SCA stocks (affiliated) are valued using which of the following methods:

Question

Options

• AMarket Value Method
• BStatutory Equity Method
• CBoth A and B
• DNeither A nor B

• A
  6% (4)
• B
  3% (2)
• C
  81% (51)
• D
  10% (6)

Explanation

Option C is correct because SCA (Subsidiary, Controlled, and Affiliated) stocks can be valued under either the Market Value Method or the Statutory Equity Method depending on the type of affiliate - publicly traded affiliates may use market value, while insurance company subsidiaries typically use the statutory equity method (based on the affiliate's own statutory surplus/net assets). Neither method alone covers all SCA situations, making A and B individually incomplete as standalone answers. Option D is simply the opposite of what statutory accounting principles prescribe - both methods are explicitly recognized under NAIC guidance for this asset class.

Memory tip: Think "SCAs get both tools in the toolbox" - the Market method for affiliates with an observable price, and the Statutory Equity method when you're looking through to the subsidiary's own SAP balance sheet. If you see "affiliated" on the exam, your default instinct should be "it depends on the type," which points to C.

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