Insurance Company.)

4

LIFE INSURANCE

HOUSING

PROJECTS

Organization Chapter 2 deals solely with the legal aspects of life insurance investments in the real estate field, with particular emphasis on housing project investments. Four broad legal factors governing the investment of life insurance companies in real estate, plus reference to all state code restrictions, are presented in this chapter to measure broadly the ability of all United States insurance companies to make investments in housing projects. T h e general investment criteria, upon which life insurance investments are based, are examined in Chapter 3. Each of these criteria is discussed individually. A comparison is made of all the broad classes of life insurance investments to determine the degree to which the different types meet the requirements of these general investment criteria. In broad terms, the extent to which housing project investments can be integrated into the over-all investment practices of the company can be seen. T h e legal aspects and investment principles of Chapters 2 and 3 are followed by a discussion, in Chapter 4, of the historical development of housing investment as carried on by life insurance companies. T h i s historical presentation serves as a foundation for a more specific study of the two distinct types of housing investments, slum clearance and nonsubsidized housing developments. These are discussed in Chapters 5 and 6. T h e s e two types of projects are studied separately due to the restrictive laws and privileges which affect the financial aspects of slum clearance projects, and which create problems unique to this type of development. W i t h i n both Chapters 5 and 6 the financial and certain managerial aspects of the various projects are studied. Chapter 7 presents the social and technical factors which favor and which oppose housing investments. Chapter 8 summarizes the findings of this study.

Chapter 2 STATUTORY RESTRICTIONS

HISTORICAL PERSPECTIVE Massachusetts, in 1852, was the first state to provide specifically for the r e g u l a t i o n of insurance c o m p a n i e s a n d to a p p o i n t officials for t h a t purpose. 1 Seven years later, in 1859, New York established a n i n s u r a n c e d e p a r t m e n t with duties similar to those p e r f o r m e d by t h e Massachusetts d e p a r t m e n t , a n d w i t h i n the n e x t ten years thirty-five a d d i t i o n a l states either established special d e p a r t m e n t s for t h e supervision of insurance or a p p o i n t e d officials to carry o u t such supervision. 2 W i t h the a d v e n t of strict state regulation of life i n s u r a n c e companies, definite restrictions were placed u p o n t h e i r investm e n t policies. 3 T h e acquisition of real estate was limited, in practically every instance, to o w n e r s h i p of h o m e a n d b r a n c h office properties. In a d d i t i o n , the c o m p a n i e s were given the r i g h t to h o l d foreclosed properties. T h e s e , however, were to be eventually disposed of a n d not kept as a p e r m a n e n t p a r t of the investm e n t p o r t f o l i o . Recently, these restrictions on the acquisition of 1 " T h e first official report on the business of insurance in Massachusetts was compiled by J o h n P. Bigelow, Secretary of the Commonwealth, in 1838, u n d e r provisions of the Acts of 1837, C. 192. T h e Acts of 1852, C. 231 created a board of insurance commissioners consisting of the secretary, treasurer and auditor of the commonwealth, which was continued till t h e regular insurance department was organized, but the reports continued to be m a d e by the secretaries of the commonwealth until 1856" (Charles Kelley Knight, The History of Life Insurance in the United States to 1870 (Philadelphia, privately printed 1920), p. 128). 2 Joseph B. Maclean, Life Insurance Book Co., Inc., 1945), p. 101.

(6th ed.; New York: McGraw-Hill

' " M a n y of the failures which took place in the period from about 1865 to 1885 were d u e to extravagance and inefficient methods, and some to dishonesty, b u t the largest n u m b e r was d u e to the strict enforcement of state requirements, particularly regarding reserves and the admissibility of assets" (Ibid., p. 461).

5

6

LIFE INSURANCE

HOUSING

PROJECTS

real estate have been liberalized in a majority of the state insurance codes.* T h e first statute that modified the restrictions against permanent holding of real estate, other than home office and branch office properties, was enacted in 1922 in the state of New York. This amendment pertained specifically to housing and was enacted primarily because of a critical housing shortage which developed during World W a r I. 5 T h e amendment allowed the life insurance companies transacting business in New York tc invest a maximum of 10 per cent of their total admitted assets in housing projects.® T h e maximum rent that could be charged for these projects was $9 per room per month. Although the amendment did not directly specify the type of construction, apartment, tenement, or other dwelling houses, nor the degree of luxury to be built into these projects, it did effectively control both of these factors. 7 Since this 1922 amendment was passed only to alleviate an emergency condition, it had to be renewed at the end of a relatively short period. 8 T h e law was renewed in 1924 for an additional two years, but it was allowed to lapse in 1926. It was not until February 17, 1938, that the New York state legislature 4 See Appendix A for a summary of individual state statutes pertaining to real estate acquisition by life insurance companies.

' " U n t i l March first, nineteen hundred and twenty-four, and so long thereafter as the emergency in housing conditions mentioned in certain acts of the legislature of nineteen hundred and twenty and nineteen hundred and twenty-one shall continue, every life insurance corporation, foreign or domestic, transacting business in this state, may purchase land in any city of the first class in this state and on such land and on land in such a city acquired pursuant to any other provision of this chapter may erect apartment, tenement or other dwelling houses, not including hotels" (Laws of New York, 1922, Chap. 658, Sec. 1, p. 1802). 8 " T h e aggregate cost of all the lands so purchased and improvements so made shall not exceed ten per centum of the total admitted assets of such corporations as of December thirty-first, nineteen hundred and twentyone, as such assets are shown in the annual report of such corporation to the superintendent of insurance for the year nineteen hundred and twenty-one" (Laws of New York, 1922, Chap. 658, Sec. 1, p. 1802). 7 " T h e cost of land acquired under this section shall not be allowed as an admitted asset unless . . . the average net rental value of such apartment, tenement or other dwelling house erected thereon, as estimated at the commencement of construction, be nine dollars or less per month per room" (Laws of New York, 1922, Chap. 658, Sec. 1, p. 1802). 8

See footnote 5.

STATUTORY

RESTRICTIONS

7

again allowed the life insurance companies operating within the state to invest in housing projects. In addition to a housing shortage, there was also a need to relieve unemployment, both of these factors helping to bring about an a m e n d m e n t to the New York Insurance Code which again permitted investment in housing projects.® T h e 1938 amendment was similar to the 1922 amendment in that it specifically limited the a m o u n t that could be invested in this field to 10 per cent of the company's total admitted assets.10 But it differed sharply from the 1922 Code a m e n d m e n t on three major counts: (1) N o m a x i m u m rent per room was specified, although the projects were to be for medium and low income groups. (2) Investment in these projects was not limited to the state of New York." (3) In addition to ownership of the housing project, the companies were permitted to acquire accommodations for retail stores, shops, offices and other community services, reasonably a p p u r t e n a n t to such projects. 12 In addition to the New York amendments, other states began to modify restrictions barring real estate acquisition by life insurance companies. T h e New Jersey Code was amended in 1929 to permit life insurance companies operating within the state to invest 5 per cent of their total admitted assets in housing of a slum clearance nature. 1 3 In 1940 the California Insurance Code was also amended to enable admitted insurance companies to carry out the construction and ownership of housing projects 9

"Sec. 20 b. T e m p o r a r y additional powers as to investments in real property for low rental housing. T o promote and to s u p p l e m e n t public and privale efforts to provide an adequate supply of decent, safe a n d sanitary dwelling accommodations for persons of low and moderate income and to relieve u n e m p l o y m e n t . . ." (IMWS of New York, 1918, C h a p . 25, Sec. 1, p. «3). 10 " T h e aggregate investment by any such corporation in all such projects, including the cost of all land so purchased and t h e estimated cost of all improvements to be made thereon, shall not exceed ten per centum of the total admitted assets of such corporation on the thirty-first day of December next preceding the date of such purchase" (Laws of New York, 1938, Chap. 25, Sec. I, p. 44). 11 ". . . any life insurance corporation may purchase land in any city having a population of three h u n d r e d thousand or m o r e in any state in which such corporation may be actively engaged in t h e transaction of its business of life insurance . . ." (Laws of New York, 1938, C h a p . 25, Sec. 1, p. 44). 12

Laws of New York, 19)8, Chap. 25, Sec. 1, p. 44.

13

Laws of New Jersey, 1929, Chap. 201.

8

LIFE INSURANCE

HOUSING

PROJECTS

14

within the state. T h i s was followed in 1942 by a modification of the Virginia Code to allow the acquisition of real estate by life insurance companies for the purpose of providing dwelling accommodations for persons of low or moderate income. 1 5 T h e Virginia Code was also amended to permit life insurance companies to acquire other types of real estate which were to be leased for the production of income. Within the n e x t five years, a majority of the states modified their codes to permit some type of ownership of income-producing real estate by life insurance companies. Present acceptance of a provision allowing a certain percentage of the total admitted assets of life insurance companies to be invested either specifically in housing projects or income real estate of any nature is illustrated by the fact that forty-one states have now modified their codes to permit such investment. 1 " T h e s e modifications are, however, by no means uniform and vary as to the permissible percentage of housing investments from 3 to 15 per cent. 17 As might be expected, certain legal problems are created for those companies which operate across state lines. In every case the life insurance company must adhere strictly to the investment code of the state in which it is domi14 "Subject to the provisions of this article, any admitted life insurer may construct comprehensive moderate cost housing projects, erect apartments, tenements, or other dwelling houses, not including hotels, b u t including accommodations for retail stores, shops, offices, and other community service and recreational facilities reasonably connected with such projects, a n d may purchase land therefor. "Such insurer may thereafter own. maintain, manage, collect and receive income from and sell and convey the land so purchased a n d the improvements t h e r e o n " (California Insurance Code, 1940, Sec. 1160.2). 15

T h e project must be constructed in or within ten miles of a city having a population of 100,000 or more, and the project must provide accommodations for not less than 200 or more than 2,500 families (Virginia State Insurance Code, 1942, Sec. 4258η). 16

See Appendix A. Restrictions on the a m o u n t of real estate in which an insurance company may invest are also present in the insurance laws of other countries. For example, H u n g a r i a n insurance companies cannot invest m o r e t h a n 10 per cent of their assets in real estate: French insurance companies a r e permitted to invest u p to 40 per cent of their assets in realty (Corliss L. Parry. " E u r o p e a n Insurance Companies and Real Estate: W i t h Particular Reference to Housing," The Journal of Land and Public Utility Economics, Vol. XXVI [August, 1940]). 17

STATUTORY

RESTRICTIONS

0

ciled. However, the effect of the laws of other states in which a company may be licensed to transact business is not so clear. LEGAL CRITERIA FOR EQUITY INVESTMENTS W i t h respect to the controlling legal aspects of equity investment in real estate, four criteria have been set forth. 18 Investment as a Necessary and Proper of a Life Insurance Company

Function

T h e first criterion which must be considered with regard to the legal aspects of insurance company investments is that investment is a necessary and proper function of a life insurance company. T h e courts have held that the power and right to invest the funds of a life insurance company are inherent in the very nature of the business as it is conducted by legal reserve life insurance companies. 1 9 As a part of this investment privilege given life insurance companies to invest policyholders' funds, the legislatures and courts have given companies the right to own their home office properties and to hold properties which " T h e s e f o u r (viteria were set f o r t h by Willis H . S a t t e r t l i w a i t e in his analysis of i n c o m e real estate i n v e s t m e n t by life i n s u r a n c e c o m p a n i e s (Willis H . S a t t e r t h w a i t e , " I n v e s t m e n t s bv I.ife I n s u r a n c e C o m p a n i e s in I n come R e a l Estate," The Insurance I.au· Journal, No. 296 [ S e p t e m b e r , 1917], p. 771). 19

" S u c h a s s u m p t i o n [that t h e only d u l y of an i n s u r a n c e c o m p a n y is to issue policies], h o w e v e r , is not s o u n d , for aside f r o m m e r e issuance of policies, it h a s t h e h i g h e s t d u t i e s a n d p o w e r s to p r o t e c t those policies a n d i n v e s t m e n t s which they r e p r e s e n t , a n d it h a s all i n c i d e n t a l p o w e r s r e a s o n a b l y necessary to t h e p e r f o r m a n c e of those d u t i e s . . ." (In re Penria I.ife Insurance Company, 75 F. [2d] 777 [CCA, 7, 1935, III.]). ". . . a n i n s u r a n c e c o m p a n y , aside f r o m t h e m e r e issuance of policies, h a s t h e h i g h e s t d u t i e s a n d p o w e r s to p r o t e c t its policies a n d t h e i n v e s t m e n t s which t h e y r e p r e s e n t , a n d has all i n c i d e n t a l p o w e r s r e a s o n a b l y necessary to t h e p e r f o r m a n c e of those d u t i e s . W e can conceive n o h i g h e r d u t y of a n i n s u r a n c e c o m p a n y t h a n t h a t of investing its m o n e y a n d t a k i n g security, f o r u p o n its success in t h i s respect t h e success of t h e e n t i r e s t r u c t u r e d e p e n d s " (.Metropolitan Ufe v. Whitestone Management Company, 77 F. [2d] 255 , 260 [CCA, 7, 1935, 111.] a n d Prudential v. Richman. II N'F. [2d] 126 [111. A p p . Ct., 1937]). " T h e i n v e s t m e n t of its f u n d s is a n i n t e g r a l p a r t of t h e l i f e i n s u r a n c e business a n d of e q u a l i m p o r t a n c e with t h e issuance of l i f e i n s u r a n c e policies. T h e i n v e s t m e n t of its f u n d s a n d t h e t a k i n g of s e c u r i t y t h e r e f o r is a p r o p e r p a r t of t h e business of a n i n s u r a n c e c o m p a n y . . ." (Central Life Assurance Society v. Tiger, 57 P. [2d] 1182 [S. Ct. Okla., 1936]).

IO

LIFE INSURANCE

HOUSING

PROJECTS

they have foreclosed. T h e privilege to invest in housing projects is merely an extension of the powers already granted life insurance companies. Sovereignty of a State over Its Real Estate T h e second criterion to be considered is the sovereignty of a state over its real estate. T h e sovereignty of the various states gives them the right to specify the conditions under which real estate may be held by corporations. These stipulations are made either by state statute or by public policy as set forth by the courts of the state.20 Rule of Comity T h e third criterion is based on the rule of comity. Unless otherwise stipulated by statutory provisions or by declaration of public policy by its courts, under the rule of comity a state should permit a foreign corporation to operate within the state under the rights and powers given under its charter and the law of its 20 "Section 48. An immovable thing is subject to the jurisdiction of the state within which it is." "Section 55. A state has jurisdiction over all acts done or eventi occurring within t h e territory of the state, a n d over all failures to act in cases where Conflict of Laws. there is a legal duty to act within the state" (Restatement, St. Paul: American Law Institute). "Section 19. Immovable property is exclusively subject to the laws of the government within whose limits it is located, and it is a rule firmly established by n u m e r o u s decisions that the law of the jurisdiction in which such property is situated controls and governs its acquisition, disposition and devolution. T h i s rule, which is embodied in the Restatement is universal, applying generally to all property classed as immovable, and operates between the several states of the United States as well as between countries entirely foreign to each other. It is not in the power of any state by any legislative act to prescribe the mode in which lands in another state may be disposed of o r title thereto passed from o n e person to a n o t h e r " (C.J.S. Conflict of Laws. St. Paul: American Law Institute). " T h e general rule is . . . that the tenure, transfer, control, and disposition of real property are matters which rest exclusively with the state where the p r o p e r t y lies" (Sunderland v. U.S., 69 L. Ed. 259 [1924]). " I t is a n established principle of law . . . that the disposition of immovable property, whether by deed, descent or any other mode, is exclusively subject to t h e government within whose jurisdiction the property is s i t u a t e d " (U.S. v. Fox, 24 L. Ed. 192 [1876]). I n a test case in Michigan where t h e statutes prohibit corporations from holding real estate which they do not occupy in conduct of their business, an a m e n d m e n t p e r m i t t i n g out-of-state life insurance companies to invest in housing projects in the state was held constitutional. (See National Underwriter, October 1. 1948, p. 13.)

STATUTORY

RESTRICTIONS

11

state of domicile. A provision not allowing the foreign corporation to exercise those rights and powers granted by its charter and the law of its domicile must be expressed and not merely implied. 21 21

" U n d e r principles of comity, and except as otherwise provided by constitutional or statutory provisions, . . . a corporation created by any state or n a t i o n is p e r m i t t e d to enter other states, and there to exercise all legitimate powers conferred on it a n d to carry on as a corporation any business not prohibited by the local laws or against the local public policy. T h e rules of comity are subject to local modification by the law-making power, but until so modified they have the controlling force of legal obligation, a n d it is the d u t y of the courts to observe and enforce them until the sovereign otherwise directs. T h e comity involved is the comity of the state, not of the courts, and t h e judiciary must be guided by the principles and policy adopted by t h e legislature. No restrictions can be imposed by the courts without the sanction of t h e law-making power. T h i s comity must be presumed to exist, and does exist, until a state expresses an intention to the contrary in some affirmative way, that is, by direct enactments on the subject, or by its public policy deduced f r o m the general course of legislation or the settled adjudications of its courts of last resort. Legislative silence on the subject is equivalent to permission. Statutes authorizing foreign corporations to do business within the state a n d prescribing the terms and conditions on which they shall be p e r m i t t e d to do so have been almost universally adopted, and their construction a n d application forms a large part of the law of foreign corporations. . . . On compliance with such statutes, the foreign corporation may transact business with the state as if u n d e r a franchise from the state, and ordinarily in the same m a n n e r as if it were a domestic corporation" Corpus Juris Secundum (Brooklyn: T h e American Law Book Co., 1936), Vol. 20, Sec. 1789). "Section 164. . . . a corporation's right to take and hold lands in a state other than t h a t in which it was incorporated must be answered by reference to t h e law of both states. T h e law of its domicile must be looked to because the corporation is a creature thereof and unable to exercise powers not conferred thereby, a n d the law of the state where the lands are situated must be consulted because any right in respect of such property is subject thereto." "Section 168. T h e right of a foreign corporation to acquire or hold realty may be denied if contrary to the local statutes or to the settled public policy of the state, a l t h o u g h it is equally true that until a state denies t h e right, a foreign corporation may own real estate" (American Jurisprudence [San Francisco: Bancroft-Whitney Co., 1939], Vol. 23). (Also see Sections 74, 76, and 171 in same volume.) "If the policy of the state or territory does not permit the business of a foreign corporation in its limits, or allow the corporation to acquire or hold real property, it must be expressed in some affirmative way; it cannot be inferred from t h e fact that its Legislature has made no provision for the formation of similar corporations, or allows corporations to be formed only by general law" (Coluteli v. Colorado Springs Company, 25 L. Ed. 547 [1879]). Other cases also substantiating this opinion are: State v. Swift & Company, 187 SW (2d) 127 (Tex. Civ. App., 1945); Commonwealth Acceptance Corporation v. Jordan, 246 P. 796 (S. Ct. Calif., 1926); People v. New York Title & Mortgage Company, 178 NE 661 (S. Ct. 111., 1931).

LIFE

12

INSURANCE

HOUSING

PROJECTS

A State's Right to Impose Investment on Foreign Companies The

last c r i t e r i o n

Standards

is t h a t a s t a t e m a y

impose an

investment

s t a n d a r d o n f o r e i g n c o m p a n i e s as w e l l as d o m e s t i c c o m p a n i e s .

A

state has the right to r e q u i r e any foreign c o r p o r a t i o n that wishes to d o business w i t h i n

its b o r d e r s

to m e e t

the s a m e

investment

s t a n d a r d s t h a t it r e q u i r e s o f its d o m e s t i c c o m p a n i e s , o r it m a y set forth

a

specific

standard

exclusively

for

the

foreign

corpora-

tions.2CLASSIFICATION RESPECT TO By using these f o u r criteria

OF STATES W I T H RESTRICTIONS as a b a s i s f o r c l a s s i f i c a t i o n ,

the

c o d e restrictions a n d l i m i t a t i o n s of e a c h state a n d t h e District of 2 2 "Section 56 of the New York Insurance Law (Consol. Laus. C. 28) was intended to require general conformity in investments between foreign and domestic insurance companies. Although the financial position of all companies, domestic and foreign, is subject to the superintendent's examination and discretion, the law certainly imposes upon him some absolute limitations. In saying that the investments of foreign companies must be of the same 'general character' as those of domestic, it did not indeed lay upon him a rigid rule; but it did, we think, authorize his insistence upon the same proportion between holdings of stock in other companies and safer investments. " . . . Perhaps the power inay be limited In the purpose and the fitness of the measure to accomplish it. . . . Scarcely any condition can be imposed touching the financial stability of a foreign corporation which will not involve some results elsewhere; it is enough that these be ancillary to the accomplishment of genuinely local purposes connected with the company's prospective business. Otherwise each state could set the standard of security for the rest of the Union, an intolerable limitation upon the autonomy of each community" (Fireman's Insurance Company v. Reha, 30 F. [2d] 539 [D.C., N.Y., 1928]; off'd 73 L. F.d. 517). " T h e right to conduct business in the form of a corporation, and as such to enter into relations of employment with individuals, is not a natural or fundamental right. It is a creature of the law, and a state, in authorizing its own corporations, or those of other states, to carry on business and employ men within its borders, may qualify the privilege by imposing such conditions and duties as reasonably may be deemed expedient in order that the corporation's activities may not operate to the detriment of the rights of others with whom it may come in contact. . . . A foreign corporation, though not waiving any constitutional objections by coming into the state to do business therein, has no valid objection to such reasonable regulations as may be prescribed for domestic corporations similarlv circumstanced" ( P r u d e n t i a l Insurance Company of America v. Roberl F. Cheek, 66 L. Ed. 1044 [1922]).

STATUTORY

RESTRICTIONS

13

Columbia have been grouped in such a m a n n e r as to obtain an over-all picture of present regulation of life insurance companies' investments in real estate. 23 Groups 1, 2, 3, and 4 are concerned with the company's relationship with its state of domicile, and groups 5, 6, 7, and 8 with the company's relationship with states other than the domiciliary state. Group I. States that give domestic companies the right to invest specifically in housing projects: California, 2 4 Illinois, Louisiana, Massachusetts, Michigan, Minnesota, 2 3 Missouri, Nebraska, New Jersey, New York, Pennsylvania, R h o d e Island, Virginia, and Wisconsin. Group II. States that give domestic companies the right to invest in either residential or commercial real estate for the production of income, or the right to hold title to leased real estate: Arizona, Arkansas, California, 2 6 Colorado, District of Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, 27 Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, Tennessee, Utah, Vermont, Virginia, West Virginia, 28 and Wyoming. Group III. States that give domestic companies the right to invest a limited percentage of their total admitted assets in assets which are not permitted or do not qualify u n d e r the provisions of the state insurance code: Connecticut, Delaware, Illinois, Louisiana, New Hampshire, North Dakota, Ohio, Oregon, Wash ington, and Wisconsin. Group IV. States that allow domestic companies to own onlv that real estate which is necessary for the convenient transaction 28

For specific restrictions and requirements see Appendix A. Original application for permission had to be filed with Commissioner before December 31, 1941. 25 May also hold real estate for the purposes of providing necessary homos and living quarters for the company's employees. 28 Only excess funds may be invested in income-producing real estate. 27 T h e state statutes provide that corporations may hold and convey lands, and the usual insurance real estate restrictions are not present. 28 Domestic companies may also, subject to Commissioner's approval, hold real estate for recreation, hospitalization, convalescence, and retirement purposes of its employees. 24

14

LIFE INSURANCE

HOUSING

PROJECTS

of the company's own business: Alabama, Florida,™ Kentucky,'0 Montana, South Carolina,31 South Dakota," and Texas." Group V. States that impose no specific restrictions on the investment in real property by foreign companies operating within their jurisdiction: Alabama, Connecticut,34 District of Columbia, Florida,55 Illinois, Kansas,36 Maine, Massachusetts, Nevada, New Hampshire, North Dakota,57 Ohio, South Carolina,38 Tennessee, and Wisconsin. Group VI. States that specifically authorize foreign insurance companies to invest in some type of real estate in addition to that necessary for the convenient transaction of their own business: Delaware, Maryland, Michigan, Minnesota, Missouri, Rhode Island, Virginia, and Wyoming. Group VII. States that restrict foreign companies to the same privileges and limitations as domestic companies and authorize domestic companies to invest in some form of income-producing real estate, either residential or commercial, or allow the investment of a limited percentage in assets not specifically permitted in their life insurance investment statutes: Arizona, Arkansas, California, Colorado, Georgia, Idaho, Indiana, Iowa, Louisiana, 2 9 T h e Florida insurance statutes provide only that domestic companies may acquire such real estate as their purposes require, in the absence of special provisions. 3 0 May sublet part of real estate held under home office provision others, with the approval of the Commissioner. 31

to

May hold real estate which is required for its purposes.

T h e home office building may, with the approval of the Commissioner, contain space for rental. 32

83

May lease or rent part of home office building.

34

May hold real estate as purposes may require.

3 5 Domestic companies may acquire such real estate as their purposes require, in the absence of special provisions, and foreign companies are limited to the same rights, powers, and privileges as domestic companies; nevertheless, there appears to be no expressed provision against the holding of real estate by foreign insurance companies, and as a consequence the doctrine of comity should make this investment by foreign companies possible.

" F o r e i g n corporations shall not engage in agricultural or horticultural business. 8 7 A foreign company must satisfy the Commissioner that its capital or net assets are well invested and immediately available for the payment of losses in this state.

" May hold real estate as purposes may require.

STATUTORY

RESTRICTIONS

15

Mississippi, Nebraska, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Utah, Vermont, Washington, and West Virginia. G r o u p V i l i . States that restrict foreign companies to the same privileges and limitations as domestic companies and do not permit domestic companies to hold real estate except that which is necessary to the convenient transaction of the company's own business: Kentucky, Montana, South Dakota, and Texas. While only fourteen states have passed special housing project provisions, authority to invest in any type of income-producing real estate, or to invest a limited percentage in assets not specifically permitted in the insurance code, makes ownership of housing projects possible for life insurance companies domiciled in forty-one states and the District of Columbia. Only four 3 9 states relate the powers of foreign companies to those of domestic companies and authorize domestic companies to invest in real estate only to the extent that is necessary for the convenient transaction of their business. Whether these restrictions affect the admissibility of a foreign company owning income-producing property in other states and operating in one of these four states, or just apply to the holding of incomeproducing real estate in one of these four states, can only be ascertained after the courts of these states have set forth their interpretations of the investment restrictions in their individual states. However, since there are foreign companies operating in these states which have engaged in real estate investment with the permission of their domiciliary states, it would appear that these restrictions only forbid the holding of real estate in one of these four states. 8 9 Florida and South Carolina may also be included in this group, but it appears from the wording of the states' insurance codes provisions governing foreign insurance companies that they are not part of this group.

Chapter 3 RELATIÜNSHIP TO BASIC INVESTMENT OBJECTIVES

While legal authority to invest in housing projects must be granted before an insurance company can make the investment, such an investment will not be m a d e unless it can compete favorably with other authorized investments, a n d unless it can be successfully integrated into the company's over-all investment policy. T o determine how housing developments may fit into an over-all investment plan of a life insurance company, it is necessary to examine the basic qualifications required of all investments m a d e by life insurance companies and the extent to which housing investments, as compared with other authorized investments, meet these requirements. T h e primary obligation of the insurance company is the disbursement of accumulateti f u n d s : (1) at the maturity of the policy, (2) as payment of n o n f o r f e i t u r e values upon surrender of the policy, (3) in the g r a n t i n g of policy loans, or (4) in event of withdrawal of dividends left at interest. In order to meet these requirements, sufficient funds must be held in cash or securities of a highly liquid nature. While surrender can occur any time, and certain of the contracts are of a short duration, the m a j o r i t y of life insurance contracts are of a very long-term n a t u r e , which allows the companies to invest a large percentage of their f u n d s in long-term investments. Since life insurance company investment policies are essentially of this long-term n a t u r e , the companies m a y acquire less marketable bonds, mortgages, stocks, a n d realty which other institutional and private investors m i g h t feel undesirable because of their lack of liquidity.

16

RELATIONSHIP

TO

INVESTMENT

OBJECTIVES

17

Table 2 gives the distribution of investments of the life insurance industry for 1952. T o meet the basic obligation of a company to its policyholders, safety of principal in an investment is of primary importance. The other considerations of an investment are its yield, and to some extent, liquidity. The legal investments of life insurance companies meet each of these investment criteria in TABLE 2 D I S T R I B U T I O N OF ASSETS OF U N I T E D S T A T E S L I F E I N S U R A N C E C O M P A N I E S F O R 1952 (000,000 omitted)

Asset United States Government Securities All Other Government Bonds Securities of Business and Industry Mortgages Real Estate Policy Loans Miscellaneous Assets Total

Amount

Percentage

$10,252 2,522 31,646 21,251 1,903 2,713 3,088

14.0 3.4 43.1 29.0 2.6 3.7 4.2

873,375

100.0

S o u r c e : I n s t i t u t e of L i f e I n s u r a n c e , Lije Insurance Fact Book 1953 ( N e w Y o r k : I n s t i t u t e of Life I n s u r a n c e , 1953).

varying degrees. Housing, in order to qualify as an investment of a life insurance company, must compete on these three bases with other investments. Safety

of

Principal

Since safety of principal is the most important investment requirement, life insurance companies must restrict their acquisition of assets to those in which speculation is at a minimum. They cannot, therefore, invest in housing if the risk involved in such investment is substantially greater than that of alternative investments.1 Bonds. Speculation with regard to repayment is at a minimum with United States government bonds, Canadian government bonds, and all state obligations, 2 since it is generally as1 Additional safety is obtained by diversification, which is accomplished by spreading the investment within the limits of legal investments and, second, by selecting various holdings within these classifications. 2 Since 1882 there has been only one state, Arkansas, that has defaulted upon its obligations. This occurred in 1933, but through an adjustment

18

LIFE

INSURANCE

HOUSING

PROJECTS

sumed that upon the maturity of the obligations there will be 100 per cent return of principal. Investment in these obligations, therefore, meets almost completely the requirement of safety of principal. Some municipal and corporate bonds meet the qualifications of safety almost as well as United States bonds, while others are considerably more speculative. Insurance companies generally restrict their corporate and municipal holdings to the highestgrade bonds, but in some cases may acquire some medium-grade corporates. T h e safety which the insurance companies have obtained with this type of holding is of a very high order. Such safety is attributable not only to the careful initial selection but also to the fact that the insurance company is a long-term investor and is able to weather business recessions without having to sell such bonds or other assets at less than their long-run or normal value. Mortgages. Real estate mortgages, like other private obligations, vary in quality from those possessing a high degree of safety to those where ultimate repayment of principal is very uncertain. T h e security behind the mortgage is real property, and as in the case of secured bonds, the insurance company may, if principal is not repaid, obtain ownership of the real property. In addition to the pledged property, 43 per cent of the mortgages held by life insurance companies are insured by agencies of the federal government. 3 Consequently, real estate mortgages can adopted in 1934 eventual payment of interest in full, as well as principal, was provided. * T Y P E S OP M O R T G A G E S O W N E D BY U . S . L I F E INSURANCE

COMPANIES

1952 (000,000 omitted) FOR

Type of Mortgage Farm: Veterans Administration Other Non-Farm: Federal Housing Admin. Veterans Administration Other Total

Amount %

Percentage

26 1,679

0.1 7.8

5,681 3,347 10,518

26.8 15.8 49.5

$21,251

100.0

S o u r c e : Institute of Life I n s u r a n c e , Li/t Insuratut Fact Book 1953 (New York: I n s t i t u t e of Life I n s u r a n c e , 1953).

RELATIONSHIP

TO INVESTMENT

OBJECTIVES

19

quite effectively meet the safety of principal standards required by life insurance companies. Stocks. In addition to the acquisition of investments upon which the obligor will at some future date repay the principal, insurance companies may also, though not to the same extent, invest in equities from which a return of principal can be obtained only by selling the asset.4 Preferred stock, which is a hybrid, has qualities of both a fixed obligation and an equity holding. 5 T h e degree of safety of an investment in preferred stock depends upon two related factors: first, the financial condition of the specific corporation issuing the stock, and, second, if a return of principal is desired by the investor, the condition of the stock market. Therefore, preferred stock in most cases does not fulfill the standard of safety as well as definite contractual obligations that have a specific maturity date." Common stocks present many of the same problems with regard to safety of principal as do preferred issues of stocks, but because of their equity nature allow the holder to participate in 4 "At one time stocks were an important source of investment for the funds of life insurance companies. In 1905 the report of the Armstrong Committee, which had conducted an investigation of the life insurance companies in New York, expressed the opinion that investment in stocks was fundamentally objectionable and recommended an amendment to the law forbidding such investments. This recommendation was adopted and made effective in 1906 both as to common and preferred stocks" (Joseph B. Maclean, Life Insurance [7th ed.; New York: McGraw-Hill Book Co., Inc.. 1945], p. 284). 5 " T h e Wales Act, passed in the state of New York in 1928, considerably liberalized the law with reference to the holding of stock investments and resulted in an u p t u r n in the holdings of this class (preferred stock) of security. Following passage of this act which permitted investment in the unsecured obligations and in the preferred or guaranteed stocks of selected classes of corporations, other states passed similar laws to widen the field of life insurance investment." (John H. Magee, Life Insurance [rev. ed.; Homewood, III.: Richard D. Irwin, Inc., 1951], p. 766.) 6 ". . . it may be said that preferred stocks do not constitute a proper investment medium for a life insurance company. . . . T h e fundamental weakness of the preferred stock as an instrument of investment for life insurance companies arises from its nondescript character—it is neither a fixed investment nor an equity investment. It has the disadvantages of both types of media, with none of the advantages of either. Its complete lack of a definite maturity date, coupled with the possibility of wide fluctuations in value as interest rates change, make preferred stocks particularly ill-adapted as investment media for life insurance companies" (R. E. Badger, "Investments and Inflation," Best's Insurance Netos, Life Ed., Vol. LI [March, 1951]).

20

LIFE

INSURANCE

HOUSING

PROJECTS

company growth. 7 Nevertheless, the lack of safety in this medium probably will restrict life insurance company investments in stocks to a very small percentage of total assets.8 R e a l Estate. Safety of principal, when funds are used to acquire real estate for income, is much different than that of property obtained through foreclosure. In the latter instance the investor has acquired the title to the property as a last resort, whereas in the former case title to the property is deliberately sought because of the inherent value of the property. T h e factors affecting the safety of funds invested in housing developments are mainly associated with the ability to rent the project. T h e ability to rent depends not only on the desirability of the living accommodations provided in the development and the rent charged b u t also upon neighborhood conditions surrounding it, location with regard to places of employment, and accessibility to facilities such as schools, shopping areas, and transportation. In addition to these factors, consideration must be given to the total supply of rental housing with which the project must compete, and possible government rent control measures. T h u s , the extent to which a housing investment will compare with other authorized investments, on the basis of safety of principal, will depend upon the amount of control that an insurance company investor can exercise over these factors affecting the safety of a housing development. 7 Recent changes in legal restrictions now permit life insurance companies in many states to invest a small percentage of assets in equity securities. For example, the New York bill making common stocks a legal investment for life insurance companies provides, "that local life companies may invest the lesser of (1) 3% of their assets; or (2) one-third of their surplus in qualified equities. T h e qualifications are: listing on a recognized exchange; dividends for 10 preceding years, the aggregate of which represents a return of at least 4% on par value (except some financial stocks are excluded)" (Editorial in Best's Insurance News, Life Ed., Vol. LI [April 19511). 8 This lack of safety in common stock has been challenged by those favoring its purchase on the basis that the safety of common stock compares very favorably with those investments, such as medium-grade bonds, term loans, and the purchase of income real estate, which the life insurance companies have made to gain higher yields than the over-all investment average (G. Wright Hoffman, Investments of Life Insurance Companies— Their Changing Frontiers (Philadelphia: Copyright by T h e American College of Life Underwriters, 1948), p. IS).

RELATIONSHIP

TO INVESTMENT

OBJECTIVES

21

Yield After safety of principal, yield is the next most i m p o r t a n t factor considered in the investment of life insurance company funds. T h e average yields earned by selected life insurance companies 9 from investments in (1) United States government and C a n a d i a n government bonds, (2) state and municipal bonds, (3) corporate bonds and stocks, and (4) mortgages, are given in T a b l e 3. Over the ten-year period from 1943 through 1952, the average rate of r e t u r n from stocks for these companies was 4.91 per cent; 10 for bonds the average r e t u r n was 3.09 per cent, 11 and for real estate mortgages slightly more than 4.24 per cent. In view of the uncertainties affecting the safety of housing investments, the anticipated yield from this type of investment must be greater than the r e t u r n from bond and mortgage investments, if this medium is to successfully attract life insurance company funds. Liquidity Liquidity for an entire portfolio can be obtained in two different ways—by purchasing assets which can be quickly converted into cash, and through the use of staggered maturity dates which will assure an even return of invested funds. However, liquidity is not an absolute concept b u t rather one of degree. T h e different assets which life insurance companies hold, vary in their degree of liquidity from complete shiftability to a very low scale of shiftability. W i t h the exception of cash and d e m a n d deposits, United States government bonds and T r e a s u r y obligations have the highest degree of liquidity. W h i l e this is particularly true of short-term Treasury obligations and government marketable issues, even government 2%'s which the Treasury D e p a r t m e n t has recently issued provide the company with an asset that can be 9 These selected companies account for over 50 per cent of the total admitted assets of the life insurance industry. 10 T h e average since 1952 figures 11 T h e average or losses resulting

yield from stocks was computed for a nine-vear period were not available. rate of return from bonds and stocks includes any profits f r o m liquidation d u r i n g the period.

CS

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• f η s o Cs O I-; r r-' i/i v

1

fi o sO ri fi

η m T—« o - t ' to' f i

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m •>»• ri fi

o sO 00 fi fi fi

r- o fcfi

fi fl m rri fi

f - Cs f l sO CS o ci ri f i

o fi SO sO m f l O r - ' -t ^ Tf

o o so r i •ν

r-- Cs r - o Cs r i m' r i

t - Cs Cs U-l f l η sO •M"' τ ' •Χ·'

(Ν f l fi r i u-ì

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per cent Treasury notes. T h e notes offered in exchange will be dated April 1 and October 1 of each year with a p p r o p r i a t e interest adjustments to dates of exchange" (Federal Reserve Bulletin, March, 1951). 13 Albert Gailord H a r t , Money, Debt and Economic Activity (New York: Prentice-Hall, Inc., 1948), p. 57. 14 " T h e formalities of a mortgage have to be gone through all over again if it is transfered to a new creditor" (Ibid.).

" F o r example, the n u m b e r of prospective buyers for a development such as the Metropolitan's Stuyvesant T o w n , which has a book value of $93 million, or New York Life's Fresh Meadows development, which has a book value of $57 million, is of course very limited. le United States government securities account for 14 per cent a n d cash for 1.6 per cent of the total assets of the life insurance industry (Institute of Life Insurance, I.ife Insurance Fact Book ¡9">ί, [New York: Institute of Life Insurance, 1953], pp. 57 a n d 76).

24

LIFE

IS SUR Ay CE HOUSISG

PROJECTS

v e s t m e n t p o r t f o l i o is c o n t i n u a l l y m a t u r i n g , a n d t h e y e a r l y reven u e of t h e industry has constantly e x c e e d e d y e a r l y d i s b u r s e m e n t s , as is s h o w n in T a b l e 4. TABLE

4

T O T A L INCOME AND T O T A L DISBURSEMENTS FOR A L L UNITED STATES LIFE INSURANCE COMPANIES FROM 1921-52 (000 o m i t t e d )

Income

Year 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952

i

1,951,418 2,149,186 2,427,328 2,702,770 3,017.800 3,330.298 3,673.151 4,087,933 4,336,738 4,593,973 4,850.376 4,653,396 4,622,292 4,785,985 5.072.095 5,180,225 5,275,094 5,357,452 5,453,134 5,657,842 5,855,121 6,082,931 6,441,841 7,010,715 7.673,987 8,067,772 9,113,815 9,751.215 10,376,074 11,337,000 12.012,000 13,076,000

Disbursements $1,335,418 1,425,186 1,625.328 1.763,770 1,673,800 1,928,298 2,221,151 2,518,933 2,815,738 3,195,973 3,570,376 4,059,396 4,480,292 3,837,985 3,700,095 3,522,225 3.882,049 3.851,452 3,965,134 4,098,842 3,926,121 3,828,931 3,606,841 3.722,715 3,930,987 4,673,772 5,561,815 5,982,215 6.258,074 6.947,000 7.754,000 7,979,000

Source: C o m p u t e d f r o m Institute of L i f e Insurance Lije Insurance Fad Book J95J and Lije Insurance Fact Book 1953 ( N e w Y o r k : Institute of L i f e Insurance,

1951, 1953).

Chapter 4 DEVELOPMENT DF HOUSING INVESTMENTS

Period

from

1921 through

1930

The effective state r e g u l a t i o n of insurance c o m p a n i e s t h a t developed d u r i n g the latter p a r t of the n i n e t e e n t h century, a n d which established the r e q u i r e m e n t s r e g a r d i n g admissibility of assets, p r e v e n t e d life i n s u r a n c e c o m p a n i e s f r o m m a k i n g any substantial i n v e s t m e n t in real estate. 1 From this period u n t i l 1922, life i n s u r a n c e c o m p a n i e s m a d e p e r m a n e n t investment in real estate only to the extent of o w n i n g their h o m e office l a n d a n d buildings.'Fable 5 illustrates the e x t e n t of investment in real estate by life i n s u r a n c e c o m p a n i e s in the decade 1921-30. W i t h the exception of the M e t r o p o l i t a n ' s housing project in 1922, this real estate ((insisted exclusively of h o m e and b r a n c h office b u i l d i n g s , a n d p r o p e r t y a c q u i r e d t h r o u g h foreclosure which was to be held t e m p o r a r i l v. Al ter the first W o r l d W a r a sev ere h o u s i n g shortage developed, especially in m e t r o p o l i t a n areas. T h i s shortage was p a r t i c u l a r l y a d i t e in New York City. It was logical, therefore, for N e w York City to t u r n to the M e t r o p o l i t a n Life Insurance C o m p a n y as a possible investor in housing. Not only did the M e t r o p o l i t a n have its h o m e office in New York b u t it was also the largest i n s u r a n c e 1 [ o s c p h B. M a c l c a - i . l i f e Insurance Nook C o., I n c . , 1945). p p . 170-72.

( 7 t h cd.; N e w Y o r k :

McGraw-Hill

- In a d d i t i o n s t a t e s t a t u t e s a l l o w e d t h e c o m p a n i e s t o h o l d f o r e c l o s e d p r o p e r t i e s , b u t a s p e c i f i c t i m e l i m i t a t i o n ivas set u p a n d t h e c o m p a n i e s h a d t o d i s p o s e of t h i s r e a l p r o p e r t y w i t h i n a c e r t a i n p e r i o d w h i c h w a s g e n e r a l l y f r o m t h r e e to ten years.

25

26

LIFE

INSURANCE

HOUSING

PROJECTS

company in the United States with total assets of $1.3 billion. 3 In order to make this investment possible, the state insurance statutes were amended in 1922 to allow life insurance companies operating in New York to invest in housing projects. 4 Operating under this revision in the insurance code, the Metropolitan constructed, at a cost of $7.5 million, fifty-four 5-story walk-up apartment houses in Long Island City on three sites selected as the most convenient to Manhattan, where the land could be obtained at prices warranting construction.® These apartments rented for $9 per room per month and provided steam heat and hot water, amenities not ordinarily TABLE

5

R E A L ESTATE O W N E D BY U N I T E D STATES L I F E COMPANIES

INSURANCE

(000,000 omitted) Tear 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930

Total $186 197 243 239 266 303 350 403 464 548

Percentage oj Assets 2.3 2.3 2.6 2.3 2.3 2.3 2.4 2.5 2.7 2.9

Source: Institute of Life Insurance, Lift Insurance Fact Bock 1953 (New York: Institute of Life Insurance, 1953).

included at $9 per room rentals. 6 Although it was necessary that the rooms be small, the plan and design gave ample light and cross ventilation to each individual apartment. 7 However, there 3 "It was at the request of the Lockwood Committee of the New York State Legislature that the Metropolitan Life agreed to erect . . . apartments" (A study by the Institute of Life Insurance for the Encyclopedia of Housing, edited by Joseph H. Bunzel, Pittsburgh, Pa.). • T h e permission to invest ran from April 13, 1922, to March 1, 1924. 5 "Metropolitan Life Makes Housing Pay," Fortune, April, 1946, p. 135. e " T h e first suggestion was that Metropolitan build 'cold water" Bats. But Ecker set standards for quality as well as profit . . ." (Marquis James, The Metropolitan Life [New York: Viking Press, Inc., 1947], p. 253). 7 "Each apartment is IJ shaped, with the open end facing an attractively planted interior garden. Between each building is a sixteen-foot space which provides additional light and air. Half the apartments have two exposure), the others have three" (Ibid., p. 254).

DEVELOPMENT

OF HOUSING

INVESTMENTS

27

was one major defect in this apartment project. No playground areas were provided for the children within the project, although the buildings occupied only 50 per cent of the land instead of the legally allowed 70 per cent. Since that time, other projects profiting by the experience gained from this pilot project have provided extensive playgrounds for children and in addition recreation areas for adults. 8 Metropolitan had had no previous experience in constructing a housing project; they were able nevertheless to effect economies in several phases of the building operation." Even with these economies the problem of keeping costs within the original estimates was exceedingly difficult. 10 New York City granted a ten-year period of tax exemption on this project. T h i s tax exemption was provided for under a state law which permitted municipalities to exempt new dwellings for ten years. During this period of tax exemption the Metropolitan netted between 8 and 10 per cent, before depreciation on the new buildings. 11 T h e buildings were ready for occupancy in 1924, and all of the 2,125 suites were occupied immediately and remained 100 per cent occupied until 1931, when vacancies developed due to the depression. At this time rents were lowered to an average of $8.35 per room. Since the early 1940's the buildings have again enjoyed full tenancy. 12 T h e Lockwood Committee was pleased with the results ob8 "Of one feature Haley Fiske was especially p r o u d : his a p a r t m e n t s welcomed children. Unfortunately, children and gardens are a difficult combination, a n d soon iron fences were p u t u p , leaving the young ones only the streets in which to play a n d Metropolitan a problem of improvement in connection with f u t u r e housing plans" (Ibid., p. 255). 8 "Some notable economies were effected in the purchase of materials a n d e q u i p m e n t . Mr. Ecker was able to import brick from the Netherlands and Belgium at two-thirds the cost of domestic brick. . . . Bathtubs were obtained at less than the cost of m a n u f a c t u r e . " ("Metropolitan Life Makes Housing Pay," Fortune, April, 1946, p. 135). 10 "Keeping down the cost was difficult. A building boom had started, a n d the contractor was squeezed between a fixed price a n d rising costs. . . . T h e r e was some sacrifice on workmanship a n d materials, but, on the whole, standards were high and the cost was kept within estimates" (James, op. cit., p. 254). 11 12

Ibid.,

p. 255.

". . . for a period of twenty-three years (1922—44) it [the project] yielded something over p e r cent above amortization to cover depreciation" (Ibid., p . 255).

28

UFE

INSURANCE

HOUSING

PROJECTS

tained by the Metropolitan under the provisions of the housing amendment of 1922, and the provisions were extended in 1924 for two more years. At the end of that period, however, they were allowed to l a p s e . T h e n , other laws, not pertaining to insurance companies, were enacted to attract capital to the field of low-rent housing. 14 Life insurance companies contributed capital to projects undertaken under these laws on a first-mortgage basis, but it was not until 1938 that New York again modified its insurance code to permit life insurance companies to invest directly in housing projects. Period

from 1931 through

1940

This period witnessed one of the worst depressions the country has ever experienced. Due to the very depressed conditions of business, the life insurance companies as holders of mortgages were forced to foreclose on a large a m o u n t of real estate. As T a b l e 6 indicates, these holdings increased over the previous period, both as a percentage of total assets of the companies and in absolute dollar amount. Both farm and u r b a n properties were acquired in substantial amounts. 1 5 T h e companies were unable to liquidate them quickly 13 " R e c o g n i z i n g t h e service of M e t r o p o l i t a n a n d its officers, t h e L o c k w o o d C o m m i t t e e , in its final r e p o r t r e n d e r e d a f t e r i n q u i r i e s p r o t r a c t e d o v e r a p e r i o d of f o u r years, p r a i s e d t h e ' m e n of p u b l i c s p i r i t a n d f o r w a r d v i s i o n ' w h o ' r e a l i z e d t h e g r e a t d a n g e r t o t h e c o m m u n i t y w h i c h g r e w o u t of t h e h o u s i n g s h o r t a g e ' " (Ibid., p p . 255-:">6). u " G o v e r n o r A l f r e d E. S m i t h w i s h e d t o a t t r a c t a d d i t i o n a l s o u r c e s of c a p i t a l t o t h e field of l o w - r e n t h o u s i n g . T h e n e w s t a t e l a w of 1926 c r e a t e d a b o a r d of h o u s i n g . . . . T h e l a w a l l o w e d 6 p e r c e n t m a x i m u m p r o f i t t o t h e o w n e r s , w h o p r o v i d e d o n e - t h i r d of t h e c a p i t a l , w h i l e t h e o t h e r t w o - t h i r d s c o u l d b e b o r r o w e d o n a first m o r t g a g e a t n o t m o r e t h a n 5 p e r c e n t . T h e h o u s e s w e r e t a x e x e m p t f o r t w e n t y years a n d a v e r a g e m a x i m u m r e n t a l s w e r e fixed a t $9 to $12.50 p e r m o n t h p e r r o o m " (Ibid., p . 255). 15 T h e following table divides, i n t o f a r m a n d n o n f a r m , t h e total real e s t a t e h e l d by a l l U n i t e d S t a t e s l i f e i n s u r a n c e c o m p a n i e s f r o m 1935 t h r o u g h 1940:

Tear

Farm

Nonfarm

1935 1936 1937

$658 706 711

$1,328 1,438 1,479

Year

Farm

Nonfarm

1938 1939 1940

$731 707 656

$1,446 1,427 1,404

Source: Institute of Life Insurance, ¿i/ir Insurant! Fact Book 1953 (New York: Institute of Life Insurance, 1953).

DEVELOPMENT

OF HOUSING

INVESTMENTS

29

a n d were forced to h o l d some of the properties for periods in excess of t h e usual five-year limit 1 6 on the h o l d i n g of foreclosed p r o p e r t y s t i p u l a t e d in state i n s u r a n c e codes. 17 I n a d d i t i o n to a c q u i r i n g real p r o p e r t y t h r o u g h foreclosure d u r i n g this period, t h e life i n s u r a n c e i n d u s t r y e n t e r e d again i n t o t h e field of h o u s i n g o n a relatively small scale. I n 1930 t h e P r u d e n t i a l I n s u r a n c e C o m p a n y b e g a n the Chellis A u s t i n p r o j e c t located in N e w a r k , N e w Jersey, t h e p r o j e c t b e i n g o p e n e d for TABLE REAL

ESTATE

OWNED

6

BY U N I T E D

STATES LIFE

INSURANCE

COMPANIES

(000,000 omitted) Total

Tear 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940

$

683 934 1,264 1,689 1,986 2,144 2,190 2,177 2,134 2,060

Percentage oj Assets 3.4 4.5 6.1 7.7 8.6 8.6 •8.3 7.8 7.3 6.7

S o u r c e : I n s t i t u t e of L i f e I n s u r a n c e , Lije Insurance Fad Book 1053 ( N e w Y o r k : I n s t i t u t e of L i f e I n s u r a n c e , 1 9 5 3 ) .

occupancy in 1931.1B Chellis Austin was p r o j e c t u n d e r t a k e n by a life insurance a n d one-half acres chosen for the p r o j e c t b l i g h t e d areas in N e w a r k . T h e p r o j e c t

the first slum clearance company. 1 9 T h e t h r e e were in o n e of the most consisted of six 6-story,

16 Permission to hold real estate beyond the limits set by the insurance rodes of the various states can be authorized by the respective state insurance commissioners. 17 As late as 1944, farm real estate owned by all United Stales life insurance companies still totaled $245 million. 18 T h e New Jersey Insurance Code was modified in 1929 by Chap. 202. Sec. 1-7, pp. 380-83, Laws of New Jersey 1929, to permit this investment, and construction began in 1930. However, since the project was not opened for occupancy until 1931, it has been included in the decade 1931-40 instead of 1921-30. 1B A study by the Institute of Life Insurance for the Encyclopedia Housing, edited by Joseph H . Bunzel, Pittsburgh, Pa.

of

30

LIFE

INSURANCE

HOUSING

PROJECTS

fire-resistant apartment buildings which occupied less than 50 per cent of the ground. T h e remaining land provided playgrounds for the children as well as attractive planted areas. Most of the 407 modern apartments were three and four rooms and rented for an average of about $13 per room per month, with utilities provided for with a flat charge of $1.15 per room per month. 20 T h e Prudential constructed two more projects in Newark somewhat similar to the Chellis Austin development: the Douglass Apartments, which were completed in 1933, and the Harrison Apartments completed in 1935. These latter two developments differed from the Chellis Austin in that they were built specifically for Negro occupants. Two thousand and four hundred people occupied these two projects and paid rents beginning at $8 per room per month and scaling up to $12. These two projects were completed at a cost of $2.4 million. Table 7 gives a comprehensive summary of comparative data on these three projects constructed by the Prudential Insurance Company. In 1938 the New York state legislature again amended its insurance code to permit life insurance companies to invest up to 10 per cent of their assets in moderate-rental housing. This law differed from the 1922 emergency amendment permitting investment in housing in that no provision for tax exemption was made and the law specified no maximum average rent. T h e Metropolitan, having been consulted in advance on the terms of the legislation, announced it would invest $100 million in housing. 21 Unlike the Prudential projects in New Jersey, the new Metropolitan undertaking, called Parkchester, was not a slum clearance project. T h e 129 acres which the project was to occupy were purchased from the New York Catholic Protectory. 22 T h e property was mainly rolling open fields with relatively few buildings, but it was located only about eight miles from Times Square, and transportation facilities were reasonably convenient. In spite of the fact that there were no maximum rents specified, the Metropolitan undertook to build Parkchester to rent at the lowest possible rates that would still provide the company »/bid. 21

"Metropolitan Life Makes Housing Pay," Fortune,

Louis I. Dublin, A Family of Thirty Life Insurance Co., 1943), p. 350. 22

Million

April, 1946, p. 136.

(New York: Metropolitan

DEVELOPMENT

OF HOUSING TABLE

INVESTMENTS

31

7

C O M P A R A T I V E D A T A ON T H E P R U D E N T I A L ' S T H R E E N E W A R K H O U S I N G DEVELOPMENTS

Douglass

Harrison

Chellis Austin

Area of Land, Square Feet of Block 137,941.90 147,841.97 142,600 Area of Land, Square Feet of Lot 41,561.17 44,408.10 142,600 Area of Buildings, Square Feet 33,388.42 36,564.80 57,316 Percentage of Block Occupied 24.0 24.7 40.2 Cubage 1,987,000.00 2,139,000.00 3,479,248.00 Number of Buildings 6 6 6 Number of Stories High 5 and 6 5 and 6 6 Number of Stores 11 Height of Ceilings in Apartments 8'3' 8'3' 8'10$i' Number of Apartments 373 380 407 Number of Rooms 1,105^ 1,154Y2 1,513 Approximate Average Area, Living Rooms, Square Feet 140 150 140 Approximate Average Area Dining Rooms, Square Feet 117 146 Approximate Average Area, Bedrooms, Square Feet 111 115 119 Approximate Avertige Area, Kitchens, Square Feet 71 Y-¿ 70 75 Cost of Land 1250,941.61 $320,319.33 $366,861.12 Cost of Building, Completely Ready for Occupancy $834,582.31 $948,776.41 $2,025,345.11 Square Feet of Block Area Used per Room 124.78 128.06 94.25 Cost of Land per Square Foot $6.04 $7.21 $2.57 Cost of Construction per Cubic Foot, Completely Ready for Occupancy $0.42 $0.443 $0.582 Construction Cost per Room, Completely Ready for Occupancy $754.94 $821.81 $1,338.63 Total Cost per Room Land and Building $981.93 $1,099.26 $1,581.10 Rental Range, per Room per Month $8.00-$11.50 $8.50-$12.00 $10.63-$14.65 Douglass-Harrison Population—2,200 Chellis Austin Population —1,500 Source: A i t u d y by the Institute of Life I n s u r a n c e for the Encydoptdia oj Hoiuing, edited by J o seph H . Bunxel, Pittsburgh, Pa.

32

LIFE

INSURANCE

HOUSING

PROJECTS

with a sound return on their S63 million investment. 2 3 T h e buildings opened piece-meal in 1940 and 1941 and have enjoyed virtually 100 per cent tenancy. Parkchester is the largest single project of its kind undertaken by any private or governmental agency. 2 4 Because of its great size, it is in effect a city within itself, its shopping center being adequate to service the entire housing project. It has its TABLE 8 S T A T I S T I C A L SUMMARY OF P A R K C H E S T E R

Site Area—in Acres Buildings (27.4%) Streets (21.2%) Lawn, Walks, Etc. (51.4%) Buildings (Residential) Building Units, Total (Resid.) 7-Story 8-Story 9-Story 11-Story 12-Story 13-Story Apartments (Total) 2-Room (Rent, S32-S34«) 3-Room (Rent, S39-S53·) 4-Room (Rent, $52-$64*) 5-Room (Rent, S63-J71 *) 6 and 7 Rooms Rent per Room (Average*) Rooms, Total

129 35.5 27.4 66.6 51 171 14 109 11 1 6 30 12,273 98 7,006 4,607 551 11 $14 42,464

Room Areas, Average in Square Feet: Living Room 225 Primary Bedroom 190 Secondary Bedroom 130 Kitchen 55 Bathroom 40 Population (Approximately) 42,000 Density—per Acre: Families 95 Persons 320 Garages (Total Capacity 3,500-4,500) 5 Parking Facilities—Cars 1,279 Theaters (Capacity: 2,000) 1 Stores (Approximately) 200 Land Cost (Approximately) $4,000,000 per Acre $31,000 per Sq. Ft. in Cents 0.71 Cost Total (Approx.) $50,000,000 per Unit (Approx.) $4,100

* Includes gas and electricity. Source: A study by the Institute of Life Insurance for the Etuydoptdia Joaeph H. Bunzel, Pittsburgh, Pa.

oj Housing,

edited by

own police system and facilities for the trained care of the community's children, and there are twenty-two recreational areas c o n t a i n i n g basketball, handball, volley ball, b a d m i n t o n and shuffleboard courts, gyms, slides, swings, and wading pools. Servicing Parkchester is a large maintenance staff with equipm e n t which includes snow-removal trucks, power lawn mowers, forty-six bicycles, a station wagon, a machine shop, an electrical 2 3 A study by the Institute of Life Insurance for the Encyclopedia Housing, edited by Joseph H. Bunzel, Pittsburgh, Pa. 24 Dublin, op. cit.

of

DEVELOPMENT

Ol- HOUSING

INVESTMENTS

33

shop for r e p a i r i n g motors and refrigerators, and a carpentry shop. 25 In spite of the efficient p l a n n i n g and m a n a g e m e n t of Parkchester, certain criticisms have been leveled at the development. Among the most serious is the high concentration of people. 20 However, the designers considered this criticism largely invalid since the 58 buildings occupied only 35.5 of the 129 acres. A statistical summary is presented in T a b l e 8, showing size, cost and other salient features of the Parkchester development. Period

from

1941 through

1952

T h e c u r t a i l m e n t of civilian building brought about by W o r l d W a r II forced the life insurance companies to postpone plans for any great extension into this field. T h e Metropolitan had u n d e r t a k e n in 1941 three projects: Parkfairfax in Alexandria, Virginia; Parkmerced in San I-rancisco; and Parklabrea in Los Angeles. P a r k f a i r f a x was u n d e r t a k e n at the solicitation of the federal government, and the government allocated the material necessary to complete it in 1911.27 T h e two West Coast projects of the M e t r o p o l i t a n were only partly completed in 1945, having been i n t e r r u p t e d by the wartime allocation of materials and lack of priority. 2 8 T h e Equitable Life Assurance Society of the U n i t e d States had planned the Clinton Hill A p a r t m e n t project before the war, b u t the project was held up, like the two West Coast projects of the Metropolitan, by war shortages. Priorities, however, were granted which allowed the Equitable to begin construction in 1942 on three of the planned eleven buildings. 2 8 Before the conclusion of W o r l d W a r II, plans h a d been laid 25

"Metropolitan Life Makes Housing Pay," Fortune, April, 1946, p. 136. "Parkchestcr's high population density (270 persons per acre) has been sharply criticized by architects and city planners. . . . T h e [sudden] concentration of 35,000 [to 40,000] residents on 129 acres . . . has disrupted subway service a n d necessitated building a new public school " ("Metropolitan Life Makes Housing Pay," Fortune, April, 1946. p. 136). 26

27

James, op. cit., p p . 383-84.

28

"At first the need was less obvious in the California cities. Priorities granted there permitted the building of only half of Parklabrea a n d twothirds of Parkmerced" (Ibid., p. 384). 29 T h e government allowed the Equitable to carry out this construction because of the project's strategic location near the Brooklyn Navy Yards where additional housing was greatly needed.

34

LIFE

INSURANCE

HOUSING

PROJECTS

by the Metropolitan for the construction of additional projects, Stuyvesant Town and Riverton, slum clearance projects, and Peter Cooper Village. Table 9 gives a statistical summary showing the size of the Metropolitan's Stuyvesant Town, which is the largest slum clearance project that has been completed by any life insurance company. TABLE 9 STATISTICAL SUMMARY OF STUYVESANT TOWN

Gross Area Net Area Buildings Height Number of Apartments Rental Rooms Apartments by Size

Living Room Average Size Bedroom Average Size Foyer Average Size Kitchen Average Size Bathroom Average Size Estimated Population Garages Below Ground Off Street Parking Store Area Buildings' Coverage of Land

75 61 35 12

Acres Acre· (89 Units) and 13 Stories with Some 10-Story Wings 8,755 33,243 3 Rooms (1 Bedroom) 4,535 4 Rooms (2 Bedrooms) 3,729 5 Rooms (3 Bedrooms) 452 7 Rooms (3 Bedrooms) 39 224 Square Feet—15 X 15 172 Square Feet—12 X 14 78 Square Feet—8 X 10 65 Square Feet—7 X 9 35 Square Feet—5 X 7 24,000 6 with Capacity of about 1,500 Cars 400 Cars 1,000 Linear Feet 25 Per Cent of 75 Acres

Source: A study by the Institute of Life Insurance for the Encycloptàia of Housing, edited by Joseph H . Bunzel, Pittsburgh, Pa.

With the cessation of hostilities many of the other life insurance companies examined this field as a possible area for future investment, and from the end of World War II until December 31, 1952, thirteen companies, in addition to the Metropolitan and the Equitable, constructed housing developments or purchased apartment buildings as investments.30 Five of these 80

T h e Western and Southern Life Insurance Company's acquisition of a 12-story apartment building in 1946 is included as an investment in housing since it was an equity investment and was acquired through purchase and not through foreclosure. However, it was purchased by the company primarily because it was located adjacent to their home office properties, and when it was offered for sale in 1946 the company wanted to assure its maintenance as a first-class apartment building. It was sold in 1952 when the prospective buyer assured the company that the same high standard of operation would be maintained.

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£» Ν ^ ^ ^ ^ oc 00 so vO ' Ν Λ «each year.3 From 1924 through 1931 the total experience was derived only from the Metropolitan's Sunnyside project; from 1932 through 1940 three more projects—Prudential's slum clearance developments—were included in the total experience. By 1952 the book value of the combined project investment included thirty-four housing developments, which ranged in size from $47,000 to $60 million. Since 1948 the combined yield for all life insurance company housing projects has been substantially below the average yield 2

The yield experience of Metropolitan's Stuyvesant Town and Riverton is not included in Table 28 since both developments are subject to the terms of the New York Redevelopment Companies Act which provides for partial tax exemption and limits the yield of projects carried out under the provisions of this Redevelopment Act. The individual operating experience of these projects can be examined in Tables 16 and 17, or in Appendix B. * Projects are included in Table 28 from the date when they have completed a year of operations.

SUMMARY

AND

CONCLUSIONS

99

received from other life insurance company investments, and, in addition, the combined yield has registered large yearly fluctuations. However, the rate of return from many individual projects has been above the average rate of return from other life insurTABLE

28

COMBINED YIELD FROM HOUSING PROJECTS PURCHASED OR CONSTRUCTED BY L I F E INSURANCE COMPANIES

(After Amortization)

Tear 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952

Mean Book Value $

7,335,000 7,387,000 7,180,000 6,937,000 6,685,000 6,438,000 6,177,000 5,904,000 8,120,000 8,062,000 9,029,000 8,951,000 9,259,000 9,633,000 9,529,000 9,362,000 9,137,000 65,043,000 70,169,000 70,052,000 101,372,000 116,404,000 116,565,000 119,946,000 200,447,000 249,399,000 284,732,000 343,637,000 347,546,000

Tield 7.8% 6.1 6.1 6.1 6.1 6.1 6.1 6.1 4.0 -0.1 0.1 2.5 -0.1 3.7 4.0 2.8 3.0 2.0 3.9 3.9 3.7 3.7 3.0 3.4 2.2 2.5 2.7 0.8 1.7

Source: Computed from the annual statements of the life insurance companies which have made housing investments.

ance company investments and has been much more stable than the combined experience of all housing projects. Social and Technical

Aspects

The equity nature of an investment in housing projects involves social and operational aspects which are not generally

100

LIFE

INSURANCE

HOUSING

PROJECTS

present in o t h e r life insurance company investments. Direct investment in housing by the life insurance industry performs an outstanding social service by providing adequate and desirable housing facilities, the social service being particularly pronounced in cases where this investment has resulted in slum clearance developments. T h i s social service feature of an investment in housing developments provides the insurance company with an outstanding m e t h o d of creating favorable public relations and goodwill. T h e problems of tenant relations and disputes arising from them have to some extent offset the favorable public relations created by the investment. In addition, the special problems of management together with a fluctuating yield from the projects have kept most companies from m a k i n g equitv investments in housing, in spite of the social advantages derived from the investments and the satisfactory yield obtained from many of the projects.

Conclusions T h e yield experience from housing projects which have been acquired by insurance companies has not been favorable as a whole. T h i s is particularly true in view of the uncertainties and managerial problems that are associated with this investment. T h e yield from certain specific projects, however, has been quite high when compared with other authorized investments. T h e favorable experience from some projects together with the social aspects may provide sufficient incentive for limited future investment in the field by a few companies, but under present construction costs life insurance companies plan to make no further investments in housing. 4 In addition, the investment management of many companies believes that even with more favorable construction costs the disadvantages of equity housing ownership will prevent any future investment in the field by their companies, and some companies that have made investments in housing have sold or are in the process of selling their housing investments. 5 * W i t h the exception of commitments already made, such as the New York Life's Chicago project. 5 For example, the Prudential Insurance Company has sold their Chellis Austin project in Newark, New Jersey, and a dwelling unit in Cincinnati, Ohio, and plans eventually to dispose of all of their housing investments.

SUMMARY

AND

CONCLUSIONS

101

It can be concluded then that this investment will not exceed a small percentage of total admitted assets of the life insurance industry, and while the legal limits set for the investment have not been approached, in the f u t u r e these limits w o u l d prevent any individual companies f r o m investing a m a j o r percentage of their total a d m i t t e d assets in housing ownership.

APPENDIX A

An and Life trict

Abstract of All the Statutory Provisions of Insurance Codes State Constitutions Pertaining to Real Estate Investment by Insurance Companies for the Forty-Eight States and the Disof Columbia through December 31, 1952

This abstract presents the specific restrictions and limitations which each state has set forth to regulate the investment of insurance companies domiciled within the state. Only those provisions which allow insurance companies to hold real estate permanently are examined. Regulations and restrictions on the type of real estate that can be permanently held, the percentage limit of total admitted assets that can be invested, the percentage limit of total admitted assets per parcel, the annual \vrite-down of the real estate investment, and other special provisions are summarized. Since most insurance companies operate on an interstate basis, restrictions made by each state governing the investment activities of foreign companies are also presented. ALABAMA DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Acquire, hold, and dispose of such real estate as may be necessary or convenient for its office or the conduct or management of its business (Sec. 70. T i t . 10, Code 1940). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. No provision. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and O t h e r Special Provisions. T h e minimum capital ($100,000) may not be invested in real estate (Sec. 70, T i t . 28, Code 1940). FOREIGN

Restrictions Placed on Investment by Foreign Companies. No restrictions.

103

104

LIFE

INSURANCE

HOUSING

PROJECTS

ARIZONA DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Invest in real property necessary for home offices (may rent space therein not immediately required for own use), provided such investment does not reduce surplus assets (exclusive of home office investment) to less than 50 per cent of required m i n i m u m capital or to less than §50,000 in case of m u t u a l company (Sec. 61-325, Code 1939, amended Chap. 7, L. 1948 [7th Sp. Sess.], approved and effective 10/7/48). Hold real estate as an investment for the production of income (added, Chap. 6, L. 1948. approved and effective 10/7/48). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than H o m e Office. T e n per cent in income-producing real estate. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. Five per cent in income-producing real estate. IV. Required M i n i m u m A n n u a l Write-down on Real Estate. No provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May not transact business in Arizona on more favorable conditions than are prescribed by law for similar Arizona corporations (Sec. 5, Art. XIV, Const.). ARKANSAS DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate necessary for principal office building and land, a n d for accommodation in convenient transaction of its business (Sec. 80[7683] Code 1947). Hold real estate as an investment for the production of income (as amended by Act 155, Laws 1947, approved 3/3/47, effective 6/12/47). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate O t h e r than H o m e Office. N o provision. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. N o provision. IV. R e q u i r e d M i n i m u m A n n u a l Write-down on Real Estate. N o provision.

APPENDIXES

105

FOREIGN

Restrictions Placed on Investment by Foreign Companies. H a v e only same power or privilege as domestic companies to purchase, hold, or convey Arkansas real estate (Sec. 11, Art. XII, Const.). CALIFORNIA DOMESTIC

I. T y p e of Real Estate T h a t Can be Permanently H e l d . MayH o l d real estate necessary for principal office building and land, a n d for accommodation in convenient transaction of its business (Sec. 1150, Art. 2, Code 1947). Invest in comprehensive housing projects. Original application for permission had to be filed with the commissioner before Dec. 31, 1941 (Art. 2.5, Code 1947. Sec. 1151.6). Invest "Excess F u n d s " (assets over required m i n i m u m capital) in business or residential real estate (other than that primarily i n t e n d e d for use or valued as agricultural, horticultural, farm, ranch, or m i n e r a l property) a n d any i m p r o v e m e n t s thereon for p r o d u c t i o n of income (Sec. 1194.8 [amended C h a p . 172 (S. 652), Laws 1947, a p p r o v e d 5/8/47], a n d 1194.9, as a m e n d e d ) . II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of R e a l Estate O t h e r than H o m e Office. T w e l v e a n d one-half per cent in housing projects. Five per cent in any income-producing real estate. I I I . Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. M i n i m u m of SI million in housing project. O n e per cent in any income-producing real estate. IV. R e q u i r e d M i n i m u m A n n u a l Write-down on Real Estate. N o provision. V. Miscellaneous Restrictions and O t h e r Special Provisions. T o invest in housing project, insurance c o m p a n y must have assets of at least 550 million. Waiver is filed waiving right to deduct real estate taxes f r o m Calif o r n i a gross p r e m i u m tax. T o invest in any real estate, insurance c o m p a n y must have assets of §25 million. Commissioner may find that interest of company requires that specified parcel be sold within reasonable time. FOREIGN

Restrictions Placed o n I n v e s t m e n t by Foreign Companies. Foreign c o m p a n i e s shall not be allowed to transact business o n more favorable conditions t h a n are prescribed by law to similar California c o m p a n i e s (Sec. 15, Art. X I I , Const.).

106

LIFE INSURANCE

HOUSING

PROJECTS

COLORADO DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate necessary for principal office; may rent space not immediately required; and may hold real estate convenient for the transaction of its business (Sec. 24, Code 1947). Hold real estate as an investment for the production of income, either business or residential, exclusive of farms or hotels (Sec. 24, Code 1947, approved 3/7/47, effective 7/17/47). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. T e n per cent in income-producing real estate. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. One per cent in income-producing real estate. IV. Required Minimum Annual Write-down on Real Estate. One and one-half per cent on income-producing real estate. FOREIGN

Restrictions Placed on Investments by Foreign Companies. Have only same power as domestic companies to purchase, receive, hold, and convey Colorado real estate (Sec. 41-110, 1935 Col. Stat. Ann.). CONNECTICUT DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate as transaction of business may require (Sec. 3382, G.S. 1930). Loan or invest its funds to an amount not exceeding in the aggregate 8 per cent of its total admitted assets in loans or investments not qualifying or not permitted under its charter or under any section of the general statutes (Public Act 100 [H.B. 1153], Acts 1947, approved and effective 5/23/47, amended 1951). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. Eight per cent in any type of nonqualifying asset. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel.

No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold real estate as purposes may require (Sec. 3382, G.S. 1930).

APPENDIXES

107

DELAWARE DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for principal office building and land and for convenient accommodation to transaction of its business (Sees. 491 and 492, R.C. 1935, as amended). Invest u p to 5 per cent total assets in investments not otherwise qualified or permitted under Chapter 20 (Sec. 492 [16], R.C. 1935, added SB 333, L. 1947, approved and effective 4/7/47). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. Five per cent in any type of nonqualifying asset. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold real estate for production of income under the law of their state of domicile (Sec. 492C, R.C. 1936, added SB 333, L. 1947, approved and effective 4/7/47). DISTRICT OF

COLUMBIA

DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Invest in real estate for principal office land and building and for the convenient accommodation in transaction of its business (Sec. 35535, D.C. Code 1940). Hold real estate for the production of income (Sec. 35-535, D.C. Code 1940, amended P.L. 672—80th Congress; approved and effective 6/19/48). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. Five per cent in income-producing real estate. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. T w o per cent per twelve-month period in income-producing real estate. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. Aggregate limit on all real estate investment shall not exceed 10 per cent of admitted assets.

108

LIFE INSURANCE

HOUSING

PROJECTS

FOREIGN

Restrictions Placed on Investment by Foreign Companies. No restrictions. FLORIDA DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Acquire such real estate as their purposes require, in the absence of special provision (Sec. 610.03, St. 1941). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. No provision. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. T h e investment restrictions for both domestic and foreign insurance companies are based on minimum capital requirements, not in excess of $100,000 and $200,000, respectively (Sees. 262.04 and 626.06, St. 1941). FOREIGN

Restrictions Placed on Investment by Foreign Companies. Limited to the same rights, powers and privileges as domestic companies (Chap. 22, 653, L. 1945). GEORGIA DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Invest in home office building, if assets exceed $100,000, u p to 25 per cent assets, subject to prior approval of commissioner (Sec. 56-224 [e], Code 1933). Invest in real estate acquired to lease or rent for at least 20 years (Act. 361, Laws 1947, [HB 212], approved 3/28/47). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. Five per cent in income-producing real estate acquired to lease or rent. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. R e n t to be sufficient to enable amortization of investment before lesser of termination of lease or forty years.

APPENDIXES

109

V. Miscellaneous Restrictions and Other Special Provisions. T o t a l real estate holdings including home office cannot exceed 25 per cent of assets. FOREIGN

Restrictions placed on Investment by Foreign Companies. Have only same power or privilege as domestic companies to acquire, hold, and convey Georgia real estate (limited to 5,000 acres) (Sec. 221502, Code 1933). IDAHO DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for its principal office and for the convenient accommodation in the transaction of its business, and limited to 5 per cent of assets (H.B. 137, Chap. 202, amending Sees. 40-606, 40-604, Code 1932). Hold real estate as an investment for the production of income (H.B. 137. Chap. 202. amending Sees. 40-606, 40-604, Code 1932). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. Five per cent limit in income-producing real estate. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. No real estate holding can be permanently acquired without the approval of the Department of Finance. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold real estate only in the same manner and subject to the saine limitations as Idaho life insurance companies (Sec. 10, Art. 11, Const., and Sec. 40-406, Code 1932, Cf. Chap. 66, L. 1937). ILLINOIS DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate only as a requisite for convenient accommodation of transaction of its business up to 5 per cent admitted assets; director of insurance may grant permission to so invest increased amount he finds necessary to provide convenient accommodation for company's business (Sec. 128, Code 1947). Hold and construct apartments, tenements, or other dwellings, ex-

110

LIFE INSURANCE

HOUSING

PROJECTS

eluding hotels, but including accommodations for retail stores, shops, offices, and other community services reasonably incident to such projects (Sec. 125, 1949 Supp. to Code). Invest 5 per cent in assets not specifically authorized in the insurance code (H. 412 approved 1947). Invest to an amount not to exceed in the aggregate 5 per centum of admitted assets in real estate under lease (added 1951). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. T e n per cent in housing projects. Five per cent in any type of nonqualifying asset. Five per cent in real estate under lease. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. Real estate under lease must be amortized over the primary term of the lease or a period of forty years, whichever may be less. V. Miscellaneous Restrictions and Other Special Provisions. Insurance director must always give approval for investment in housing projects. Combined investments in housing projects and real estate mortgages not to exceed 50 per cent of assets. FOREIGN

Restrictions Placed on Investment by Foreign Companies. No restrictions. INDIANA DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for principal office building and land and for the convenient transaction of its business (Sec. 39-4203, Code 1942). Hold unencumbered real estate if under lease or for leasing for terms of from 5 to 99 years (Sec. 39-4202, Burns" S. as amended 1947). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. Five per cent in income-producing real estate acquired for leasing. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. T w o per cent in income-producing real estate acquired for leasing. IV. Required Minimum Annual Write-down on Real Estate. T w o per cent on income-producing real estate acquired for leasing. V. Miscellaneous Restrictions and Other Special Provisions. Additional provisions are made as to special type of lease and writedown.

APPENDIXES

111

FOREIGN

Restrictions Placed on Investment by Foreign Companies. May only have same power and privilege as domestic companies to acquire, hold, and convey Indiana real estate (Sec. 39-4702, 1940 Replacement, Burns' S. 1933). IOWA DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate necessary for the accommodation of the company as home office or for the transaction of its business, u p to 10 per cent of legal r e s e n e (Sec. 511.8, 1949 Supp. to Code). Hold real estate including leaseholds, except land used for agricultural, horticultural, ranching, or mining purposes, for the production of income (Sec. 511.8, Code 1946, amended SF 140, approved 3/24/47, effective 4/5/47). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. Five per cent of legal reserve in income-producing real estate. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No Provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. Have only same power as domestic companies to acquire, hold, and (onvey Iowa real estate (Sec. 494.14, Code 1946). KANSAS DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for its convenient accommodation in the transaction of its business u p to 5 per cent admitted assets (Sec. 40-228, Code 1945). Hold real estate for income purposes (Sec. 40-228, G.S. 1935, amended 1947). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. No provision. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. T w o per cent or 50 per cent of surplus (lesser of the two) in incomeproducing real estate. IV. Required Minimum Annual Write-down on Real Estate. T w o per cent on income-producing real estate.

112

LIFE INSURANCE

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PROJECTS

V. Miscellaneous Restrictions and Other Special Provisions. All real estate holdings not to exceed 10 per cent of admitted assets FOREIGN

Restrictions Placed o n Investment by Foreign Companies. May invest as permitted by its domiciliary law, except it shall not engage in agricultural or horticultural business or raising and harvesting prescribed grains or potatoes, or milking cows for dairy purposes (HB 291, L. 1947, approved 4/8/47). KENTUCKY DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: H o l d real estate for principal office and other unencumbered real estate for its convenient accommodation in the transaction of its business u p to 5 per cent of admitted assets (Sec. 304.437, Code 1950). Sublet part of real estate held u n d e r section 304.437 to others u p o n the approval of the commissioner (Sec. 304.438, Code 1950). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate O t h e r than Home Office. T e n per cent in real estate for subleting. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Pàrcel. Five per cent in real estate for subleting. IV. Required M i n i m u m A n n u a l Write-down on Real Estate. N o provision. V. Miscellaneous Restrictions and Other Special Provisions. Real estate of any corporation subject to escheat except that which is necessary for its legitimate business (Sec. 192, Const.; Sec. 271.080, R.S. 1943). FOREIGN

Restrictions Placed on Investment by Foreign C o m p a n i e s Companies shall possess assets of same general character as domestic companies, except director may recognize as legal investments such investments as are authorized by home state (Sec. 296.190, R.S. 1943). LOUISIANA DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: H o l d real property for the convenient accommodation of the transaction of its business u p to 20 per cent of admitted assets (Sec. 18.04, Code 1948). H o l d a n d construct apartments, tenements, or other dwellings, excluding hotels, but including accommodations for retail stores, shops, offices, a n d other community services reasonably incident to such projects (Sec. 18.04, Code 1948).

APPENDIXES

113

Invest 5 p e r cent of assets without regard to restrictions of the code (Sec. 18.05, C o d e 1948). II. Percentage I.imit of I'otal A d m i t t e d Assets T h a t May Be Invested in a Specific T y p e of Real Estate O t h e r than H o m e Office. Five per cent in housing projects. Five per cent in any type of n o n q u a l i f y i n g asset. I I I . Percentage Limit of Total A d m i t t e d Assets T h a t May Be Invested in Each Parcel. N o provision. IV. R e q u i r e d M i n i m u m A n n u a l Write-down on Real Estate. N o provision. V. Miscellaneous Restrictions a n d O t h e r Special Provisions. I n v e s t m e n t in housing project can be m a d e only with the a p p r o v a l of the Secretary of State of Louisiana. FOREIGN

Restrictions Placed o n I n v e s t m e n t by Foreign Companies. I n v e s t m e n t s shall be as p e r m i t t e d by laws of its domicile b u t shall be of a quality substantially as high as those r e q u i r e d u n d e r C h a p . 18, (Investments of Domestic Insurers) f o r similar f u n d s of like domestic insurers (Sec. 18.11, Code, Act 195, Acts 1948, a p p r o v e d 6 / 3 0 / 4 8 a n d effective 10/1/48). MAINE DOMESTIC

I. I ype of R e a l Estate T h a t Can Be P e r m a n e n t l y Held. R e a l estate investments in M a i n e a p p a r e n t l y may be m a d e w i t h o u t restriction. T h i s conclusion is based o n the following reasoning: (1) C o r p o r a t i o n s may hold and convey lands (Secs. 1, 15, 16, a n d 18. C h a p . 49, Sec. 22, C h a p . 56, R.S. 1914). (2) U s u a l insurance real estate restrictions are not present. II. P e r c e n t a g e Limit of T o t a l A d m i t t e d Assets T h a t May Be Invested in a Specific T y p e of Real Estate O t h e r t h a n H o m e Office. N o provision. I I I . Percentage Limit of T o t a l A d m i t t e d Assets T h a t May Be Invested in Each Parcel. N o provision. IV. R e q u i r e d M i n i m u m A n n u a l W r i t e - d o w n o n R e a l Estate. N o provision. FOREIGN

Restrictions Placed o n I n v e s t m e n t by Foreign Companies. N o restrictions. MARYLAND DOMESTIC

I. T y p e of R e a l Estate T h a t C a n Be P e r m a n e n t l y H e l d . May: H o l d u n e n c u m b e r e d real estate for office a n d business p u r p o s e s u p to 20 p e r cent of a d m i t t e d assets (Sec. 25, C o d e 1949).

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Hold unencumbered, fee simple or improved leasehold real estate other than to be used primarily for mining, recreations, amusement, hotel, or club purposes, acquired as an investment for production of income (Sec. 25 [Ka] Code 1949). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. Five per cent in income-producing real estate. III. Percentage Limit of T o t a l Admitted Assets That May Be Invested in Each Parcel. One-fourth of 1 per cent in income-producing real estate. IV. Required M i n i m u m Annual Write-down on Real Estate. T w o per cent on income-producing real estate. V. Miscellaneous Restrictions and Other Special Provisions. Twenty per cent limit on all real estate holdings, including home office properties. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May acquire by purchase or in any other manner, and generally deal with, Maryland real estate that it may be authorized to acquire, hold, or invest in by its domiciliary law, provided such property or investment is of grade and quality as to security substantially equivalent to that required for domestic companies (Sec. 25, [3], Art. 48A, Ann. C. 1939). MASSACHUSETTS DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate necessary for convenient accommodation in the transaction of its business u p to 10 per cent of assets (Sec. 63, Code 1939). Hold real estate for investment as housing project (project must be designed for 25 families or more) (Sec. 66A, Chap. 175, G.L. 1932, amended Chap. 504 [H.B. 2144], L. 1947, approved and effective 6/7/47). Hold real estate, except for agricultural purposes, for investment purposes (Chap. 269, Code 1947, approved 4/17/47, and effective 7/17/47). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. T h r e e per cent in income-producing real estate. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. One per cent in income-producing real estate. IV. Required Minimum Annual Write-down on Real Estate. T w o per cent on income-producing real estate. V. Miscellaneous Restrictions and Other Special Provisions. Limit on all real estate held is not to exceed 20 per cent of assets.

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115

FOREIGN

Restrictions Placed on Investments by Foreign Companies. No restrictions. Provisions specifically applicable to domestic companies do not thereby become applicable to foreign companies (Sec. 150, Chap. 175 an. L., amended Chap. 60a, L. 1945). MICHIGAN DOMESTIC

I. Type of Real Estate That Can Be Permanently Held. May: Hold real estate for its immediate accommodation in the transaction of its business (Sec. 511.10, Sub. Sec. 10, Code 1950). Invest in housing projects and incidental retail and service facilities, and construction, development, and operation of income-producing real estate (Sec. 511.10 Sub. Sec. 10, Code 1950, amended 1952). II. Percentage Limit of Total Admitted Assets That May Be Invested in a Specific Type of Real Estate Other than Home Office. Ten per cent of assets or 25 per cent of surplus or combined capital and surplus in housing projects and income-producing real estate. III. Percentage Limit of Total Admitted Assets That May Be Invested in Each Parcel. Ten per cent of surplus or combined capital and surplus in housing projects or income-producing real estate. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. Total real estate holdings are limited to 20 per cent. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May invest required capital or surplus or assets in conformity with domiciliary law and specifically in housing projects including incidental retail and service facilities within Michigan, if within franchise under such law (Sees. 12,312, 12,313, Comp. L. 1929, amended Act 45, L. 1948 [Ex. Sess.], approved and effective 5/14/48). MINNESOTA DOMESTIC

I. Type of Real Estate That Can Be Permanently Held. May: Hold real estate for its convenient accommodation in the transaction of its business limited to 25 per cent of its cash assets (Sec. 60.49, St. 1945). Hold real estate for the erection of apartments or other dwellings, within 10 miles of cities of 25,000 or more population (hotels are ex-

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eluded) (Sees. 61.11, 61.12, St. 1945 as amended Chap. 439 [HB 1316] Laws 1947). Invest in real estate excluding agricultural, mining, hotel, or amusement, for the production of income Sec. 61.11, 61.12, St. 1945 as amended Chap. 439 [HB 1316] Laws 1947). Hold real estate with the approval of the commissioner for the purpose of providing necessary homes and living quarters for its employees (Sec. 60.49, Code 1945 as amended Chap. 333 [HB 1247] Laws 1949). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. T e n per cent for housing projects. T h r e e per cent in income-producing real estate. T h r e e per cent for employee housing. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. One-fourth of 1 per cent in real estate other than housing project. IV. Required Minimum Annual Write-down on Real Estate. T w o per cent on real estate other than housing project. V. Miscellaneous Restrictions and Other Special Provisions. Investment in housing projects can be made only with commissioner's approval. FOREIGN

Restrictions Placed on Investment by Foreign Companies. Foreign company, if so authorized by domiciliary law, may make Minnesota real estate investments provided for in Section 61.12, subdivisions 2 a n d 3, St. 1945, u n d e r doctrine of comity, but limitations of said subdivisions as to amount of investments in real property apply to its Minnesota investments (opinion of Attorney General, dated J u n e 23, 1947). MISSISSIPPI DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for principal office and for its convenient accommodation in the transaction of its business (Sec. 5653, Code 1942). Invest in real estate for the production of income (Sec. 5553, Code 1942, amended H.B. 621, L. 1946). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. Fifteen per cent in income-producing real estate. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision.

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117

FOREIGN

R e s t r i c t i o n s Placed o n I n v e s t m e n t by F o r e i g n C o m p a n i e s . M a y h o l d r e a l estate o n l y in t h e s a m e m a n n e r a n d s u b j e c t to s a m e restrictions as d o m e s t i c c o m p a n i e s (Sees. 534-1 a n d 5677, C o d e 1942). Μ ιssoι RI DOMESTIC

I. T y p e of R e a l Estate T h a t C a n Be P e r m a n e n t l y H e l d . May: H o l d real estate necessary for its a c c o m m o d a t i o n i n t h e t r a n s a c t i o n of its business l i m i t e d to an a m o u n t n o t to exceed c a p i t a l stock or $100,000 f o r m u t u a l c o m p a n i e s . I n v e s t in real estate subject to r e d e v e l o p m e n t a r e a u n d e r U r b a n Red e v e l o p m e n t C o r p o r a t i o n Act to erect a p a r t m e n t s , t e n e m e n t s , o r o t h e r d w e l l i n g houses, n o t hotels, i n c l u d i n g a c c o m m o d a t i o n s f o r retail stores, shops, offices, a n d o t h e r c o m m u n i t y services r e a s o n a b l y i n c i d e n t to p r o j e c t s (Sec. 6032, [11], R.S. 1939. a m e n d e d SB 321, L. 1945, a p p r o v e d 3 / 2 6 / 4 6 a n d effective 7 / 1 / 4 6 ) . H o l d real estate for t h e p r o d u c t i o n of i n c o m e b u t said i n v e s t m e n t shall o n l y b e in n e w business or n e w i n d u s t r i a l p r o p e r t i e s o r n e w resid e n t i a l p r o p e r t i e s o r n e w h o u s i n g (Sec. 6029, R.S. 1939, a m e n d e d H B 376, L. 1948, a p p r o v e d 4 / 5 / 4 8 a n d effective 7 / 1 8 / 4 8 ) . I I . P e r c e n t a g e L i m i t of T o t a l A d m i t t e d Assets T h a t M a y Be I n vested in a Specific T y p e of Real E s t a t e O t h e r t h a n H o m e Office. Five p e r c e n t for h o u s i n g projects. Five p e r c e n t for a n y specified r e a l estate. I I I . P e r c e n t a g e L i m i t of T o t a l A d m i t t e d Assets T h a t M a y Be I n vested in E a c h Parcel. N o provision. IV. R e q u i r e d M i n i m u m A n n u a l W r i t e - d o w n o n R e a l Estate. N o provision. V. M i s c e l l a n e o u s Restrictions a n d O t h e r Special Provisions. I n v e s t m e n t in h o u s i n g p r o j e c t s m u s t b e a p p r o v e d by t h e S u p e r i n t e n d e n t of I n s u r a n c e . Specified r e a l estate for t h e p r o d u c t i o n of i n c o m e c a n b e a c q u i r e d o n l y w i t h t h e S u p e r i n t e n d e n t of I n s u r a n c e ' s a p p r o v a l . FOREIGN

R e s t r i c t i o n s Placed o n I n v e s t m e n t by F o r e i g n C o m p a n i e s . If a d m i t t e d to d o business in Missouri, m a y invest its c a p i t a l reserve a n d s u r p l u s f u n d s in same m a n n e r , to s a m e e x t e n t , a n d in same investm e n t s as d o m e s t i c c o m p a n i e s , p r o v i d i n g n o t h i n g c o n t a i n e d in Sec. 6032A, R.S. 1939, shall b e so c o n s t r u e d as to p r o h i b i t such f o r e i g n comp a n y i n v e s t i n g said f u n d s as p e r m i t t e d by its c h a r t e r a n d t h e laws of its d o m i c i l i a r y state (Sec. 6032A, R.S. 1939, a d d e d SB 323, L. 1945, app r o v e d 3 / 2 6 / 4 7 a n d effective 7 / 1 / 4 6 ) . If a d m i t t e d to d o business in Missouri, m a y , p r i o r to 6 / 2 3 / 5 2 a n d in M i s s o u r i C o n s t i t u t i o n a l c h a r t e r cities of 350,000 o r m o r e u n d e r t a k e ,

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alone or in conjunction with, or as lessee of domestic or admitted foreign life insurance company or urban redevelopment corporation, a redevelopment project under Urban Redevelopment Corporations Act (Sees. 7875.44, et seq.. R.S. 1939, amended SB 238, L. 1947, approved and effective 6/23/47). MONTANA DOMESTIC

I. Type of Real Estate That Can Be Permanently Held. May: Hold real estate for the convenient accommodation in the transaction of its business (Sec. 6270, R.C. 1935). II. Percentage Limit of Total Admitted Assets That May Be Invested in a Specific Type of Real Estate Other than Home Office. No provision. III. Percentage Limit of Total Admitted Assets That May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold real estate only in the same manner and subject to the same limitations as Montana life insurance companies (Sec. 11, Art. XV, Const.; Sec. 6659, R.C. 1935). NEBRASKA DOMESTIC

I. Type of Real Estate That Can Be Permanently Held. May: Hold real estate for home offices up to 25 per cent of admitted assets and may rent balance of space therein (Sec. 44-311.02, Code 1949). Hold real estate for the construction and operation of comprehensive, moderate cost rental housing projects, not including hotels, but including accommodations for retail stores, garages, shops, offices, and other community and recreational facilities reasonably connected with such housing projects. Projects must house at least 50 families or more and be located within the limits of a village or city (HB 215 Chap. 133, approved and effective 3/9/49). May acquire and hold unencumbered fee in real estate which is leased for sufficient rentals to net 3 per cent on investment in fee, which shall not exceed its appraised value, and to amortize the investment within lesser of 40 years or terms of lease, lessee to pay all taxes, maintenance, and operating costs, etc. (Sec. 44-309, [5], [c], R.S. 1943, added Chap. 197, Laws 1945, amended LB 359, L. 1947, approved 5/9/47 and effective 8/10/47). Hold real estate essentially residential or commercial in cities or towns for the production of income (Sec. 44-309, [12], R.S. 1943, added LB 359, L. 1947, approved 5/9/47 and effective 8/10/47).

APPENDIXES

119

Invest u p to 5 per cent of admitted assets in property, real, personal, or mixed not otherwise qualified for investment (Sec. 44-309, [13], R.S. 1943, added LB 359, L. 1947, approved 5/9/47 and effective 8/10/47). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. Five per cent in residential or commercial real estate. Five per cent in any real estate personal, real or mixed. One-fourth of capital and surplus or if mutual, one-fourth of surplus in housing projects. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. One per cent in residential or commercial real estate. IV. Required Minimum Annual Write-down on Real Estate. T w o per cent in residential or commercial real estate. V. Miscellaneous Restrictions and Other Special Provisions. T o be eligible to invest in housing projects the company must have capital stock and surplus assets in excess of 55 million, or if a mutual company, surplus in excess of $5 million. FOREIGN

Restrictions Placed on Investment by Foreign Companies. Foreign corporations transacting or seeking to transact business in this state shall be subject, under general law, to regulation, supervision and general control, and shall not be given greater rights or privileges than are given domestic corporations of a similar character (Sec. 1, Art. XII, Const.). NEVADA DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for the convenient accommodation of the transaction of its own business u p to 15 per cent of admitted assets (Sec. 3656.53, Comp. L. Supp. 1941). Hold real estate for the purpose of constructing and generating building for business purposes, building apartments, tenements, or other dwelling houses (SB 196 Sec. 54 as amending Sec. 3656.53, Code 1929 and Comp. L. Supp. 1941). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. Fifteen per cent in housing projects for business purposes. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. An estimate of the rental must assure a net return of 5 per cent on the project, and the project must be amortized within a period of twenty years. V. Miscellaneous Restrictions and Other Special Provisions.

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Approval of the housing project must be obtained from the governing body of the city in which project will be located. FOREIGN

Restrictions Placed on Investment by Foreign Companies. There appears to be no prohibition against the ownership of real estate in Nevada by foreign life insurance companies. Sec. 5656.25. Comp. L. Supp. 1941, sets forth as one condition for the issuance of a license that "Its f u n d s are invested in accordance with the laws of its domicile." NEW

HAMPSHIRE

DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate at least ample and adequate for the transaction of its own business (Sees. 16, 17, Chap. 328, R.L. 1942). Invest in assets not qualifying or permitted under the Code to an amount not exceeding 5 per cent of their assets (H.B. 163, Chap. 48, approved and effective 3/10/49). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. Five per cent in any type of nonqualifying assets. III. Percentage Limit of T o t a l Admitted Assets T h a t May be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. There appears to be no prohibition against the ownership of real estate in New Hampshire by foreign life insurance companies. NEW

JERSEY

DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for its accommodation in the transaction of its business (Sec. 33, Code 1947; R.S. 17:18-3, Code 1937). Hold real estate for the purpose of constructing thereon apartments, or other dwelling houses (low rental housing projects) (Art. 2, Sees. 52-56, Code 1947; R.S. 17:19-18 to 19:19-12, Code 1937). Invest in real estate, either commercial or residential for the production of income (Sec. 17:18-3, 17:24-1 as amended; Sec. 17:19-18 R.S. Code 1937). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office.

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Five per cent in housing projects. Five per cent in commercial or residential real estate. I I I . Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. R e q u i r e d Minimum A n n u a l Write-down on Real Estate. Provision made for write-down of leasehold investments, and also for housing projects. V. Miscellaneous Restrictions and O t h e r Special Provisions. Rents on housing projects fixed to yield 5 per cent minimum to 6 per cent m a x i m u m after amortization (Art. 2, Sec. 55, Code 1947). Property acquired through eminent domain can be sold only with the consent of governing body (Art. 1. Sec. 51. Code 1917). FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold only in same m a n n e r and subject to same limitations as New Jersey life insurance companies (Sec. 1 7 : 3 2 - 9 , R.S. 1937). NEW

MEXICO

DOMESTIC

I. T y p e of R e a l Estate T h a t Can B e Permanently Held. May: Hold real estate for principal office building and land and for the convenient accommodation in the transaction of its business (Sec. 30, Code 1931). Hold real estate for the production of income (Sec. 6 0 - 3 0 7 , St. 1941 Ann., amended S B 221, approved 3 / 2 1 / 4 7 ) . I I . Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of R e a l Estate O t h e r than H o m e Office. T e n per cent in income-producing real estate. I I I . Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. I V . R e q u i r e d Minimum Annual AVrite-down on R e a l Estate. No provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. Foreign corporations have only the same powers as domestic companies (Sec. 5 4 - 8 0 1 , St. 1941). NEW

YORK

DOMESTIC

I. T y p e of R e a l Estate T h a t Can B e Permanently Held. May: H o l d real estate for principal office land and building and for the convenient accommodation in the transaction of its business. Limited to 10 per cent o f assets (Sec. 18, Baldwin's A n n . Code 1940).

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Hold real estate as acquired under the emergency housing section (Chap. 658, Code 1922). Hold real estate acquired under the emergency housing section (Chap. 25, Code 1938). Hold real estate acquired pursuant to Section 84 which currently allows investment in housing projects (Chap. 557, Code 1946). Hold real estate, except agricultural, recreational, mining, or amusement purposes, for the production of income (Sec. 81 [h] 1948 Supplement to Insurance Code of New York). II. Percentage Limit of Total Admitted Assets That May Be In vested in a Specific Type of Real Estate Other than Home Office. T e n per cent limit for housing projects. Three per cent for any type of income-producing real estate. III. Percentage Limit of Total Admitted Assets That May Be Invested in Each Parcel. One-half of 1 per cent for any type of income-producing real estate, excluding housing projects, for insurers with assets up to $250 million, and one-fourth of 1 per cent for those over $250 million. IV. Required Minimum Annual Write-down on Real Estate. T w o per cent on income-producing real estate. V. Miscellaneous Restrictions and Other Special Provisions. T h e 1922 housing project provision has expired. T h e 1938 housing provision renewed until 1949. FOREIGN

Restrictions Placed on Investment by Foreign Companies. If their investments do not comply in substance with investment requirements and limitations imposed on like domestic companies, superintendent may refuse license (Sec. 90, [I], Ins. L.). NORTH

CAROLINA

DOMESTIC

I. Type of Real Estate That Can Be Permanently Held. May: Hold real estate for convenient transaction of its own business (Sec. 58-49 G.S. 1943 and Cum. Supp. 1947). Hold real estate for the purpose of leasing or under lease (Sec. 5879 I [K] G.S. 1943, amended Chap. 386, Ins. L. 1945, amended 1951). II. Percentage Limit of Total Admitted Assets That May Be Invested in a Specific Type of Real Estate Other than Home Office. Six per cent in income-producing real estate acquired for leasing. III. Percentage Limit of Total Admitted Assets That May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. Additional requirements as to lease and write-down thereof.

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123

Total investment not to exceed capital and surplus. Limit of 10 per cent for all real estate holdings, but commissioner may approve unspecified investments. FOREIGN

Restrictions Placed on Investment by Foreign Companies. Investments must comply in substance with limitations imposed on domestic insurance companies (Chap. 386, Code 1945). NORTH

DAKOTA

DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for convenient accommodation in the transaction of its business (Sec. 26-0812, Code 1950). Hold real estate for the production of income, excluding farm real estate (Sec 26-0811, Code 1950). Make investments u p to 5 per cent of assets which are not qualified or permitted as legal investments under the Code (Sec. 26-0811, [12], Rev. Code 1943, added H B 179, L. 1947, approved and effective 3/15/47). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. T e n per cent in any type of income-producing real estate. Five per cent in type of assets not specifically authorized. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. One per cent in income-producing real estate. IV. Required Minimum Annual Write-down on Real Estate. T w o per cent on income-producing real estate. FOREIGN

Restrictions Placed on Investment by Foreign Companies. Must satisfy the commissioner that its capital or net assets are well invested and immediately available for the payment of losses in this state (Sec. 26-0901, Code 1950). T h e r e appears to be no prohibition against the ownership of North Dakota real estate by foreign companies. OHIO DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for principal office or used in connection therewith (Sec. 9357, Code 1943). Invest 5 per cent of assets in types of investments not specifically authorized (Sec. 9357-2, G. Code as amended 1947).

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II. Percentage L i m i t of T o t a l A d m i t t e d Assets T h a t May Be Invested in a Specific T y p e of R e a l Estate O t h e r t h a n H o m e Office. Five per cent in any type of n o n q u a l i f y i n g asset. I I I . Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. N o provision. IV. R e q u i r e d M i n i m u m A n n u a l Write-down o n R e a l Estate. N o provision. FOREIGN

Restrictions Placed on I n v e s t m e n t by Foreign Companies. T h e r e appears to be n o provisions as to acquisition of O h i o real estate by foreign life insurance companies. OKLAHOMA DOMESTIC

I. T y p e of Real Estate T h a t Can Be P e r m a n e n t l y Held. May: Hold real estate for the convenient accommodation in the transaction of its own business u p to 10 per cent of a d m i t t e d assets (Sec. 17.4. T i t . 36, St. 1941). Invest 5 per cent of assets in income-producing real estate, excluding agricultural, h o r t i c u l t u r a l f a n n , ranch, a n d residential property ( H B 150, 1951). II. Percentage Limit of T o t a l A d m i t t e d Assets T h a t May Be Invested in a Specific T y p e of Real Estate O t h e r than H o m e Office. Five p e r cent of a d m i t t e d assets or company's capital and surplus or surplus. I I I . Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. T w o p e r cent in any o n e site. IV. R e q u i r e d M i n i m u m A n n u a l Write-down on Real Estate. N o provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. No foreign corporation shall be authorized to carry o n in this state any business which a domestic corporation is p r o h i b i t e d f r o m doing, o r be relieved f r o m compliance with any of the r e q u i r e m e n t s m a d e of a similar domestic corporation by the Constitution or laws of the state (Sec. 44, Art. IX, Const.). OREGON DOMESTIC

I. T y p e of Real Estate T h a t Can Be P e r m a n e n t l y Held. May: Hold real estate for principal office building a n d land a n d for convenient accommodation in the transaction of its business (Chap. 180, Laws of 1941 as a m e n d e d by C h a p . 347, Laws 1947).

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125

Hold investments, including real estate not otherwise permitted or otherwise specifically qualified, u p to 7% per cent of assets (Sec. 101— 408.5 [k], O.C.L.A., added Chap. 347 [HB 333], Laws 1947, approved 4/3/47). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. Seven and one-half per cent of assets or surplus funds over all liabilities including statutory reserves, minimum capital requirements and other liabilities (the lesser of the two) in any type of nonqualifying assets. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. N o provision. IV. Required Minimum Annual Write-down on Real Estate. N o provision. V. Miscellaneous Restrictions and Other Special Provisions. If commissioner believes investment made under Section 101^108.5 [k], O.C.L.A., added Chap. 347 [HB 333], is not amply secure, he may direct company to report under oath amount, security and market value of the investment. FOREIGN

Restrictions Placed on Investment by Foreign Companies. Foreign companies have only the same powers and privileges as domestic companies to acquire, hold, and convey Oregon real estate (Sees. 77-318, 77-319, O.C.L.A.). PENNSYLVANIA DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for the convenient accommodation of the company in the transaction of its business (Sec. 406, Code 1943). Hold real estate for housing projects consisting of apartment, tenement, or other dwelling houses. May include accommodations for retail stores, shops, offices, and other community services reasonably incident, but not hotels. (Sec. 406 Act 93 [SB 2], L. 1947, approved and effective 5/9/47). Hold real estate as an investment for the production of income. (Sec. 406, Act 93 [SB 2], L. 1947, approved and effective 5/9/47). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. T e n per cent limit for combined holdings of housing projects and income real estate. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate.

126

LIFE INSURANCE

HOUSING

PROJECTS

Two per cent on income-producing real estate. V. Miscellaneous Restrictions and Other Special Provisions. Investment in housing projects and income real estate subject to reserve requirements of Section 404 of the state insurance code. FOREIGN

Restrictions Placed on Investment by Foreign Companies. An authorized foreign company may hold Pennsylvania real estate in the same manner and under the same limitations as a domestic insurance company (Sec. 341, amended Act 92, Code 1947). RHODE

ISLAND

DOMESTIC

I. Type of Real Estate That Can Be Permanently Held. May: Hold without limitation of time any real property or interest therein in Rhode Island, and may use such property, and any other real property owned, held, or leased by it for housing projects for ten or more families or for any other investment or income-producing purpose. (Housing projects including apartments, tenements, dwelling houses, buildings or accommodations for retail stores, shops, offices, and other community services which company deems proper and suitable for convenience of tenants and occupants.) (HB 837, L. 1947, approved and effective 4/28/47.) II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. No provision. III. Percentage Limit of Total Admitted Assets That May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. Total real estate holdings limited to 20 per cent of assets. FOREIGN

Restrictions Placed on Investment by Foreign Companies. A duly authorized foreign company, in same manner as domestic company, may invest in and use Rhode Island real property or interest therein, and its other real property, for housing projects for ten or more families or for any other investment or income-producing purpose (HB 837, L. 1947, approved and effective 4/28/47). SOUTH

CAROLINA

DOMESTIC

I. Type of Real Estate That Can Be Permanently Held. May: Hold real estate which is required for its purposes (Sees. 7677, 7685, Code 1942).

APPENDIXES

127

II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. No provision. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold in same manner and subject to same limitations as domestic companies of like kind and class (Sec. 7764, Code 1942). SOUTH

DAKOTA

DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for its immediate accommodation in the transaction of its business, and any building acquired for that purpose, may, with the approval of the commissioner, contain space for rental (Sec. 31.1401, Code 1945). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. No provision. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. N o provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold only in same manner and subject to same limitations as South Dakota life insurance companies (Sec. 11.2101, Code 1939). TENNESSEE DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for principal office land and building and for the convenient accommodation in the transaction of its business u p to 10 per cent of admitted assets (Sees. 6206 and 6205, Code 1932). Hold real estate for the production of income, but without the commissioner's specific advanced approval, no investment shall be made in hotels, clubhouses, garages, schools, factories erected and designed for special purposes, or agricultural properties (Sec. 6205. Code 1932,

128

LUE

INSURANCE

HOUSING

PROJECTS

amended Chap. 110 [SB 511], Laws 1947, approved and effective :v 10/47). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. No provision. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. T w o per cent in income-producing real estate. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. Total real estate holdings limited to 10 per cent of admitted assets. FOREIGN

Restrictions Placed on Investment by Foreign Companies. There appear to be no express restrictions or prohibitions as to foreign life insurance company acquisition and holding of Tennessee real estate. TEXAS DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate as follows: one building site and office building for its accommodation in transaction of its business and for lease and rental (Sec. 4726, Vernon's Civ. S. 1936). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. No provision. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. Required Minimum Annual Write-down on Real Estate. No provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold only in same manner and subject to same limitations as Texas life insurance companies (Sec. 4762, Vernon's Civ. S. 1936). UTAH DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for home office building and land and for convenient transaction of its business not to exceed 5 per cent of assets

APPENDIXES

129

unless approved by commissioner, or if mutual insurer not to exceed such amount as would reduce its surplus, exclusive of such investment, below $50,000, unless approved by commissioner (Sec. 45-15-17, Code 1913). Hold real estate for the production of income (Sec. 43-13-17, Code l«J43, added Chap. 63 [SB 34], I.aws 1947, approved 3/15/47, effective 5/13/47). II. Percentage Limit of Total Admitted Assets That May Be Invested in a Specific Type of Real Kstate Other than Home Office. No provision. III. Percentage Limit of Total Admitted Assets That May Be Invested in Lach Partei. No provision. IV. Required Minimum Annual \\'rite-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. T o t a l real estate holdings cannot exceed 20 per cent of assets. FOREIGN

Restrictions Placed on Investment by Foreign Companies. T h e investments of a foreign or alien insurer shall be as permitted by the laws of the state of its domicile or entry, but shall represent investments of quality substantially as high as those required under the insurance code for similar funds of like domestic insurers (Sec. 43-13-2, [4], Code 1943, added Chap. 63 [SB 34], Laws 1947, approved 3/15/47, effective 5/13/47). VERMONT DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate necessary for its busiziess (Sec. 6706, P.L. 1933, amended Act 153, L. 1945). Hold real estate under lease for the production of income excluding agricultural, horticultural, ranch, mining, recreational, amusement or club purposes, or for quarrying (S.B. 2 Laws of 1949 revising Act 167, L. 1947). I I . Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other dian Home Office. No provision. I I I . Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. Five per cent in income-producing real estate. IV. Required Minimum Annual Write-down on Real Estate. Property must be written down completely by expiration of lease. V. Miscellaneous Restrictions and Other Special Provisions. Property at time of acquisition must be leased to a specified group:

ISO

LIFE INSURANCE

HOUSING

PROJECTS

financial institution, public utility, or lessee engaged in industry, trade or commerce, or be subject of contract to lease by such a lessee. T e r m of lease cannot be less than five years or more than fifty years. FOREIGN

Restrictions Placed on Investment by Foreign Companies. A foreign corporation shall not have authority to do any act in Vermont except such acts as a Vermont company might lawfully do (Sec. 5986, P.L. 1933). VIRGINIA DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for home office purposes and for convenient accommodation in the transaction of its business, subject to sale within ten years ceasing to be necessary for accommodation of business (Sec. 4258a, Code 1942). Hold real estate acquired prior to December 31, 1949, for purpose of improving same to provide dwelling accommodations for persons of low or moderate income in or within 10 miles of city having a population of 100,000 or more and accommodating not less than 200 or more than 2,500 families (Sec. 4258a, Code 1942). Hold real estate to be leased or already leased for the production of income (Sec. 4258a, Code 1942, amended Chap. 4, I.. 1945 and Chap. 325, L. 1946). Hold real estate for the production of income, but excluding agricultural, horticultural, ranch, mining, recreational, or hotels (H.B. 136, Sec. 38-397 as amending Sees. 38-397, 38-398, 38-^12, Code 1950). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than Home Office. T e n per cent in housing project. Five per cent limit on leased property. Five per cent in income-producing real estate. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. T w o per cent on income-producing real estate. IV. Required Minimum Annual Write-down on Real F.state. T w o per cent on income-producing real estate. V. Miscellaneous Restrictions and Other Special Provisions. Limit on total real estate holdings not to exceed 15 per cent of assets. FOREIGN

Restrictions Placed on Investment by Foreign Companies. May hold only in same m a n n e r and subject to same limitations as Virginia life insurance companies (Sec. 163, Art. XII, Const.). May invest in low-cost housing developments, as prescribed, if

APPENDIXES

IBI

authorized by State Corporation Commission (Sec. 4258a, Code 1942, amended Chap. 4, L. 1945). WASHINGTON DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for home office and for accommodation in the convenient transaction of its business if approved by the commissioner up to 5 per cent of assets (Sec..l3.16 [Ins. Code], Chap. 79 [SB 47], Laws 1947, approved 3/7/47, effective 10/1/47). Invest in assets not qualifying or permitted as legal investments under its charter or provisions of its code to an amount not to exceed 5 per cent of admitted assets (Sec. 13.24 [Ins. Code], Chap. 79, [SB 47], Laws 1947, approved 3/7/47, effective 10/1/47). II. Percentage Limit of Total Admitted Assets T h a t May Be Invested in a Specific Type of Real Estate Other than Home Office. Lesser of 5 per cent of assets or 50 per cent surplus over capital and other liabilities, or if mutual company, 50 per cent surplus over minimum required surplus in any kind of nonqualifying assets. III. Percentage Limit of Total Admitted Assets T h a t May Be Invested in Each Parcel. One per cent in any type of nonqualifying asset. IV. Required Minimum Annual Write-down on Real Estate. No provision. V. Miscellaneous Restrictions and Other Special Provisions. Upon commissioner's advance approval company may make investment otherwise prohibited or not eligible under any other section of the Code (Sec..l3.25, [Ins. Code], Chap. 79 [SB 47], Laws 1947, approved S/7/47, effective 10/1/47). FOREIGN

Restrictions Placed on Investment by Foreign Companies. T h e investments of a foreign or alien insurer shall be as permitted by the laws of its domicile but shall be of a quality substantially as high as those required for similar funds of like domestic insurers (Sec. .13.36 [Ins. Code], Chap. 79 [SB 47], Laws 1947, approved 3/7/47, effective 10/1/47). WEST

VIRGINIA

DOMESTIC

I. Type of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for the convenient accommodation of the transaction of its own business for an amount not to exceed 5 per cent of the assets (HB 234, Chap. 70, Laws of 1949, Sec. 41). Hold real estate for the purpose of leasing the same to any firm, or corporation or person, or real estate already leased (HB 234, Chap. 70, Laws of 1949, Sec. 41).

132

LIFE

INSURANCE

HOUSING

PROJECTS

Hold real estate subject to commissioner's approval for recreation, hospitalization, convalescence, and retirement purposes of its employees ( H B 234, Chap. 70, Laws of 1949, Sec. 41). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate Other than H o m e Office. Five per cent of assets or not to exceed capital and surplus, which ever is less. Five per cent of surplus on real estate for employees' benefit. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. N o provision. IV. R e q u i r e d M i n i m u m A n n u a l Write-down on Real Estate. Special provision m a d e for write-down of leased property. V. Miscellaneous Restrictions and O t h e r Special Provisions. Hereafter a domestic corporation shall state in its application for authority to hold property and transact business in this state, the n u m b e r of acres it desires to hold, and pay the taxes thereon to the secretary of state before the certificate of incorporation or of authority is issued (Sec. 930, Code 1943). T o t a l real estate holdings not to exceed 10 per cent of assets (HB 234, Chap. 70, Sec. 41, Laws of 1949). FOREIGN

Restrictions Placed on Investment by Foreign Companies. Foreign companies have only same rights, powers, and privileges as domestic companies to acquire, hold, and convey West Virginia real estate (Sees. 930, 3091, Code 1943). WISCONSIN DOMESTIC

I. T y p e of Real Estate T h a t Can Be Permanently Held. May: Hold real estate for the convenient transaction of its business, including with its offices other apartments to rent, u p to 20 per cent of assets (Sec. 201.24, St. 1945). Carry out development, ownership, and operation of veterans' or civilians' housing projects (Sec. 206.34, [1], [n], St. 1945, added Chap. 324 [SB 412], I.. 1947, approved 6/24/47, effective 6/28/47). Invest in assets not qualifying or permitted as legal investments under its charter or provisions of the code to an a m o u n t not to exceed 5 per cent of admitted assets (Sec. 206.34, fl], [m], St. 1945, amended Chap. 11 [A.B. 45], L. 1947, approved 3/18/47, effective 3/22/47). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate O t h e r than H o m e Office. Five per cent in any type of nonqualifying assets. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. N o provision.

APPENDIXES

ISS

IV. R e q u i r e d M i n i m u m A n n u a l Write-down on Real Estate. N o provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. T h e r e appears to be no statutory prohibition against acquisition or holding of Wisconsin real estate by foreign life insurance companies. WYOMING DOMESTIC

I. T v p e of Real Estate T h a t Can Be Permanently Held. MayHold real estate used exclusively for the company's business (Sec. 52-1006, Comp. St. 1945). Hold real estate for the production of income (Chap. 121 [HB 93], Laws 1947, approved and effective 2/24/47). II. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in a Specific T y p e of Real Estate O t h e r than H o m e Office. N o provision. III. Percentage Limit of T o t a l Admitted Assets T h a t May Be Invested in Each Parcel. No provision. IV. R e q u i r e d M i n i m u m A n n u a l Write-down on Real Estate. N o provision. FOREIGN

Restrictions Placed on Investment by Foreign Companies. Duly authorized foreign companies may acquire and hold real estate for the production of income (Chap. 121 [HB 93], Laws 1947, approved and effective 2/24/47).

APPENDIX

Β

Financial Experience Constructed by Life 1952.

for Housing Developments Purchased Insurance Companies as of December

or 31,

B A K U M NATIONAL L I F E INSURANCE COMPANY *

Year of Acquisition: 1947 Number of Vendors: 1

Project: Carteret Village Location: Orange, New Jersey Tear Cost to Company Book Value 1947 1948 1949 1950 1951 1952

$297,616.57 z345,625.73 643,242.30 643,242.30 643,242.30 643,242.30 643,242.30

Depreciation and Amortization Expenses