NAIC BLANKS (E) WORKING GROUP

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1 NAIC BLANKS (E) WORKING GROUP Blanks Agenda Item Submission Form CONTACT PERSON: TELEPHONE: ADDRESS: ON BEHALF OF: NAME: Joseph Fritsch DATE: 09/30/2011 FOR NAIC USE ONLY Agenda Item # BWG MOD Year 2012 Changes to Existing Reporting [ X ] New Reporting Requirement [ ] REVIEWED FOR ACCOUNTING PRACTICES AND PROCEDURES IMPACT No Impact [ X ] Modifies Required Disclosure [ ] DISPOSITION TITLE: AFFILIATION: ADDRESS: Chair SAPWG New York Department of Insurance 25 Beaver St. New York, NY [ ] Rejected For Public Comment [ ] Referred To Another NAIC Group [ ] Received For Public Comment [ X ] Adopted Date 03/03/2012 [ ] Rejected Date [ ] Deferred Date [ ] Other (Specify) BLANK(S) TO WHICH PROPOSAL APPLIES [ X ] ANNUAL STATEMENT [ ] QUARTERLY STATEMENT [ X ] INSTRUCTIONS [ ] CROSSCHECKS [ ] BLANK [ X ] Life and Accident & Health [ X ] Property/Casualty [ X ] Health [ ] Separate Accounts [ X ] Fraternal [ X ] Title [ ] Other Specify Anticipated Effective Date: Annual 2012 IDENTIFICATION OF ITEM(S) TO CHANGE Modify the instructions and illustrations for Note 9A to reflect the disclosure requirements of SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10. The illustrations for Note 9A will be data captured. REASON, JUSTIFICATION FOR AND/OR BENEFIT OF CHANGE** The Statutory Accounting Principles Working Group adopted SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10. This proposal modifies the instructions and illustrations for Note 9 to reflect the disclosures required by SSAP No NAIC STAFF COMMENTS Comment on Effective Reporting Date: Annual 2012 should not be a problem Other Comments: ** This section must be completed on all forms. Revised 6/13/ National Association of Insurance Commissioners 25

2 ANNUAL STATEMENT INSTRUCTIONS LIFE, HEALTH, PROPERTY, FRATERNAL AND TITLE NOTES TO FINANCIAL STATEMENTS Detail Eliminated To Conserve Space 9. Income Taxes Instruction: A. Disclose the components of the net deferred income tax asset (DTA) or deferred tax liability (DTL) recognized in the reporting entity s financial statements as follows: (1) Disclose for the current year, the prior year and the change between years by tax character (ordinary and capital) the following: a. The total of all gross deferred tax assets. b. The total of all statutory valuation allowance adjustments. c. The total of all adjusted gross deferred tax assets. d. The total of all deferred tax assets nonadmitted as the result of the application of SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10. e. The total of all net adjusted gross admitted deferred tax assets. f. The total of all deferred tax liabilities. g. The total of all net adjusted gross deferred tax assets (net deferred tax liabilities). (1) The total of all DTAs (gross, adjusted gross, admitted and nonadmitted) and DTLs by tax character as well as the net change during the year by component: Net deferred tax asset (liability). The total DTAs nonadmitted as the result of the application of paragraph 10 of SSAP No. 10R, Income Taxes A Temporary Replacement of SSAP No. 10. (2) Whether the reporting entity has elected to admit DTAs pursuant to paragraph 10.e. SSAP No. 10R, Income Taxes A Temporary Replacement of SSAP No. 10; and whether the current-period election differs from the prior reporting period. (3) The increased amount by tax character, and the change in such, of admitted adjusted gross DTAs as the result of the application of paragraph 10.e. SSAP No. 10R, Income Taxes A Temporary Replacement of SSAP No. 10, if applicable. (4) The amount of each result or component of the calculation, by tax character of paragraphs 10.a., 10.b.i, 10.b.ii., 10.c., 10.e.i., 10.e.ii.a., 10.e.ii.b., and 10.e.iii. of SSAP No. 10R, Income Taxes Revised, A Temporary Replacement of SSAP No. 10, and the risk-based capital level (total adjusted capital and authorized control level) used in paragraph 10.d National Association of Insurance Commissioners 26

3 (2) Admission Calculation Components per SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10 For the current year, prior year and the change between years, disclose the amount of each result or component of the deferred tax asset admission calculation as provided in SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10. a. The amount of federal income taxes paid in prior years that can be recovered through loss carrybacks, by tax character (ordinary and capital); b. The amount of adjusted gross DTAs expected to be realized (excluding the amount of DTAs reported in 9A(2)a) after application of the threshold limitations, by tax character (ordinary and capital). (The amount determined in 9A(2)b1 limited by the amount determined in 9A(2)b2.); 1. The amount of adjusted gross DTAs, expected to be realized within the applicable period following the balance sheet date, by tax character (ordinary and capital). Refer to the applicable Realization Threshold Limitation Table in SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10, to determine the applicable period; 2. The amount of the applicable percentage of statutory capital and surplus as required to be shown on the statutory balance sheet of the reporting entity for the current reporting period s statement filed with the domiciliary state commissioner adjusted to exclude any net DTAs, EDP equipment and operating system software and any net positive goodwill. Refer to SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10, to determine the applicable percentage to be applied; c. The amount of adjusted gross DTAs (excluding the amount of DTAs reported in 9A(2)a and 9A(2)b) that can be offset against existing gross DTLs, by tax character (ordinary and capital); d. The amount of DTAs admitted as the result of the application of SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10, by tax character (ordinary and capital). (The sum of 9A(2)a, 9A(2)b and 9A(2)c.) (3) Disclose the ratio used to determine applicable period used in 9A(2)b1 for determining the amount of adjusted gross DTAs, expected to be realized and the amount of adjusted capital and surplus used to determine the percentage threshold limitation in 9A(2)b2. (54) Disclose the impact of tax-planning strategies: a. On the determination of adjusted gross deferred tax assets, by tax character as a percentage of total; b. On the determination of net admitted deferred tax assets, by tax character, as percentage of total; c. State whether the tax-planning strategies include the use of reinsurance-related tax planning strategies. The reporting entity shall perform additional calculations to determine the impact of tax-planning strategies on adjusted gross and net admitted DTAs. This impact shall be disclosed as a percentage, by tax character, of the total (either adjusted gross DTAs or net admitted DTAs). Similar to the with and without calculation used to determine admitted adjusted gross DTAs pursuant to paragraphs 10.b.i. and 10.e.i.(a) referenced in SSAP No. 10 Exhibit A, Implementation Questions & Answers, Question No. 6, the reporting entity should perform a with and without calculation of adjusted gross and net admitted DTAs, by tax character, one with the application of available prudent and feasible tax-planning strategies (relating to both the reporting entity s DTAs and DTLs ) and one without. The tax-planning strategy with and 2012 National Association of Insurance Commissioners 27

4 without calculation related to net admitted DTAs shall be performed using either paragraphs 10.a, 10.b. and 10.c. or paragraph 10.e. in accordance with the qualification and election determination resulting from paragraph 10.d. The difference between the with and without calculations is the impact of the tax-planning strategies on adjusted gross and net admitted DTAs. Reference SSAP No. 101 A Guide to Implementation of SSAP 101 on Accounting for Income Taxes: Questions and Answers;Exhibit A, Implementation Questions &Answers, Question No. 13, for guidance on tax planning strategies. (6) The amount of admitted DTAs, admitted assets, statutory surplus and total adjusted capital in the risk-based capital calculation resulting from the calculation in paragraphs 10.a, 10.b and 10.c. of SSAP No. 10R, Income Taxes Revised, A Temporary Replacement of SSAP No. 10; and the increased amount of DTAs, admitted assets and surplus as the result of the application of paragraph 10.e. SSAP No. 10R, Income Taxes A Temporary Replacement of SSAP No. 10, if applicable. B. To the extent that DTLs are not recognized for amounts described in paragraph 31 of FAS 109, disclose the following: Detail Eliminated To Conserve Space G. For any federal or foreign income tax loss contingencies as determined in accordance with SSAP No. 5R, Liabilities, Contingencies and Impairments of Assets, with the modifications provided in SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10, for which it is reasonably possible that the total liability will significantly increase within 12 months of the reporting date, the reporting entity shall disclose an estimate of the range of the reasonably possible increase or a statement that an estimate of the range cannot be made. Refer to SSAP No. 101, Income Taxes A Replacement of SSAP No. 10R and SSAP No. 10SSAP No. 10R, Income Taxes A Temporary Replacement for SSAP No. 10, for accounting guidance on disclosure requirements, and INT for more detail on protective tax deposits. Illustration: A. The components of the net deferred tax asset/(liability) at December 31 are as follows: 1. 12/31/ /31/2011 Change (a) Gross Deferred Tax Assets $ $ $ $ $ $ $ $ $ (b) Statutory Valuation Allowance Adjustments $ $ $ $ $ $ $ $ $ (c) Adjusted Gross Deferred Tax Assets $ (1a 1b) $ $ $ $ $ $ $ $ (d) Deferred Tax Assets Nonadmitted (e) Subtotal Net Admitted Deferred Tax Asset (1c 1d ) $ $ $ $ $ $ $ $ $ (df). Deferred Tax Liabilities $ $ $ $ $ $ $ $ $ (e) (f) (g) Subtotal Net Deferred Tax Asset/(Net Deferred Tax Liability) (1c 1d ) $ $ $ $ $ $ $ $ $ Deferred Tax Assets Nonadmitted Net Admitted Deferred Tax Asset/(Net Deferred Tax Liability) (1e 1f) $ $ $ $ $ $ $ $ $ 2012 National Association of Insurance Commissioners 28

5 42. 12/31/ /31/2011 Change Admission Calculation Components SSAP No. 101 SSAP No. 10R, Paragraphs 10.a.., 10.b., and 10.c.: (a) Federal Income Taxes Paid In Prior Years Recoverable Through Loss Carrybacks. $ $ $ $ $ $ $ $ $ (b) Adjusted Gross Deferred Tax Assets Expected To Be Realized (Excluding The Amount Of Deferred Tax Assets From 2(a) $ $ $ $ $ $ $ $ $ above) After Application of the Threshold Limitation. (The Lesser of 2(b)1 and 2(b)2 Below) 1. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date. $ $ $ $ $ $ $ $ $ 2. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold. XXX XXX $ XXX XXX $ XXX XXX $ (c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax $ $ $ $ $ $ $ $ $ Assets From 2(a) and 2(b) above) Offset by Gross Deferred Tax Liabilities. (d) Deferred Tax Assets Admitted as the result of application of SSAP No (2(a) + 2(b) + 2(c)) $ $ $ $ $ $ $ $ $ (a) SSAP No. 10R, Paragraph 10.a. $ $ $ $ $ $ $ $ $ (b) SSAP No.10R, Paragraph 10.b. (the lesser of paragraph 10.b.i. and 10.b.ii. below) $ $ $ $ $ $ $ $ $ (c) SSAP No.10R, Paragraph 10.b.i. $ $ $ $ $ $ $ $ $ (d) SSAP No.10R, Paragraph 10.b.ii. XXX XXX $ XXX XXX $ XXX XXX $ (e) SSAP No.10R, Paragraph 10.c. $ $ $ $ $ $ $ $ $ (f) (4a + 4b + 4e) $ $ $ $ $ $ $ $ $ Admission Calculation Components SSAP No.10R, Paragraph 10.e.: (g) SSAP No.10R, Paragraph 10.e.i. $ $ $ $ $ $ $ $ $ (h) SSAP No.10R, Paragraph 10.e.ii. (the lesser paragraph of 10.e.ii.a. and 10.e.ii.b. below) $ $ $ $ $ $ $ $ $ (i) SSAP No.10R, Paragraph 10. e.ii.a. $ $ $ $ $ $ $ $ $ (j) SSAP No.10R, Paragraph 10. e.ii.b. XXX XXX $ XXX XXX $ XXX XXX $ (k) SSAP No.10R, Paragraph 10.e.iii. $ $ $ $ $ $ $ $ $ (l) (4g + 4h + 4k) $ $ $ $ $ $ $ $ $ Used in SSAP No. 10R, Paragraph 10.d. (m) Adjusted XXX XXX $ XXX XXX $ XXX XXX $ (n) Authorized Control Level XXX XXX $ XXX XXX $ XXX XXX $ age (a) Ratio age Used To Determine Recovery Period And Threshold Limitation Amount. (b) Amount Of Adjusted And Surplus Used To Determine Recovery Period And Threshold Limitation In 2(b)2 Above age (c) The Company s tax-planning strategies include the use of reinsurance-related tax-planning strategies /31/ /31/2011 Change Impact of Tax Planning Strategies (a) (b) Adjusted Gross DTAs (% of Adjusted Gross DTAs) Net Admitted Adjusted Gross DTAs (% of Net Admitted Adjusted Gross DTAs) (c) Does the Company s tax planning strategies include the use of reinsurance? Yes No 2012 National Association of Insurance Commissioners 29

6 6. 12/31/ /31/2010 Change SSAP No.10R, Paragraphs 10.a., 10.b., and 10.c.: (a) Admitted Deferred Tax Assets $ $ $ $ $ $ $ $ $ (b) Admitted Assets XXX XXX $ XXX XXX $ XXX XXX $ (c) Adjusted Statutory Surplus * XXX XXX $ XXX XXX $ XXX XXX $ (d) Adjusted from DTAs XXX XXX $ XXX XXX $ XXX XXX $ Increases due to SSAP No.10R, Paragraph 10.e. (e) Admitted Deferred Tax Assets $ $ $ $ $ $ $ $ $ (f) Admitted Assets $ $ $ $ $ $ $ $ $ (g) Statutory Surplus $ $ $ $ $ $ $ $ $ * As reported on the statutory balance sheet for the most recently filed statement with the domiciliary state commissioner adjusted in accordance with SSAP No.10R, Paragraph 10bii Line 9A1e, Column 3 If greater than or equal to zero, it should equal the Asset Page Line 18.2, Column 1 and the Liability Page Line 15.2, Column 1 should equal zero. If not greater than zero, the Asset Page Line 18.2, Column 1 should equal zero. Line 9A1f, Column 3 If greater than or equal to zero, it should equal the Asset Page Line 18.2, Column 2 and the Liability Page Line 15.2, Column 1 should equal zero. If not greater than zero, the Asset Page Line 18.2, Column 2 should equal zero. Line 9A1g, Column 3 If greater than or equal to zero, it should equal the Asset Page Line 18.2, Column 3 and the Liability Page Line 15.2, Column 1 should equal zero. If not greater than zero, it should equal the Liability Page Line 15.2, Column 1 and the Asset Page Line 18.2, Column 3 should equal zero. If equal to zero, the Liability Page Line 15.2, Column 1 should equal zero and the Asset Page Line 18.2, Column 3 should equal zero. B. Regarding deferred tax liabilities that are not recognized: See example in paragraph of the SSAP No. 10, Income Taxes Q&A. Detail Eliminated To Conserve Space W:\QA\BlanksProposals\ BWG_Modified.doc 2012 National Association of Insurance Commissioners 30