Section 3. Notwithstanding any provision of this chapter or any other provision of law, any bank may invest in the following classes of stocks in accordance with the conditions, limitations and requirements prescribed herein:
1. Insurance Company Stocks — In the capital stock of any insurance company authorized to conduct a fire and casualty insurance business in the commonwealth, subject to the following conditions, limitations and requirements.
(i) Kind of Business — In the calendar year immediately preceding the date of investment not less than one-fourth of the net premiums written by such company and its subsidiaries shall have been in respect to risks involving loss of or damage to property belonging to or in the custody of the insured, which risks shall be deemed to be fire and allied risks. As used herein, the term “fire and allied risks” shall be deemed to include homeowners, commercial and industrial multiple period risks, boiler and machinery, glass, burglary and theft and fidelity risk. Net premiums written in the same period in respect to casualty risks shall have been not less than one-fourth of the net premiums written by the company and its subsidiaries. The term “casualty risks” shall be deemed to include risks involving liability of the insured for injury or damage to the person or property of others, workers’ compensation, accident and health, hospital and medical, surety and credit risks. Not more than one-half of the net premiums written in the same period shall have been in respect to liability of owners or operators of motor vehicles for personal injury or property damage. If more than one-fifth of the net premiums written by the company and its subsidiaries in the same period shall have been life insurance premiums, the company or the subsidiary or subsidiaries writing such life insurance shall be licensed to conduct such business in this commonwealth.
(ii) Subsidiary Defined — For the purposes of this section, “subsidiary” shall be construed to mean any insurance company fifty per cent or more of the capital stock of which is owned by such insurance company or by any other subsidiary thereof.
(iii) Large Company Requirement — At the end of the calendar year immediately preceding the date of investment the total admitted assets of such company shall be not less than one hundred million dollars, and it shall be one of the companies which meet the provisions of clause (i) and of which a majority of stock is not owned by five or less stockholders.
(iv) Operating Profit Ratio — Of the companies referred to in clause (iii), such company shall be one of the fifteen having the highest average operating profit ratio for the five years immediately preceding the date of investment. The annual operating profit ratio of each of the five years preceding the date of investment shall be calculated by subtracting from one hundred per cent the ratio of loss and loss adjustment expense to net premiums earned and thereafter subtracting from the remainder the ratio of other operating expenses, excluding all income taxes, to net premiums written. The ratios of the five years immediately preceding the date of investment shall be averaged to obtain the measurement. The losses, expenses, premiums written and profits earned referred to above shall be the totals of such items for such company and all its fire and casualty insurance subsidiaries except that, if less than ninety per cent of the capital stock of a subsidiary is owned by such company, the totals of said items for such subsidiary shall be included in the calculation only in proportion of the percentage of stock so owned.
(v) Ratio of Assets to Liabilities — At the end of the calendar year immediately preceding the date of investment, the total admitted assets of the company shall be equal to or in excess of one hundred and twenty-five per cent of all liabilities of the company excluding capital, surplus and voluntary reserves.
(vi) Dividends — Such company shall have paid a dividend in cash in each of the ten years preceding the date of investment.
(vii) Other Limitations — The following additional limitation also shall apply to stocks of insurance companies:
(a) Preferred Stock, etc. — Such company shall have no preferred stock or other senior securities outstanding at the date of investment.
(b) Aggregate Investment Limit — No insurance stock shall be purchased (a) if the cost thereof added to the cost of insurance stocks and bank stocks already owned shall exceed sixty-six and two-thirds per cent of the total of the capital stock and surplus account for a stock corporation or the surplus account for a thrift institution or (b) if the cost thereof added to the amount already invested in stocks and in shares of beneficial interest of the Savings Bank Investment Fund shall exceed the total of such capital stock and surplus accounts for a stock corporation or such surplus account for a thrift institution.
(c) Investment Limit in One Company — No investment shall be made in the stock of any one insurance company if the cost thereof added to the amount already invested in its stock shall exceed one-fifteenth of the total of said surplus accounts of such corporation, as so appearing.
2. Shares of Certain Bank Investment Funds — In the shares of beneficial interest of the Savings Bank Investment Fund and the Co-operative Bank Investment Fund; provided, however, that no such corporation shall invest in any such shares of any class representing a beneficial interest in any distinct investment fund consisting in whole or in part of equity securities (a) if the cost thereof added to the cost of such shares of an equity fund already owned shall exceed fifty per cent of the total of one capital stock and surplus account for a stock corporation or the surplus account for a thrift institution, or (b) if the cost thereof added to the amount already invested in such shares of such equity fund and in stocks shall exceed the total of such capital stock and surplus account for a stock corporation or surplus account for a thrift institution; and provided, further, that a corporation may invest in any such shares of any class representing a beneficial interest in any distinct investment fund which is not an equity fund to an amount in excess of one hundred per cent of the capital stock and surplus account of a stock corporation or to an amount in excess of one hundred per cent of the surplus account of a thrift institution except insofar as the commissioner may by regulation set limits and conditions on the amount which may be invested in such shares.
3. Utility Company Stocks — In the preferred and common stocks of any company which, at the time of such investment, is incorporated under the laws of the United States or any state thereof, or the District of Columbia, and authorized to engage, and engaging, in the business of furnishing telephone service in the United States, or any gas, electric light or water company incorporated or doing business in this commonwealth and subject to the control and supervision thereof; provided, that in at least four of the five years immediately preceding the date of investment such company shall have earned and paid dividends on each class of outstanding stock and the after tax net operating income, as hereinafter defined, of such company shall have been not less than twice the sum of the amount necessary to pay the interest for the same periods, excluding interest charged to fixed assets during construction thereof, if any, on all of its outstanding indebtedness and of the amount required to pay dividends on all of its preferred stock, if any. As used in this paragraph the words “after tax net operating income” shall mean the amount available for payment of interest and dividend charges after deduction from total operating revenues of all operating expenses, including current maintenance, provision for depreciation, all taxes including federal income taxes, rentals and guaranteed interest or dividends. No such corporation shall invest in such preferred or common stocks (a) if the cost thereof added to the cost of such preferred or common stocks, as the case may be, already owned shall exceed thirty-five per cent of the total of the capital stock and surplus account for a stock corporation or the surplus account for a thrift institution, or (b) if the cost thereof added to the amount already invested in stocks and in shares of the Savings Bank Investment Fund of a class representing a beneficial interest in any distinct investment fund consisting in whole or in part of equity securities shall exceed the total of such capital stock and surplus account of a stock corporation or surplus account of a thrift institution; and provided, further, that no such corporation shall invest more than one-half of one per cent of its deposits in the stock of any one such company.
4. Preferred and Common Corporate Stock — In the preferred and common stock of any corporation organized under the laws of the United States or any state and any association defined herein to mean an association the business of which is conducted or transacted by trustees under a written instrument or declaration of trust; provided, however, not more than four per cent of its deposits shall be invested in the stocks so authorized and provided, further, that in addition to such four per cent, an amount equivalent to one per cent of its deposits may be invested in stocks of Massachusetts corporations or companies with substantial employment in the commonwealth which have pledged to the commissioner that such monies will be used for further development within the commonwealth. No bank shall make an investment pursuant to this paragraph in any such corporation or association controlled by said bank. For the purposes of this paragraph a bank shall be deemed to control a corporation or association if: (1) the bank owns or controls twenty-five per cent or more of the voting stock of any such corporation or association; or (2) the bank, in any manner controls the election of a majority of the directors of any such corporation or association; or (3) twenty-five per cent or more of the vote or voting stock of any such corporation or association is held by trustees for the benefit of said bank.
5. Prudent Investments — In the shares of stock registered on a national securities exchange as provided in the Securities Exchange Act of 1934, 15 USC 78a or for which quotations are available through the National Association of Securities Dealers Automated Quotations System, or any comparable service designated by the commissioner; provided that not more than fifteen per cent of the assets of such corporation shall be invested pursuant to the provisions of this paragraph, and such investment shall be made in the exercise of the judgment and care consistent with the prudent man rule, so-called.
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