                     -E          ATTORNEY          GENERAL
                                    OF   ?rExA&


   WILL     WILSON
*-rro-        GENERAL

                                      August 13, 1958

          Hon. William A. Harrison          Opinion No. WW492
          Commissioner of Insurance
          State Board of Insurance          Re :   Question concerning in-
          Austin 14, Texas                         vestments of life Insurance
                                                   companies under Article
                                                     39, Sections 6, 7 and
          Dear Mr.   Harrison:                     3; and related questions.
                      The first   question presented In your letter
          under date of May 7, 1958; involves the proper con-
          struction   of Section 6, Article    3.39 of the Insurance
          Code,    This section deals generally with the investments
          by a life insurance company in the shares or share accounts
          of building and loans associations      and, federal savings
          and loan associatlons..~,    In order to get a complete and
          comprehensive picture of the type of funds which may be
          invested in shares or share accounts,        and to facilitate
          the construct&on of Article      3.39 so as to give each section
          contained therein its full and complete meaning, it seems
          wise to interpret     the entire article   (3.39) regarding
          investments in shares and share accounts.          We are here
          dealing with these various types of funds:          (1) Capital,
          (2) surplus,   (3) contingency funds over and above the a-
          mount required    for policy reserves and (4) the policy re-
          serves themselves.
                    Section 1 of Article 3.39 is the first place
          wherein express mention Is made of investments in shares
          and share accounts.
                     “A life Insurance company organized under
               the laws of this State may invest in or loan
               upon the following      securities,  and none other,
               v,;~~u~h~i~;;   ;ny invest any of its funds and
                                   . . .shares or share accounts
               as authorized in Section 1, page 76, Acts 1939,
               46th Legislature;     . . . or in shares or share
               accounts as authorized in Chapter 534, page
               966, Acts 1949 51st Legislature;         . . .”
               (Eanphasis ours)
                                                                     .




Hon. William     A. Harrison,   page 2 (WW-492)


             The references     above are both to Article    881a,
Section    24, which states:
               “Any county, or any political    subdivision
        of any county, any school district,      city or
        town in this State as well as any Texas corpora-
        tion, Including any insurance company organized
        under the laws of this State, or any insurance
        company doing business In this State under a
        permit, may invest any of its funds in the shares
        or share accounts of any building and loan
        association      organized under the iaws of this
        State,   . , .‘I (pnphasis ours)
            Up until 1951, there had been no expressed reference
Inthe    Insuranoe Code to the Building and Loan Act (Article
881a).    In 1951 the Legislature made abudantly clear Its
Intention as to the investment of “any of the funds or
accumulations” of a life insurance company in the shares or
share accounts of “any building and loan association”.
Thus was intended a broad delegation    of investment power
in this type of security.
             Now In the light of Section 1, what is the proper
construction    of Sections 4 and 6 of Article 3.391      It must
here be reiterated     the importance of distinguishing    between
the types of funds to be invested.        Section 4 applies only
to the Investment of capital,      surplus, and contingency funds
over the amount required for policy reserves.         The statute
says, as to these, that a life insurance company
                . ..shall   not invest in nor take as collateral
        security     for any loan its own capital     stock nor
        more than ten per cent (10%) of the amount of
        its capital,      surplus, and contingency funds in
        the stock of any one corporation.       . ..’
           By no stretch of Interpretation   could this provision
be said to limit a life insurance company to a total invest-
ment of ten percent in shares and share accounts.       The phrase-
ology of Section 4 places only a restriction     on the investment
of ten percent of the amount of the capital,     surplus, and
contingency funds in the stock of any one corporation       and
not the stock of all corporations    in which investments may
be made.
Hon. William A. Harrison,    @age,3   (WW-492)


           This   brings us finally   to the proper interpreta-
tion of Section    6 in light  of-the previous Section 4.
First,  It will   be noted that contained in the last sentence
of Section 6 is    this statement:
           "The investment powers conferred by
     this Section 6 are in addition to those con-
     ferred by Section 4 of this article     and are
     not to be construed as restricting     the powers
     already   ranted by said Section 4, and this
     Section 2 and the powers conferred herein are
     cumulative with respect to the said Section
     4 and the powersconferred    therein."
           This is taken to mean that the provisions of Section
6 will not apply to an Investment in a savings and loan pursuant
to Section 4.
           Remembering the wording in Se~ction 1, that an in-      __
suranoe company "may Invest 9     of its funds and accumulations";
and likewise referring  again to Section 6 which says:
            . ..provlded. however, that under this
     Section 6, and except as authorized in Section
     4 of this article,   no more than five (5%) per
     cent of the admitted assets of the insuranoe
     company making the investment . . . and no suah
     investment shall exceed twenty (20%) per cent
     OS  tn to%il outstanding shares.of- any such
     indiv?dual building and loan association,
     savings and loan association,   or stock of such
     bank. ,.."
             It is obvious that to interpret     Sectlon 6 so as
to limit the total investment in all building and loan shares
and share accounts to five percent would be to render mean-
ingless the words "any of ,its funds" as used in Section 1.
So that import may be given to both sections,         the better
construction     is that Section 6 gives power to Invest all
funds, other than capital,      surplus, and contin ency funds
above the amount required for policy reserves ? which are
covered in Section 4) in the shares and share accounts of
building and loan associations,       but limited to five percent
;;ny;fo;;      company. The proviso of no more than five per-
             e admitted assets refers to ".the investment'
in a single association,      not to all such Investments in a
number of associations.       In the conjunctive   proviso,   it
is clear that the Legislature      is setting up the restriction
Hon. William A. Harrison,     page 4 (.W-&92)



as to a single association    or bank for    it   IS stated   “of
any such Individual  association”.
           Thus, in order to fully encompass the meaning
of the entire statute relating     to investments in shares
and share accounts,    It Is the considered opinion of this
department that the Investments of capital,       surplus, and
contingency funds over    the amount required for policy re-
serves are controlled    by Section 4 of Article    3.39; while
the remaining funds to be Invested are controlled        by Section
6 of the same article.     Further, ,that the five percent
requirement In Section 6 relates     to the amount of funds
which may be invested In an one company,~ and does not
limit the total Investmen 3 InXiis     particular   type of
security.
             In construing any statute which is as ambiguous
and uncertain as this one obviously       is, the departmental
construction    is oftentimes   helpful and of probative weight
as an aid to interpretation,        The departmental history of
Section 6 of Article      3.39 Is varied and uncertain.     It
appears from a preliminary      Inquiry that for a number of
years, prior to February 6, 1956, that the Investigators
for the Insurance Department, In their examinations,         were
prone to admit investments in various shares and share
accounts of building and loan associations        In the calculations
of the assets of the company being examined.         It appears
that their major concern was whether or not the Investment
;;,v;;;OOQ.OO     or less so as to be covered by government
              This was more of a tolerance     than an afflrma-
tive approval,    yet this seems to carry some probative weight
as to the attitude     of the department with regard to these
investments.
            On February 6, 1956, ~csme the ,first written state-
ment as to the departmental attitude    regarding-e         3.39.
This was not a complete pronouncement of departmental in-
teption,  yet it Is probative for. the determination    of the
then existing   attitude.
            “This directive is issue for the pur-
     pose of advising the procedure to be used in
     testing all investments of mutual assessment
     life companies. . . .
           “Section 6.   Stocks of insured bulldlng
     and loan associations,    insured Federal savings
     and loan associations    and stocks of state and
Hon. William   A. Harrison,   page'5   (WW-492)


     national banks - limited to 5% of the admitted
     assets of the insurance company in any one
     security.  (Emphasis ours)
           "Section 7. Debentures of qualified    solvent
     public utility:'  corporations  - limited to 5s
     of the admitted assets of the insurance company
     in any one security.     (Emphasis ours)
           "Section 8. Preferred stock of qualified
     solvent public utility  corporations   - limited
     to 23% of the admitted assets of the insurance
     company in any one security."     (Emphasis ours)
           This attitude prevailed      until'the order of the Com-
missioner under date of February       25, 1958, was issued.  This
order states the present position       of the department as follows:
          "You are hereby     informed that the directive
     of February 6, 1956,     is amended as follows:
           "1.    Itls    the opinion of this office     that
     Section 6, Article       3.39 of the Insurance Code
     limits the total insurance company investments
     in an or a‘lT-iif; the above described      securities
     to -8--
         f ve per cent of the'insurance       company's ad-
     mitted assets and not to such amount in any
     one security.       In ?iEier words, investment of
     mortuary or relief       funds in the shares or
     share accounts of Insured building and loan
     associations      and savings and loan associations
     plus investments in capital       stock of state
     and national.banks       In the aggregate may not
     total more than five per cent of the insurance
     company's admitted assets.
            "2 . Under the provisions      of Section 7,
     Article    3.39, the total investment of mortuary
     or relief     funds indebentures     of qualified
     solvent public utility      corporations   is limited
     to five per cent of the insurance company's
     admitted assets.
           " 3 . Section    8, Article  3.39, limits the
     total investment of mortuary or relief         funds
     ine      preferred    stock of qualified   solvent
     public utility     corporations   to 23 per cent
     of the insurance company's admitted assets."
Hon. William A. Harrison,      Page 6 (WW-4%)


              In determining which departmental construction
is valid we are confronted with the following:               The present
attitude    is most recent in duration while the prior attitude
was more of a tolerant         one than an active statement of policy.
However, departmental construction           is made up of various
comkdities       - actions of officers      in administering     the act,
tolerance     of various practices      and actions of those con-
trolled   thereunder,      as well as explicit     statements of policy.
In expressing an opinion of this department, the same aids
to interpretation        are available   for the proper construction
of the statute and the determination           of the correct legis-
lative   intent,       It would thus appear that the Attorney
General's     office,    in construing a statute,      can utilize   one
of the longstanding        aids to interpretation,      meaning the
departmental construction         by the agency charged with the
administration        of the act.    "When statutes    construed by the
Attorney General are at least of doubtful meaning, ion@;-
standing departmental construction           may be resorted to in
determining their proper interpretation."              Dallas Title
Guaranty Company v, Insurance Commissioners, 224 S.W.2d
332 (Civ.App. 1949 rehearing den., error ref,).                Also
see Lower Nueces River Water Supply District             v. Cartwright,
'74 S.W.2d 199 (Civ.App. lgf:k, rehearing den., error ref.
n.r.e.).
             It will be noted here that the departmental con-
struction    of the statute in question previous to the current
attitude   of the Commissioner of Insurance has been in con-
formity with the conclusions    reached above.    We feel that
absent any abuse of discretion     on the part of the administra-
tive agency charged with the enforcement of a particular
act, that that agency's interpretation     should be controlling
where a statute is ambiguous or at best uncertain.        We feel
that the previous departmental construction      has been neither
abusive nor unreasonable and find that, in line with the
interpretation    enumerated above, this departmental construction
adds considerably    to the weight of the conclusions    reached
herein.
            Your next inquiry involves the construction   of
Section   7 of Article 3.39 which states in pertinent   parts:
              "It may invest any of its funds and akmula-
      tions in the debentures of any solvent public
      utility     corporation...;   but in no event shall
      the amount of such investment in debentures under
      this subdivision       exceed five (575) per cent of
      the admitted a-sets of the insurance company
      making the investment."
    .   . .




Hon. William       A. Harrison,   page 7 (WW-492)


             The quoted portion of Section 7 indicates        an
authorization    to invest "any of ----its funds" in the first
portion thereof and later appears to limit that other-
wise general permissive language by the use of the
phrase "such investment" in the latter part of the section.
This ambiguous situati&       in the statute calls for clear
interpretation     and construction.      The only difference
between the language in Section 7 and the language in
Section 6 is that the entire statement regarding this
particular    type of investment is found in one section,
without reference     to another section and statute,       as is
the case in Section 6. It would thus appear that the
same type of analysis      is applicable    to Section 7 as was
discussed in the preceding Section 6; namely, - to.give
meaning to both parts of the section it is mandatory that
the percentage requirement refer only to the investment
in one particular     company and not refer to the total
authorization     for this particular     type of investment.
                In attempting to find the departmental construction
of this       particular  section of the statute, we look to your
opinion       request wherein is stated:
               "It has heretofore    been the departmental
        construction    of this statute that a life in-
        surance company could invest up to five (5%)
        oercent of its admitted assets in the debentures
        bf any public utility      corporation  without limit___
        as to the total overall      investmentyn      such deben-
        tures in a number of publicutility        ---corporations-.
        In other words, a life insurance company could
        invest 5s of its admitted assets in the debentures
        of ABC Public Utility      Corporation,   5% of its ad-
        mitted assets in the debentures of DEF Public
        Utility    Corporation,   and 5% of its admitted
        assets in the debentures of XYZ Public Utility
        Corporation."
           We feel that this construction  placed by your de-
partment on this apparently ambiguous or at best uncertain
statute is to be given great weight in considering    the
proper interpretation  of same. Absent any clear showing
of abuse in the departmental construction,    we feel that
the departmental construction  should be controlling,   and
so hold in this case.
                The last question raised by your recent inquiry
involves       Section 8 of Article  3.39 which reads in part:
                                                                  .




Ron. William A. Harrison,     page 8 (WW-492)


            "It may invest any of its funds and
      accumulations   in the preferred   stock of any
      solvent public utility   corporation.,.,   but in
      no event shall the amount of such investment
      in pre.ierred stock under this subdivision
      exceed two and one-half    (2$;6) per cent of the
      admitted assets of the insurance company making
      the investment."
           The lingua,~e here is identical      in pertinent   parts
to the language in Section 7. Consequently,          the interpretation
of Section 7 would likewise apply to Section 8; namely, that
the statute being ambiguous or at best uncertain,         the depart-
mental construction     of this section should be looked to for
the proper interpretation      of the statute.      Absent any
clear abuse in this construction       it should and is here de-
clared controlling     as to the legislative    intent embraced
therein.   Thus, it would appear that in Section 8 a life in-
surance company could invest any of its funds and accumulations
in the preferred    stock of any solvent public utility       corporation;
this meaning that there should be no limit on the number of
companies in whose stock investments are made, but that the
two and one-half    (26%) per cent should apply to the amount
of investment in any one corporation.         Eeeliminary investi-
gation discloses    thatthis    has been the departmental construc-
tion for a number of years.
           A word of clarification  seems appropriate  here.
The opinion has been written addressed to inquiries    in-
volving Sections 6, 7 and 8. This is in no way to be con-
strued as limiting  or lessening the effect  of Section 9 of
Article  3.39, wherein requirements are made for preservation
of more liquid assets.



                            SUMMARY
            Section 1 of Article     3.39 of the Insur-
            ance Code provides for investments of
            "any and all funds and accumulations".
            This is modified by a 10% limit in Sec-
            tion 4 on the investment of capital,
            surplus, and contingency funds over
            and above amount required for policy re-
            serves in the shares and share accounts
            of --
                any one corporation.
,Hon. William   A. Harrison,   page 9 (WW-492)


           The investment of the remaining funds is
           provided,for  in Section 6. The percent-
           age requirement in Section 6 refers to
           the amount which may be invested~in    the
           shares and share accounts of x    -one
           corporation  and is no limit on the total
           investment in this type of security.
           Section 7 of Article   3.39 authorizes the
           investment of any of the funds and accu-
           mulations of a life insurance company in
           the debentures of any solvent public utili-
           ty corporation.    The five (5s) per cent
           requirement enumerated therein refers to
           the investment in any one public utility
           corporation.    This does not refer to the
           total investment in this type of security.
           Section 8 of Article    3.39 authorizes   a
           life insurance company to invest any of
           its funds and accumulations in the pre-
           ferred stock of any solvent public utili-
           ty corporation.    The two and one-half
           (2%) percent     requirement enumerated
           therein refers to the investment in any
           one public utility    corporation.   This
           does not refer to the total investment
           of this type of security.
           Nothing    in the above Is to be construed    as
           limiting    the effect of Section 9 of
           Article    3.39.
CDD:ph                                  Very truly   yours,
APPROVED:                               WILL WILSON
            '>                          Attorney General of Texas
OPINION COMMITTEE:
Geo. P. Blackburn,    Chairman          ByCr !il-&db;4
                                           C. Dean Davis
J. Arthur Sandlln                          Assistant
Wallace P. FinfrocK
Jay Howell
FGVIWED FOR THE ATTORNEY
                       GENERAL
BY:
    W. V. Geppert
