Texas Attorney General Opinion: WW-435 Page: 3 of 4
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Hon. William A. Harrison, page 3 (WW-435).
change, into the Insurance Code of the State of Texas under its new
number 3.39, portions of which are quoted above. This department
has had occasion to state its position with regard to Article 3.39,
Section 4, involving the investments of Texas life insurance com-
panies. In Attorney General's Opinion No. WW-293-A, the position
of the department was thus stated:
"A life insurance company cannot invest its
capital, surplus and contingency reserves in the
stock or commercial notes of any company which
has not been in existence for a period of five years
next preceding the date of such investment."
Thus the present problem resolves itself down to whether
or not a guaranty or warranty agreement by a parent corporation may
override the otherwise clear requirements of the legislative mandate.
This department has likewise expressed itself regarding the above
qualification under a previous administration in Attorney General Opin-
ion No. )-3015, in which was stated:
"It would thus be seen a security to be eligible for
either class (speaking of life insurance corporations
under 4725 and insurance corporations other than life
under 4706) of these Texas corporations must be the
direct obligation of the issuing corporation. The statu-
tory definition of eligible securities excludes, therefore,
stocks or shares evidencing merely participating inter-
ests by the holders in the net profits, if any , of the issu-
ing concern."
The position of this department is further substantiated
by an authoritative announcement in Corpus Juris Secundum which
states as follows:
"Investments of insurance corporations cannot be
made in securities other than those prescribed by stat-
ute, and indirect evasion of such statutes, as by the
medium of a subsidiary, will not be permitted ...
"While an insurance company has implied power
to make investments of its capital, and in the absence
of legislative restriction, it may do so in the manner it
deems most judicious, nevertheless, for the purpose of
protecting policyholders and others, it is usual for the
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Texas. Attorney-General's Office. Texas Attorney General Opinion: WW-435, text, May 22, 1958; (https://texashistory.unt.edu/ark:/67531/metapth267047/m1/3/: accessed April 19, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.