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connected to an insurance business within the United States and
that NAIC form 1A (foreign insurers' form) differs significantly
from NAIC form 1 (domestic insurers' form). Stewart concluded
that:
Canadian life insurance companies are not required to
earmark specific assets for their U.S. business * * *.
[B]ecause Canadian life insurance companies have
economic incentives to place higher yielding assets in
lower taxing jurisdictions, something other than NAIC
statement assets and investment yields are needed to
determine the investment income derived from the
trusteed assets of a Canadian life insurance company.
Respondent also points to various facts, which she claims
indicate that petitioner's NAIC forms 1A fail to reflect the
economic realities of petitioner's U.S. branch: (1) During 1988
through 1990, petitioner’s total cash and term deposits, which
were maintained as a part of its U.S. branch, were 75 percent, 90
percent, and 75 percent, respectively, of its total worldwide
funds; (2) petitioner maintained only 35 percent, 38 percent, and
50 percent of its total bond portfolio--arguably higher-yielding
assets--in its U.S. branch, for 1988, 1989, and 1990,
respectively; (3) petitioner transferred Canadian dollar-
denominated bonds from its Canadian business to its Seattle bank
trust account in order to equalize the surplus held in each
operation; and (4) petitioner transferred from its Seattle bank
trust account to its Canadian parent stock that petitioner held
in a subsidiary and for purposes of the transfer the stock was
valued at its cost rather than at its fair market value.
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