PARRIS N. GLENDENING, Governor                                   Ch. 36

(II) SUBMIT A STATEMENT OR REPORT TO THE COMMISSIONER ON
THE FINANCIAL CONDITION OF THE RESERVE.

(3) IN CONNECTION WITH AN EXAMINATION OR REQUIRED FINANCIAL
STATEMENT OF AN AUTHORIZED INSURER, THE COMMISSIONER MAY:

(I)       REQUIRE THE INSURER TO SUBMIT A COMPLETE FINANCIAL
STATEMENT AND AUDITED REPORT OF THE FINANCIAL CONDITION OF A
CORPORATION IN WHICH THE INSURER OWNS SECURITIES; AND

(II)     ORDER AN EXAMINATION TO BE MADE OF A SUBSIDIARY OR
AFFILIATE OF THE INSURER.

(B)     STOCK OF ANOTHER INSURER.

(1)      AN INSURER THAT OWNS 15% OR MORE OF THE STOCK OF ANOTHER
INSURER SHALL HAVE ITS STOCK VALUED AT BOOK VALUE AS SHOWN BY THE
MORE RECENT OF:

(I)      THE LAST ANNUAL STATEMENT OF THE OTHER INSURER; OR

(II)     THE LAST REPORT ON EXAMINATION OF THE OTHER INSURER.

(2)      EXCEPT AS PROVIDED IN PARAGRAPH (3) OF THIS SUBSECTION, THE
BOOK VALUE OF A SHARE OF COMMON STOCK OF AN INSURER SHALL BE
REPRESENTED BY A FRACTION:

(I)      THE NUMERATOR OF WHICH IS THE AMOUNT OF THE
INSURER'S CAPITAL AND SURPLUS, LESS THE VALUE OF ANY OUTSTANDING
PREFERRED STOCK; AND

(II)     THE DENOMINATOR OF WHICH IS THE NUMBER OF SHARES OF
THE INSURER'S COMMON STOCK ISSUED AND OUTSTANDING.

(3)      AN INSURER MAY VALUE ITS HOLDINGS OF STOCK IN A SUBSIDIARY
INSURER IN AN AMOUNT THAT IS NOT LESS THAN THE ACQUISITION COST, IF THE
ACQUISITION COST IS LESS THAN THE VALUE DETERMINED UNDER PARAGRAPH (2)
OF THIS SUBSECTION.

(C)     STOCK OF SUBSIDIARY.

THE STOCK OF A SUBSIDIARY OF AN INSURER SHALL BE VALUED ON THE BASIS
OF ONLY THOSE ASSETS THAT WOULD BE AUTHORIZED INVESTMENTS FOR THE
INSURER IF THE INSURER ACQUIRED OR HELD THEM DIRECTLY.

(D)     REAL ESTATE.

REAL ESTATE THAT IS ACQUIRED BY FORECLOSURE OR BY DEED IN LIEU OF
FORECLOSURE AND THAT LACKS A RECENT APPRAISAL THAT THE COMMISSIONER
CONSIDERS RELIABLE MAY NOT BE VALUED AT AN AMOUNT GREATER THAN THE
SUM OF:

(1) THE UNPAID PRINCIPAL OF ANY DEFAULTED LOAN AT THE DATE OF
THE FORECLOSURE OR DEED;

- 937 -