Examination of Financial Statements of the Overseas Private Investment Corporation, Fiscal Years 1976 and 1975

This report, which is required by the Government Corporation Control Act, shows the financial condition of the Overseas Private Investment Corporation at June 30, 1976, and discusses pertinent aspects of its operations.

We are sending copies of this report to the Director, Office of Management and Budget; the Secretary of the Treasury; the Administrator, Agency for International Development; and the President, Overseas Private Investment Corporation.

Tumer D. Staats

Comptroller General

COMPTROLLER GENERAL'S
REPORT TO THE CONGRESS

EXAMINATION OF FINANCIAL

STATEMENTS OF THE OVERSEAS
PRIVATE INVESTMENT CORPORATION
FISCAL YEARS 1976 and 1975

DIGEST

The Overseas Private Investment Corporation's
Investment Insurance Program is designed to
encourage the investment of U.S. capital and
resources in developing countries. To accom-
plish this, the Corporation insures U.S.
investors against political risks of loss from
expropriation, inconvertibility of currency,
and war, revolution, or insurrection.

As of June 30, 1976, the Overseas Private
Investment Corporation's maximum contingent
liability for insurance was $6.2 billion.
The Corporation's management believes that a
more accurate representation of its maximum
potential exposure to insurance claims is
$3.08 billion. (See pp. 3 and 4.)

At June 30, 1976, the Corporation's insurance
reserve for losses amounted to $204.7 million.
Potential charges against this reserve for
claims filed totaled $395.5 million. (See
p. 5 to 7.)

The Overseas Private Investment Corporation
Amendments Act of 1974 requires that the Cor-
poration eventually become a reinsurer only
and that the private sector directly insure
overseas investment. The Corporation's
endeavors to comply with the legislation
include establishing the Overseas Investment
Insurance Group, an organization through which
private insurance companies join with the
Corporation as insurers and also reinsure the
Corporation for previously issued insurance.
The Corporation also plans to establish a War
Risk Insurance Reciprocal. In addition, the
Corporation has continued a previously exist-
ing contract for reinsurance with Lloyd's of
London. (See ch. 3.)

Tear Sheet. Upon removal, the report cover date should be noted hereon.

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In addition to insuring U.S. investors against political risk loss, the Corporation supports U.S. private investors by

--guaranteeing loans and other investments,

--making loans from its own resources, and

--providing preinvestment assistance.

As of June 30, 1976, the Corporation had outstanding guarantees totaling $157 million and outstanding loans totaling $22 million.

ch. 4.)

OPINION ON FINANCIAL STATEMENTS

(See

Due to the many uncertainties affecting claims as well as those affecting other liabilities (see notes 7 and 8 to the financial statements), GAO is not able to express an opinion on the adequacy of the amount reserved for losses the Corporation may suffer because of its insurance and guaranty contracts.

In GAO's opinion, except for the adequacy of the amount reserved for losses, the financial statements in the report present fairly the financial position of the Overseas Private Investment Corporation at June 30, 1976 and 1975, and the results of its operations, the changes in its capital and reserves, and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. (See ch. 5.)