HERBERT R. O'CONOR, GOVERNOR. 1711

such insurer shall have averaged per year not less than one
and one-half times the sum of its average annual fixed charges
and its average annual maximum contingent interest appli-
cable to such period and if during each of the last two j^ears
of such period such net earnings shall have been not less than
one and one^half times the sum of its fixed charges and maxi-
mum contingent interest for such year.

Within the meaning of this Act the term "obligation" shall
include bonds, debentures, notes or other evidences of in-
debtedness; the term "institution" shall include a corporation,
a joint stock association and a, business trust. The term "net
earnings available for fixed charges" shall mean net income
after deducting operating and maintenance expenses, taxes
other than federal and state income taxes, depreciation and
depletion, but excluding extraordinary non-recurring items of
income or expense appearing in the regular financial state-
ments of the issuing, assuming or guaranteeing institutions.
The term "fixed charges" shall include interest on funded and
unfunded debt amortization of debt discount, and rentals for
leased properties. If net earnings are determined in reliance
upon consolidated earnings statements of parent and subsid-
iary institutions, such net earnings shall be determined after
provision for income taxes of subsidiaries and after proper
allowance for minority stock interest, if any; and the re-
quired coverage of fixed charges shall be computed on a basis
including fixed charges and preferred dividends of subsidiaries
other than those payable by such subsidiaries to the parent
corporation or to any other of such subsidiaries, except that if
the minority common stock interest in the subsidiary corpo-
ation is substantial, the fixed charges and preferred dividends
may be apportioned in accordance with regulations prescribed
by the Commissioner.

In applying the earnings tests under this Act to any issu-
ing, assuming or guaranteeing institution, whether or not in
legal existence during the whole of such five years next pre-
ceding the date of investment by such insurer, which has at
any time or times during such five year period acquired the
assets of any other institution or institutions by purchase,
merger, consolidation or otherwise, substantially as an en-
tirety, or has been reorganized pursuant to the bankruptcy
law, the earnings of such other predecessor or constituent
institutions, or of the institution so reorganized, available for
interest and dividends for such portion of such period as shall
have preceded such acquisition, or such reorganization, may
be included in the earnings of such issuing, assuming or guar-
anteeing institution for such portion of such period as may be
determined in accordance with adjusted or pro forma consol-