848                              Laws of Maryland                      [Ch. 284

each of the last two years of each period such net earnings shall
have been not less than one and one-half times the sum of its
fixed charges and maximum contingent interest for such year.

Within the meaning of this section the term "obligation" shall
include bonds, debentures, notes or other evidences of indebtedness;
the term "institution" shall include a corporation, a joint stock
association and a business trust. The term "net earnings avail-
ble for fixed charges" shall mean net income after deducting operat-
ing and maintenance expenses, taxes other than federal and state
income taxes, depreciation and depletion, but excluding extraordinary
nonrecurring items of income or expense appearing in the regular
financial statements of the issuing, assuming or guaranteeing in-
stitutions. 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 subsidiary institu-
tions, such net earnings shall be determined after provision for in-
come taxes of subsidiaries and after proper allowance for minority
stock interest, if any; and the required coverage of fixed charges
shall be computed on a basis including fixed charges and preferred
dividends of subsidiaries other than those payable by such sub-
sidiaries to the parent corporation or to any other of such sub-
sidiaries, except that if the minority common stock interest in the
subsidiary corporation is substantial, the fixed charges and preferred
dividends may be apportioned in accordance with regulations pre-
scribed by the Commissioner.

In applying the earnings tests under this section to any issuing,
assuming or guaranteeing institution, whether or not in legal exist-
ence during the whole of such five years next preceding 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 in-
stitution or institutions by purchase, merger, consolidation or other-
wise, substantially as an entirety, 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 de-
termined in accordance with adjusted or pro forma consolidated
earnings statements covering such portion of such period and giving
effect to all stocks or shares outstanding, and all fixed charges exist-
ing, immediately after such acquisition, or such reorganization.

(3) Preferred or guaranteed stocks or shares.—Preferred or
guaranteed stocks or shares of any solvent institution, created or
existing under the laws of the United States or of any state, dis-
trict or territory thereof, if all of the prior obligations, and prior
preferred stocks, if any, of such institution at the date of acquisi-
tion by such insurer are eligible as investments under this article;
and if qualified under paragraph (i) or paragraph (ii) following:

(i) Preferred stocks or shares shall be deemed qualified if both
of the following requirements are met:

(A) The net earnings of such institution available for its fixed
charges for a period of five fiscal years next preceding the date