                                 CODE OF VIRGINIA

VALUATIONS (§ 38.2-4125)

A. The report of valuation shall show, as reserve liabilities, the difference
between the present midyear value of the promised benefits provided in the
certificates of the society in force and the present midyear value of the future
net premiums as they are in practice actually collected, not including any value
for the right to make extra assessments and not including any amount by which
the present midyear value of future net premiums exceeds the present midyear
value of promised benefits on individual certificates. At the option of any
society, the valuation may show the net tabular value instead of the above
value. The net tabular value as to certificates issued prior to June 28, 1969,
shall be determined in accordance with the provisions of law applicable prior to
June 28, 1968, and as to certificates issued on or after June 28, 1969, shall
not be less than the reserves determined according to the Commissioners&#8217;
reserve valuation method as defined in subsection C of this section. If the
premium charged is less than the tabular net premium according to the basis of
valuation used, an additional reserve equal to the present value of the
deficiency in the premiums shall be set up and maintained as a liability. The
reserve liabilities shall be properly adjusted in the event that the midyear or
tabular values are not appropriate.

B. A society may value its certificates in accordance with valuation standards
authorized by the laws of this Commonwealth for the valuation of policies issued
by life insurers.

C. Reserves according to the Commissioners&#8217; reserve valuation method, for
the life insurance and endowment benefits of certificates providing for a
uniform amount of insurance and requiring the payment of uniform premiums shall
be any excess of the present value, at the date of valuation, of the future
guaranteed benefits provided for by those certificates, over the then present
value of any future modified net premiums therefor. The modified net premiums
for any such certificate shall be a uniform percentage of the respective
contract premiums for the benefits that the present value, at the date of issue
of the certificate, of all modified net premiums shall equal the sum of the then
present value of the benefits provided for by the certificate and the excess of
1 over 2, as follows:

   1. A net-level premium equal to the present value, at the date of issue, of
   the benefits provided for after the first certificate year, divided by the
   present value, at the date of issue, of an annual annuity of one dollar
   payable on each anniversary of the certificate on which a premium falls due.
   However, the net-level annual premium shall not exceed the net-level annual
   premium on the nineteen-year premium whole life plan for insurance of the same
   amount at any age one year higher than the age at issue of the certificate;
   and

   2. A net one-year term premium for the benefits provided for in the first
   certificate year. Reserves according to the Commissioners&#8217; reserve
   valuation method for (i) life insurance benefits for varying amounts of
   benefits or requiring the payment of varying premiums, (ii) annuity and pure
   endowment benefits, (iii) disability and accidental death benefits in all
   certificates and contracts, and (iv) all other benefits except life insurance
   and endowment benefits, shall be calculated by a method consistent with the
   principles of this subsection.

D. The present value of deferred payments due under incurred claims or matured
certificates shall be deemed a liability of the society and shall be computed
upon mortality and interest standards prescribed in subsections E through G of
this section.

E. The valuation and underlying data shall be certified by a competent actuary
or, at the expense of the society, verified by the actuary of the department of
insurance of the state of domicile of the society.

F. The minimum standards of valuation for certificates issued prior to June 28,
1969, shall be those provided by the law applicable immediately prior to June
28, 1968, but not lower than the standards used in the calculating of rates for
those certificates.

G. The minimum standard of valuation for certificates issued after June 28,
1969, shall be 3 1/2 percent interest and the following tables:

   1. For certificates of life insurance, American Men Ultimate Table of
   Mortality, with Bowerman&#8217;s or Davis&#8217; Extension thereof or with the
   consent of the Commission, the Commissioners 1941 Standard Ordinary Mortality
   Table, the Commissioners 1941 Standard Industrial Mortality Table or the
   Commissioners 1958 Standard Ordinary Mortality Table, using actual age of the
   insured for male risks and an age not more than three years younger than the
   actual age of the insured for female risks;

   2. For annuity and pure endowment certificates, excluding any disability and
   accidental death benefits in the certificates, the 1937 Standard Annuity
   Mortality Table or the Annuity Mortality Table for 1949, Ultimate, or any
   modification of either of these tables approved by the Commission;

   3. For total and permanent disability benefits in or supplementary to life
   insurance certificates, Hunter&#8217;s Disability Table, or the Class III
   Disability Table (1926) modified to conform to the contractual waiting period,
   or the tables of Period 2 disablement rates and the 1930 to 1950 termination
   rates of the 1952 Disability Study of the Society of Actuaries with due regard
   to the type of benefit. Any of these tables shall, for active lives, be
   combined with a mortality table permitted for calculating the reserves for
   life insurance certificates;

   4. For accidental death benefits in or supplementary to life insurance
   certificates, The Inter-Company Double Indemnity Mortality Table or the 1959
   Accidental Death Benefits Table. Either table shall be combined with a
   mortality table permitted for calculating the reserves for life insurance
   certificates; and

   5. For noncancellable accident and health benefits, the Class III Disability
   Table (1926) with conference modifications or, with the consent of the
   Commission, tables based upon the society&#8217;s own experience.

H. The Commission may, in its discretion, accept other standards for valuation
if it finds that the reserves produced by those standards will not be less in
the aggregate than reserves computed in accordance with the minimum valuation
standard prescribed in this section. The Commission may, in its discretion, vary
the standards of mortality applicable to all certificates of insurance on
substandard lives or other extra hazardous lives by any society licensed to do
business in this Commonwealth. Whenever the mortality experience under all
certificates valued on the same mortality table exceeds the expected mortality
according to that table for a period of three consecutive years, the Commission
may require additional reserves that it deems necessary on account of the
certificates.

I. Any society, with the consent of the commissioner of insurance of the state
of domicile of the society and under any conditions he may impose, may establish
and maintain reserves on its certificates in excess of the reserves required by
the state. However, the contractual rights of any insured member shall not be
affected by the excess reserves.

HISTORY: Code 1950, §§ 38-316, 38.1-624; 1952, c. 317, § 38.1-638.45; 1968,
c. 654; 1975, c. 262; 1986, c. 562.