The Florida Senate

634.044  Assets and liabilities.--

(1)  ASSETS.--In any determination of the financial condition of a service agreement company, there shall be allowed as assets only those assets that are owned by the service agreement company and which assets consist of:

(a)  Cash in the possession of the service agreement company, or in transit under its control, including the true balance of any deposit in a solvent bank, savings and loan association, or trust company which is domiciled in the United States.

(b)  Investments, securities, properties, and loans acquired or held in accordance with this part, and in connection therewith the following items:

1.  Interest due or accrued on any bond or evidence of indebtedness which is not in default and which is not valued on a basis including accrued interest.

2.  Declared and unpaid dividends on stock and shares, unless the amount of the dividends has otherwise been allowed as an asset.

3.  Interest due or accrued upon a collateral loan which is not in default in an amount not to exceed 1 year's interest thereon.

4.  Interest due or accrued on deposits or certificates of deposit in solvent banks, savings and loan associations, and trust companies domiciled in the United States, and interest due or accrued on other assets, if such interest is in the judgment of the office a collectible asset.

5.  Interest due or accrued on current mortgage loans, in an amount not exceeding in any event the amount, if any, of the excess of the value of the property less delinquent taxes thereon over the unpaid principal; but in the property less delinquent taxes thereon over the unpaid principal; but in no event shall interest accrued for a period in excess of 90 days be allowed as an asset.

6.  Rent due or accrued on real property if such rent is not in arrears for more than 3 months. However, in no event shall rent accrued for a period in excess of 90 days be allowed as an asset.

7.  The unaccrued portion of taxes paid prior to the due date on real property.

(c)  Furniture, fixtures, furnishings, vehicles, and equipment, if the original cost of each item is at least $200, which cost shall be amortized in full over a period not to exceed 5 calendar years, unless otherwise approved by the office.

(d)  Part inventories maintained for the purpose of servicing products warranted. Part inventories must be listed at cost. Service agreement companies are required to maintain records to support valuation of part inventories.

(e)  The liquidation value of prepaid expenses.

(f)  Other assets or receivables, not inconsistent with the provisions of this section, deemed by the office to be available for the payment of losses and claims, at values to be determined by the office.

The office, upon determining that a service agreement company's asset has not been evaluated according to applicable law or that it does not qualify as an asset, shall require the service agreement company to properly reevaluate the asset or replace the asset with an asset suitable to the office within 30 days of written notification by the office of this determination, if the removal of the asset from the organization's assets would impair the company's solvency.

(2)  ASSETS NOT ALLOWED.--In addition to assets impliedly excluded by the provisions of subsection (1), the following assets expressly shall not be allowed as assets in any determination of the financial condition of a service agreement company:

(a)  Goodwill, agreement holder lists, patents, trade names, agreements not to compete, and other like intangible assets.

(b)  Any note or account receivable from or advances to officers, directors, or controlling stockholders, whether secured or not, and advances to employees, agents, or other persons on personal security only.

(c)  Stock of the service agreement company owned by it directly or owned by it through any entity in which the organization owns or controls, directly or indirectly, more than 25 percent of the ownership interest.

(d)  Leasehold improvements, stationery, and literature, except that leasehold improvements made prior to October 1, 1991, shall be allowed as an asset and shall be amortized over the shortest of the following periods:

1.  The life of the lease.

2.  The useful life of the improvements.

3.  The 3-year period following October 1, 1991.

(e)  Furniture, fixtures, furnishings, vehicles, and equipment, other than those items authorized under paragraph (1)(c).

(f)  Notes or other evidences of indebtedness which are secured by mortgages or deeds of trust which are in default and beyond the express period specified in the instrument for curing the default.

(g)  Bonds in default for more than 60 days.

(h)  Deferred costs other than the liquidation value of prepaid expenses except for those companies that reserve 100 percent of gross written premium.

(i)  Any note, account receivable, advance, or other evidence of indebtedness, or investment in:

1.  The parent of the service agreement company;

2.  Any entity directly or indirectly controlled by the service agreement company parent;

3.  An affiliate of the parent or the service agreement company; however, receivables from the parent or affiliated companies shall be considered an admitted asset of the company when the office is satisfied that the repayment of receivables, loans, and advances from the parent or the affiliated company are guaranteed by an organization in accordance with s. 634.045; or

4.  Officers, directors, shareholders, employees, or salespersons of the service agreement company; however, premium receivables under 45 days old may be considered an admitted asset.

The office may, however, allow all or a portion of such asset, at values to be determined by the office, if deemed by the office to be available for the payment of losses and claims.

(3)  LIABILITIES.--In any determination of the financial condition of a service agreement company, liabilities to be charged against its assets shall include, but not be limited to:

(a)  The amount, in conformity with generally accepted accounting principles, necessary to pay all of its unpaid losses and claims incurred for or on behalf of an agreement holder, on or prior to the end of the reporting period, whether reported or unreported.

(b)  Taxes, expenses, and other obligations due or accrued at the date of the statement.

(c)  Reserve for unearned premiums.

The office, upon determining that the service agreement company has failed to report liabilities that should have been reported, shall require a correct report which reflects the proper liabilities to be submitted by the service agreement company to the office within 10 working days of receipt of written notification.

History.--ss. 12, 68, ch. 91-106; s. 20, ch. 93-195; s. 453, ch. 97-102; s. 2, ch. 2001-281; s. 1419, ch. 2003-261.