Regulation (NAP) - Valuation Criteria

Central Bank of S. T. P.	N A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S) NSB	EFFECTIVE DATE 10.09.02	ISSUE DATE 10.09.02	DOC NO. 05/02	PG 1/3

Subject: Valuation Criteria

Article 46 of Decree-Law No. 47/98, dated November 5 and published in Supplement of the Official Gazette No. 17, dated December 31, provides that the CB shall establish, by notice, the criteria to be observed by insurance companies in the valuation of their respective asset and liability values.

Accordingly, in compliance, it is determined that:

1. The criteria and methods to be adopted in the valuation of insurance companies' assets and liabilities shall take into account, inter alia, the following general principles and concepts:

   a) Of continuity --- the insurance company operates continuously without limited duration;

   b) Of consistency of accounting periods --- valuation principles throughout the accounting periods are not altered;

   c) Of accounting period specialization --- operations carried out in an accounting period affect their respective results, regardless of receipt or payment;

   d) Of historical cost --- records are made based on a real and objective fact, referred to a specific date and not based on random or subjective values;

   e) Of conservatism --- accounting must record all value losses and not account for potential gains.

Reviewed	Revocation Data :

*

Central Bank of S. T. P.	N A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S) NSB	EFFECTIVE DATE 10.09.02	ISSUE DATE 10.09.02	DOC NO. 05/02	PG 2/3

2. Taking into account the stated principles, fluctuating asset and liability values of insurance companies shall be monthly adjusted accounting-wise, according to the following criteria:

   a) Without prejudice to the rules defined below, all values expressed in foreign currency shall be adjusted to the amount resulting from applying the average exchange rate (buy and sell) established by the CB for banks on the last business day of the month or, failing that, through cross exchange with the US dollar;

   b) The value of securities shall be adjusted to the last quotation value on one of the Lisbon, London or New York stock exchanges, or to historical cost, whichever is lower. If not quoted on any of those exchanges, or in the absence of quotation for a period exceeding three months, historical cost or nominal value shall be considered, whichever is lower.

3. If real estate, or its autonomous fractions, are registered at a value manifestly misaligned with the market, insurance companies may request their appraisal from the Directorate of Public Works and Urbanization, with respective costs borne by the insurance company.

4. Decorative objects with artistic value that form part of insurance companies' assets may be adjusted every two-year period to 80% of their market value. This value shall be assigned by a reputable entity, competent in the matter, independent of the insurance company and accepted by the CB.

5. If the CB considers any asset element of an insurance company to be manifestly misaligned with its respective realization value, the latter shall, within a fixed period, submit an appraisal conducted by an independent entity and accepted by the CB, proceeding to the resulting adjustment.

Reviewed	Revocation Data :

*

Central Bank of S. T. P.	N A P PERMANENT APPLICATION STANDARD	CODE
		RD 09
PROPOSER(S) NSB	EFFECTIVE DATE 10.09.02	ISSUE DATE 10.09.02	DOC NO. 05/02	PG 3/3

6. Assets allocated to securing technical provisions shall be valued at the amounts resulting from applying the standards stipulated in this notice, increased by unrealized gains and reduced by unrealized losses determined in the meantime.

7. If the valuation imposed by this notice results in unrealized losses, insurance companies shall establish or adjust, at the end of each month, provisions for the total amount, without offsetting against unrealized gains.

8. The unrealized gains resulting from the valuation imposed by this notice shall be accounting-wise recognized, but may not, however, be allocated to results, distributed or used for any other purpose, until they are realized through the sale of the asset or assets that created them, unless expressly authorized by the CB.

Reviewed	Revocation Data :