Central Reserve Life Corporation and Subsidiaries - Page 7




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               An insurance company is a life insurance company for Federal           
          income tax purposes if it meets the definition set forth in                 
          section 816.  Section 816 provides in part:                                 
               SEC. 816.  LIFE INSURANCE COMPANY DEFINED.                             
                    (a) Life Insurance Company Defined.--For purposes                 
               of this subtitle, the term “life insurance company”                    
               means an insurance company which is engaged in the                     
               business of issuing life insurance and annuity                         
               contracts (either separately or combined with accident                 
               and health insurance), or noncancellable contracts of                  
               accident and health insurance, if--                                    
                         (1) its life insurance reserves (as                          
                    defined in subsection (b)), plus                                  
                         (2) unearned premiums, and unpaid losses                     
                    (whether or not ascertained), on                                  
                    noncancellable life, accident or health                           
                    policies not included in life insurance                           
                    reserves,                                                         
               comprise more than 50 percent of its total reserves (as                
               defined in subsection (c)).  * * *                                     
                    (b) Life Insurance Reserves Defined.--                            
                         (1) In general.  For purposes of this                        
                    part, the term “life insurance reserves”                          
                    means amounts--                                                   
                              (A) which are computed or                               
                         estimated on the basis of                                    
                         recognized mortality or morbidity                            
                         tables and assumed rates of                                  
                         interest, and                                                
                              (B) which are set aside to                              
                         mature or liquidate, either by                               
                         payment or reinsurance, future                               
                         unaccrued claims arising from life                           
                         insurance, annuity, and                                      
                         noncancellable accident and health                           
                         insurance contracts (including life                          





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Last modified: May 25, 2011