2014 NAIC ACCOUNTING AND REPORTING UPDATE

Transcription

1 CHICAGOLAND IASA 2014 NAIC ACCOUNTING AND REPORTING UPDATE APRIL 17, 2014

2 An insurance regulatory services firm dedicated to providing statutory training and consulting services to insurance companies and regulators Millennium Consulting Services, LLC New Falls Of Neuse Rd., Suite Raleigh, NC Phone: (919)

3 Who We Are Bruce A. Cromartie President & CEO Over 30 years of insurance, regulatory, lobbying, training, and consulting experience SunGard Insurance Systems 3 Years VP of Seminars and Regulatory Consulting BCBSA 10 years Financial Regulatory Affairs NAIC 2 Years Financial Analyst N. C. DOI 6 Years Assistant Deputy Commissioner N. C. Farm Bureau 4 Years Internal Auditor 3

4 Who We Are Colleen Gingrich Sr. Vice President Over 20 years of insurance, regulatory, training, and consulting experience Family Health Partners HMO - Statutory & GAAP Accounting/Reporting Manager Coventry Health Plan Accounting Manager SunGard Director of Seminars & Regulatory Consulting NAIC P&C Financial Analyst Manager Pinnacle Rehabilitation Company Supervisor Federated Rural Electric Insurance Company Staff Accountant 4

5 Who We Are Karen Foster Director, Consulting Services Brian Neader, CPA, FLMI Director, Consulting Services Katrina Gunn Associate Director, Consulting Services Kim Campbell Consultant Teresa Daveline Consultant Virginia Jett Consultant Nadia Nahvi Consultant Lori Oertli Consultant Jenny Sloane Consultant Nancy White Consultant 5

6 Scope of Services Specializing in providing comprehensive educational training and regulatory consulting for the insurance industry Seminar Services Public Seminars Private Seminars Webinars Consulting Services Outsourcing Services Insurance Regulatory Advisory Services Quality Control Review (QCR) Services 6

7 2014 NAIC ACCOUNTING and REPORTING UPDATE Agenda Topics Overview of Statutory Accounting Principles Changes to Accounting Practices and Procedures Manual; Version March 2014 Substantive Revisions Nonsubstantive Revisions Emerging Accounting Issues Changes to Accounting Practices and Procedures Manual; Version March 2015 Emerging Accounting Issues Substantive Revisions Nonsubstantive Revisions Outstanding Statutory Accounting Issues 7

8 CODIFICATION OF STATUTORY ACCOUNTING PRINCIPLES

9 Codification of Statutory Accounting Principles Guide referred to as NAIC Accounting Practices and Procedures Manual Encompasses statutory accounting principles for statutory accounting and reporting 9

10 Codification of Statutory Accounting Principles Accounting Practices and Procedures Manual composed of Preamble Statements of Statutory Accounting Principles Appendices Interpretations of Emerging Accounting Issues Working Group Collectively these items are referred to as the Accounting Practices and Procedures Manual (APPM) Adopted by NAIC in 1998 Became effective on state-by-state basis on January 1, 2001 Updated on an annual basis 10

11 Codification of Statutory Accounting Principles APPM applies to all types of insurers Health Entities Health Maintenance Organizations (HMOs) Limited Health Service Organization (LHSOs) Hospital, Medical and Dental Service or Indemnity (HMDI) Corporations Life, Accident and Health Insurers Mortgage Guaranty Insurers Property and Casualty Insurers Title Insurers 11

12 Maintenance of Statutory Accounting Principles Maintenance Process Formal maintenance process designed to: Address accounting rules for new transactions that occur in the business environment of insurers and modifications Provide clarifications to existing accounting practices APPM is continuously under review and periodically updated with new: Issue Papers Interpretations Statements of Statutory Accounting Principles Changes are done in accordance with NAIC Policy Statement on the Maintenance of Statutory Accounting Principles Updated annually to reflect the adoption of new guidance 12

13 Maintenance of Statutory Accounting Principles Accounting Practices and Procedures Task Task Force employs two working groups with distinctly different functions to carry out charge of maintaining SAP Groups are made up of insurance department regulators Staffed by NAIC personnel Statutory Accounting Principles Working Group Emerging Accounting Issues Working Group 13

14 CHANGES TO THE ACCOUNTING PRACTICES AND PROCEDURES MANUAL; VERSION MARCH 2014

15 Changes to AP&P Manual; Version March 2014 Changes to AP&P Manual This section addresses changes to Accounting Practices and Procedures Manual as of March 2014 Adopted at 2013 NAIC Fall National Meeting with 2014 effective dates Substantive Revisions - New Statements of Statutory Accounting Principles Nonsubstantive Revisions - Amendments to current SSAPs 15

16 SUBSTANTIVE REVISIONS EFFECTIVE JANUARY 2014

17 Substantive Revisions At NAIC 2013 Fall National Meeting Working Group adopted the following Substantive Revisions with January 1, 2014 effective date SSAP No. 35R Guaranty Fund and Other Assessments SSAP No. 104R Share-Based Payments SSAP No Working Capital Finance Investments 17

18 Substantive Revisions SSAP No. 35R Guaranty Fund and Other Assessments Adopted accounting guidance for ACA Section 9010 Insurer Fee Statutory accounting guidance found in SSAP No. 35R, paragraphs Effective January 1,

19 Substantive Revisions SSAP No. 35R Guaranty Fund and Other Assessments For initial application of 2013 Data Year Insurer Fee in 2014 Reporting Entity must: Accrue liability and expense for Insurer Fee in Fee Year (year fee is due and paid) Pay 2013 Data Year Insurer Fee as of September 30, 2014 (Fee Year) Report Insurer Fee in operating expenses in Fee Year in expense category of Taxes, Licenses and Fees 19

20 Substantive Revisions SSAP No. 35R Guaranty Fund and Other Assessments Date Data Year Fee Year Account Debit Credit 1/1/14 N/A ACA Section 9010 Expense Insurer Fee Liability Recognize liability and expense for Prior Year Data Year ACA Section 9010 Insurer Fee in Current Fee Year 20

21 Substantive Revisions SSAP No. 35R Guaranty Fund and Other Assessments Recognize payment of 2013 Data Year Insurer Fee no later than September 30, 2014 (Fee Year) Date Data Year Fee Year Account Debit Credit 9/30/14 N/A Insurer Fee Liability Cash Payment of Prior Year Data Year ACA Section 9010 Insurer Fee 21

22 Substantive Revisions SSAP No. 35R Guaranty Fund and Other Assessments Accrue monthly estimated Insurer Fee in Special Surplus for current Fee Year (2015 Fee Year/2014 Data Year) assessment Date Current Data Year Account Debit Credit Unassigned Funds /31/14 Special Surplus Reserve for 2014 Data Year ACA Section 9010 Fee Unassigned Funds /28/14 Special Surplus Reserve for 2014 Data Year ACA Section 9010 Fee Unassigned Funds /30/14 Special Surplus Reserve for 2014 Data Year ACA Section 9010 Fee 12/31/14 Unassigned Funds Special Surplus Reserve 2014 Data Year ACA Section 9010 Fee (Total reclassification in the amount of $150) 22

23 Substantive Revisions SSAP No. 35R Guaranty Fund and Other Assessments Date Data Year Account Debit Credit 1/1/2015 Special Surplus Unassigned Funds Reverse 2014 reserve reclassification for 2014 Data Year ACA Section 9010 Fee 23

24 Substantive Revisions SSAP No. 104R - Share-Based Payments Ref. No ASC Equity Payments to Non- Employees Adopted with modifications ASC Addresses equity payments to non-employees Requires recognition in financial statements of most reliable measurable FV of such transactions Effective December 31,

25 Substantive Revisions SSAP No. 105 Working Capital Finance Investments Adopted SSAP to provide accounting guidance for Working Capital Finance Investments Aka vendor finance note Created when supplier sells goods to buyer then delivers invoice for payment Investments typically held by commercial banks Insurance entities have begun investing in securities Accounted for as admitted asset pursuant to SSAP No. 105 Reported in Schedule BA Effective January 1,

26 NONSUBSTANTIVE REVISIONS

27 Nonsubstantive Revisions SSAP No. 1 Disclosure of Accounting Policies Ref No Accounting Disclosures for Restricted Assets Revises paragraph 17.b Revises disclosure requirement for investments not under exclusive control of reported entity to be included in Notes to Financial Statement Information currently reported in General Interrogatories. Intent to accumulate all relevant disclosures regarding restricted assets in one place in statutory statement 27

28 Nonsubstantive Revisions SSAP No. 26 Bonds, Excluding Loan-Backed and Structured Securities Ref No Mandatory Convertible Securities Revises paragraph 7, adds new paragraph 9 Revises definition of mandatory convertible securities Revises accounting and reporting guidance to report these securities at lower of amortized cost or fair value Effective January 1,

29 Nonsubstantive Revisions Ref No Adding Preferred Stock Class for ETFs New paragraph 3.c SSAP No. 32 Preferred Stock Adds classification of exchange traded funds (ETFs) to definition of preferred stocks 29

30 Nonsubstantive Revisions Ref No Measurement and Classification of Real Estate Investments Revises paragraph 4.c Moves guidance related to measurement and classification of real estate investments from SSAP No. 90 to SSAP No. 40 Ref No Real Estate Encumbrances Revises paragraph 6 SSAP No. 40/90 Real Estate Investments Clarifies definition of encumbrances

31 Nonsubstantive Revisions SSAP No. 43R - Loan-Backed and Structured Securities Ref No Disclosure Requirements for Loan-Backed and Structured Securities New paragraph 26 Limits disclosure for bifurcated other-than-temporary credit impairments to current reporting period Revises guidance for interim financial statements for RMBS and CMBS securities acquired subsequent to year-end 31

32 Nonsubstantive Revisions SSAP No. 56 Separate Accounts Ref No Seed Money Disclosure New paragraph 35.b Revises disclosure requirement to capture information on: Separate account seed money Other fees and expenses Additional required surplus amounts 32

33 Nonsubstantive Revisions SSAP No. 62R Property & Casualty Reinsurance Ref No Impact of Transfer on Provision for Reinsurance New paragraphs Impacts asbestos and pollution reinsurance contracts Changes Schedule F reporting and provision for reinsurance calculation Effective January 1,

34 Nonsubstantive Revisions SSAP Nos. 64, SSAP No. 86, SSAP No. 103 Ref No ASU , Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities SSAP No. 64, new paragraph 6-7 SSAP No. 86, new paragraph 53.h SSAP No. 86, new paragraph 28.m Revisions clarify that: Derivatives, repurchase and reverse repurchase agreements, and securities borrowing and securities lending transactions reported» Net on Balance Sheet» Gross on Schedule DB Adds disclosures to illustrate netting impact 34

35 Nonsubstantive Revisions SSAP No. 86 Accounting for Derivative Instruments Ref No Hedge Accounting Requirements Revises paragraph 15 Allow transactions that meet criteria of highly effective hedge transactions to follow fair value hedge accounting if elected by reporting entity 35

36 Nonsubstantive Revisions SSAP No. 92 Accounting for Postretirement Benefits Other Than Pensions Ref No EITF 06-04, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements Revises paragraphs 58, 84, and 99 Revisions adopt with modification EITF Specifies that endorsement split-dollar life insurance contracts do not settle liability for postretirement benefit obligations 36

37 Nonsubstantive Revisions Ref No Inconsistency Regarding Tax Planning Strategies Revises paragraphs 14 SSAP No. 101 Income Taxes Clarifies that tax planning strategies: Must be utilized in statutory valuation allowance calculation Not required in admittance calculation If used for admittance calculation Should be consistent with tax-planning strategies used in computing statutory valuation allowance 37

38 Nonsubstantive Revisions SSAP No. 101 Income Taxes Ref No DTA Admissibility Test for Financial and Mortgage Guaranty Insurers Revises paragraph 11b and Realization Threshold Limitation Table Clarifies threshold limitations for calculation of RBC for mortgage guaranty insurers

39 CHANGES TO THE ACCOUNTING PRACTICES AND PROCEDURES MANUAL; VERSION MARCH 2015

40 Changes to AP&P Manual; Version March 2015 Changes to AP&P Manual This section addresses changes to Accounting Practices and Procedures Manual as of March 2015 New Consensus Interpretations Statements of Statutory Accounting Principles Substantive Revisions Nonsubstantive Revisions Outstanding Substantive and Nonsubstantive Revisions 40

41 EMERGING ACCOUNTING ISSUES

42 Consensus Interpretations Emerging Accounting Issues Responds to questions of Application Interpretation Clarification of existing SSAPs Final consensus opinions (Consensus Interpretation) are published annually in Appendix B of APPM Effective upon adoption by Accounting Practices and Procedures Task Force 42

43 CONSENSUS INTERPRETATIONS (AS OF MARCH 31, 2014)

44 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of the Affordable Care Act (ACA) Adopted interpretative accounting guidance for ACA s Risk Sharing Programs Risk Adjustment, Reinsurance, and Risk Corridors Commonly referred as to the 3Rs Accounting guidance effective immediately Applicable for st Quarter reporting period 44

45 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA ACA Risk Sharing Programs Programs take effect in 2014 Imposes both fees and premium and claim stabilization programs on insurance companies offering commercial insurance Accounting guidance in INT similar to guidance in INT 05-05: Accounting for Revenues under Medicare Part D Coverage Interpretation references existing statutory accounting guidance from various SSAPs, including SSAPs No. 6, 35R, 47, 54, 61R, 63, 66 and 84 45

46 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA With adoption of INT Working Group submitted referral to SAPWG to: Address issues pertaining to admissibility of certain items within three programs Develop stand-alone SSAP to codify 3R guidance 46

47 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Accounting Issues How to account for various components of three risk sharing programs Which existing SSAPs should be utilized for various program provisions 47

48 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Risk Adjustment Program Permanent program designed to transfer premiums between health insurers in individual and small-group markets, including grandfathered plans In/Out of Marketplace Transfer of premiums based on relative risk scores of insurers in program Function of diagnosis codes without regard to actual claims experience Administered by HHS or optionally a state 48

49 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Risk Adjustment Program Submission and settlement deadline is April 30 th and June 30 th, respectively of year following the benefit year Also includes administrative risk adjustment user fee assessed on a per-enrollee-per-month basis Collected by HHS in June of year following benefit year Approximately $1 per enrollee per year HHS will invoice insurers for risk adjustment program contributions and payments Similar terms will apply for user fees of state operated programs 49

50 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Risk Adjustment Program INT addresses two accounting issues for the Risk Adjustment Program: Risk adjustment contributions (premium reduction) into Program and payments or recoveries from Program (additional premiums) Risk adjustment user fee 50

51 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Risk Adjustment Program INT clarifies two accounting issues in paragraphs 12 16: Paragraph 12 - Premium adjustments (contributions and recoveries) accounted for as premiums subject to redetermination per SSAP No. 54 Paragraph 15 - Record adjustments to premium in period in which changes in risk scores of enrollees result in premium adjustment To extent adjustments are reasonably estimable Paragraph 16 - Receivables or recoveries subject to 90-day rule nonadmission rule per SSAP No. 6 Beginning when payment is due to be disbursed by HHS or state - not from date of initial accrual Receivable also subject to impairment analysis 51

52 INT Accounting for the Risk Sharing Provisions of ACA 52

53 INT Accounting for the Risk Sharing Provisions of ACA 53

54 INT Accounting for the Risk Sharing Provisions of ACA 54

55 INT Accounting for the Risk Sharing Provisions of ACA 55

56 INT Accounting for the Risk Sharing Provisions of ACA 56

57 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Risk Adjustment Program Paragraph 13 - User fees treated as government assessments Accounted for under SSAP No. 35R Treated the same as other non-income-based governmental taxes and fees 57

58 INT Accounting for the Risk Sharing Provisions of ACA 58

59 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Transitional Reinsurance Program Three-year program designed to stabilize premiums for coverage in individual market from 2014 through 2016 Requires all health insurance issuers and TPAs on behalf of selfinsured group health plans to pay into fund via reinsurance Applies to individual market covering high-cost individuals Impacts fully insured individual, non-individual products and self insured products but utilizes different accounting methodologies Funding scheduled to decrease systematically from 2014 through 2016 and eliminated in 2017 Administered by HHS or each state 59

60 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Transitional Reinsurance Program Funded over three-year period through: Transitional reinsurance assessment on health plan sponsors ($20 billion) defined as contributions for reinsurance Contributions to U.S. Treasury ($5 billion) defined as additional U.S. Treasury contributions Additional assessments of $20.3 million defined as program administrative costs contributions National per capita contribution rate of approximately $0.11 annually 60

61 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Transitional Reinsurance Program Accounting guidance outlined in paragraphs 20, Paragraph 20 clarifies that reinsurance as used by TRP does not represent reinsurance between licensed insurers per SSAP No. 61R Similar to involuntary pool per SSAP No. 63 Mechanism employed by states to provide insurance coverage to those with higher than average probability of loss who otherwise would be excluded from obtaining coverage Paragraph 28, et al, clarify that contributions for reinsurance and recoveries accounted for as traditional reinsurance in accordance with SSAP No. 61R for fully insured individual products 61

62 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA INT Reinsurance - ( ) Individual Insured Products Paragraphs 20, Contributions for Reinsurance U.S. Treasury Contribution Program Admin Cost Contributions 62 Reinsurance Payment Description $20B Assessment $5B Assessment $0.11 PMPY N/A Accounted For As Ceded Reinsurance Premiums Assessment Ceded Reinsurance Premiums Ceded Claim Benefit Recovery SSAP Guidance 61R/63 35R 61R/63 61R/63 INT Paragraph Other Accounting & Reporting Guidance HHS and any other applicable reinsurance entity considered provider to involuntary pool and an authorized reinsurer per paragraph 38 All receivables subject to 90-day admissibility rule beginning when payment due to be disbursed by HHS per paragraph 39 Accounting dissimilar from other reinsurance recoverables in SSAP 61R which do not have 90-day admissibility rule

63 INT Accounting for the Risk Sharing Provisions of ACA 63

64 INT Accounting for the Risk Sharing Provisions of ACA 64

65 INT Accounting for the Risk Sharing Provisions of ACA 65

66 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA INT Reinsurance - ( ) All Other In Insured Products Fully Insured Non-Individual Plans Paragraphs Contributions for Reinsurance U.S. Treasury Contribution Program Admin Cost Contributions Reinsurance Payment Description $20B Assessment $5B Assessment $0.11 PMPY N/A Accounted For As Assessment Federal Assessment Assessment N/A SSAP Guidance 61R/63 35R 61R/63 N/A INT Paragraph 40/ /42 44 Charged To Taxes, Licenses & Fees Taxes, Licenses & Fees Taxes, Licenses & Fees N/A 66

67 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA INT Reinsurance - ( ) Self-Insured Products Paragraphs Contributions for Reinsurance U.S. Treasury Contribution Program Admin Cost Contributions Reinsurance Payment Description $20B Assessment $5B Assessment $0.11 PMPY N/A Accounted For As Uninsured Plans Federal Assessment Assessment N/A Pass-through/Deposit Account Pass-through/Deposit Account Pass-through/Deposit Account SSAP Guidance N/A INT Paragraph 45/48 45/48/49 40/48/

68 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Risk Corridors Program Provides for sharing between QHPs and Federal Government of profits and losses resulting from inaccurate rate-setting for individual and small group markets in and out of the Marketplace Provides government subsidy if insurer losses exceed certain threshold and recoups funds from insurers if gains exceed certain threshold Unlike risk adjustment and reinsurance programs, RCP not required to be budget neutral Three year program ( ) 68

69 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Risk Corridors Program If actual plan allowable costs (net of risk adjustment and reinsurance payments) come within ± 3% of target Plan bears loss or keeps gains If actual costs fall outside 3% corridor Government shares in gains or losses with Plan In other words Government pays Plan if costs are more than expected Plan pays government if costs are lower than expected Government bears 50% of spending between 3% and 8% of target 80% of spending beyond 8% of the target 69

70 Consensus Interpretations INT Accounting for the Risk Sharing Provisions of ACA Consensus Position: Risk Corridors Program INT outlines accounting guidance in paragraphs Predicated on INT paragraph 4.b., which is accounted for under SSAP No. 66 Per paragraph 57 receipts and payments pursuant treated as premium adjustments for retrospectively rated contracts pursuant to SSAP No. 66 Per paragraph 59 all receivables considered admitted assets per SSAP No. 84 Inasmuch as they are receivables from government or a governmentsponsored entity and funding is mandated by law Receivable subject to impairment analysis 70

71 NONSUBSTANTIVE REVISIONS EFFECTIVE JANUARY 2014

72 Nonsubstantive Revisions SSAP No. 35R - Guaranty Fund and Other Assessments Ref. No Guaranty Fund and Other Assessments Adopted quarterly and annual disclosures applicable to 3Rs Included in Notes 24, 24E and 24F of Health, Life and Property Statements, respectively, for Retrospectively Rated Contracts and Contracts Subject to Redetermination Report balances that reside in certain Balance Sheet and Income Statement accounts for each 3R Program Asset balances reported on admitted asset basis Disclosure requirement currently resides in SSAP No. 35R but may be moved to stand-alone SSAP Effective 1 st Quarter 2014 filing and data captured 72

73 Nonsubstantive Revisions SSAP No. 35R - Guaranty Fund and Other Assessments Ref. No Guaranty Fund and Other Assessments 24. The financial statements shall disclose the assets, liabilities and revenue elements by program regarding the risk sharing provisions of the Affordable Care Act for the reporting periods, which are impacted by programs including the listing in sections a-c below. Asset balances shall reflect admitted assets. In addition, material re-estimations and or impairments for the reporting period should also be disclosed. 73

74 Nonsubstantive Revisions SSAP No. 35R - Guaranty Fund and Other Assessments Ref. No Guaranty Fund and Other Assessments ACA Permanent Risk Adjustment Program: Premium adjustments receivable due to ACA Risk Adjustment $ Risk adjustment user fees payable for ACA Risk Adjustment $ Premium adjustments payable due to ACA Risk Adjustment $ Reported as revenue in premium for accident and health contracts $ (written/collected) due to ACA Risk Adjustment $ Reported in expenses as ACA risk adjustment user fees (incurred/paid) $ 74

75 Nonsubstantive Revisions SSAP No. 35R - Guaranty Fund and Other Assessments Ref. No Guaranty Fund and Other Assessments ACA Transitional Reinsurance Program: Amounts recoverable for claims paid due to ACA Reinsurance $ Amounts recoverable for claims unpaid due to ACA Reinsurance $ Amounts receivable relating to uninsured plans for contributions for ACA Reinsurance $ Claims unpaid Ceded due from ACA Reinsurance $ Liabilities for Contributions payable due to ACA Reinsurance - not reported as ceded premium $ Ceded reinsurance premiums payable due to ACA Reinsurance $ Liability for amounts held under uninsured plans contributions for ACA Reinsurance $ Ceded reinsurance premiums due to ACA Reinsurance $ Reinsurance recoveries (income statement) due to ACA Reinsurance payments or expected payments $ ACA Reinsurance Contributions not reported as ceded premium $ 75

76 Nonsubstantive Revisions SSAP No. 35R - Guaranty Fund and Other Assessments Ref. No Guaranty Fund and Other Assessments ACA Temporary Risk Corridors Program: Accrued retrospective premium due from ACA Risk Corridors $ Reserve for rate credits or policy experience rating refunds due to ACA Risk Corridors $ Effect of ACA Risk Corridors on net premium income (paid/received) $ Effect of ACA Risk Corridors on change in reserves for rate credits $ 76

77 Nonsubstantive Revisions SSAP No. 3 - Accounting Changes and Corrections of Errors and SSAP No Business Combinations and Goodwill Ref. No Clarification of Merger Footnote Adopted revisions to SSAP Nos. 3 and 68 Clarifies that disclosure exemption for shell companies does not change January 1 date used to determine how cumulative effect in accounting principle is measured 77

78 Nonsubstantive Revisions SSAP No. 97 Investments in SCA Entities Ref. No Clarification of Appendix B in SSAP No. 97 Adopted new reference to Appendix B Determining the Valuation Method Under SSAP No. 97 regarding guidance for a downstream holding company New reference revises flowchart in Appendix B Clarifies that for downstream holding companies Sum of all investments in the SCAs within (in accordance with the valuation methods by type of SCA) are calculated as the investment in the downstream holding company As detailed in paragraph 21 of SSAP 78

79 Nonsubstantive Revisions SSAP No Accounting for Derivative Instruments and Hedging Income Generation and Replication Transactions Ref. No ASU : Inclusion of the Fed Funds Swap Rate as a Benchmark Interest Rate Adopted revisions to SSAP No. 86 to adopt ASU Revisions incorporate GAAP definition of benchmark interest rate Deletes prior guidance indicating that entities should designate same benchmark interest rate as risk being hedged for similar hedges 79

80 Nonsubstantive Revisions SSAP No Accounting for Postretirement Benefits Other than Pensions and SSAP No Accounting for Pensions Ref. No ASU : Compensation Retirement Benefits Multiemployer Plans Disclosures about an Employer s Participation in a Multiemployer Plan Adopted revisions to SSAP No. 92 and 102 to adopt by reference ASU to incorporate limited disclosures Disclosures capture limited instances in which reporting entities participate in multiemployer plans Revisions ensure that GAAP and SAP differences are minimal 80

81 EXPOSED SUBSTANTIVE REVISIONS (COMMENTS DUE BY MAY 8, 2014)

82 Exposed Substantive Revisions New SSAP and Issue Paper No. 148 Ref. No ACA Guidance in Separate Statements Working Group exposed revisions to SSAP No. 35R to move ACA Section 9010 accounting and reporting guidance from SSAP No. 35R to stand-alone SSAP 82

83 EXPOSED NONSUBSTANTIVE REVISIONS (COMMENTS DUE BY MAY 8, 2014)

84 Exposed Nonsubstantive Revisions SSAP No. 35R - Guaranty Fund and Other Assessments Ref. No ACA Risk Sharing Provisions Exposed roll-forward disclosure applicable to ACA Risk Sharing Provisions Required to: Disclose roll forward of certain prior year ACA risks sharing asset and liability balances in Notes to Financial Statements Disclose asset balances gross of any nonadmission Provide reasons for adjustments to prior year balances Requires disclosure requirement for both annual and quarterly statement beginning with 2014 year-end statement 84

85 Exposed Nonsubstantive Revisions SSAP No. 35R - Guaranty Fund and Other Assessments 85

86 Exposed Nonsubstantive Revisions SSAP No Bonds, Excluding Loan-backed and Structured Securities and SSAP No. 43R - Revised Loan-Backed and Structured Securities Ref. No Disclosure for Structured Notes Exposed revisions to incorporate new structured note disclosure for 2014 year-end statutory statements Disclose information for structured notes as defined in SVO P&PM including: CUSIP number Actual cost Fair and book/adjusted carrying values Additional information required if structured note is considered mortgage-referenced security Adds clarification to SSAP No. 43R that guidance pertains to structured securities and not structured notes Will be data-captured for

87 Exposed Nonsubstantive Revisions SSAP No. 16R - Electronic Data Processing Equipment and Accounting for Software Ref. No Inconsistent Audit Requirement in SSAP No. 16R Exposed revisions to: Make disclosure related to changes in written capitalization policy threshold consistent with similar guidance in other SSAPs Remove restriction that disclosure to be in annual audited financial statements only 87

88 Exposed Nonsubstantive Revisions SSAP No Furniture, Fixtures and Equipment; and SSAP No Leases Ref. No ASU , Service Concession Arrangements Exposed revisions to SSAP No. 19 that adopt modified version of ASU clarifying that: Service concession arrangements are not within scope of SSAP No. 22 Shall not be recognized as property, plant or equipment in SSAP No

89 Exposed Nonsubstantive Revisions SSAP No. 57 Title Insurance Ref. No Title Insurance Premium Classifications Exposed revisions that: Changes premium disclosure categories with five activity codes Expands definitions of type of rate to coincide with previous changes to Title Blank Deletes categories for Gross All Inclusive Premiums and Gross Risk Rate Premiums Replaces them with five Activity Codes - Risk Rate, Search, Exam, Closing, and Escrow 89

90 Exposed Nonsubstantive Revisions SSAP No. 11 Postemployment Benefits and Compensated Absences Ref. No SSAP No. 11 Clarification of Adopted GAAP Exposed revisions to incorporate adoption of paragraphs 6A and 7 of APB 12, Omnibus Opinion 1967 Adds guidance to reflect previously adopted GAAP GAAP guidance addresses compensated absences, sick leave benefits, and sabbatical leave benefits For statutory accounting these types of benefits are addressed in SSAP No. 11 Proposed revisions will update SSAP No. 11 to clearly identify adopted GAAP guidance 90

91 Exposed Nonsubstantive Revisions Various Issue Papers Ref. No Reference SSAPs on Issue Papers Exposed revisions to all IPs to add reference to SSAP that corresponds with IP IPs not considered authoritative and currently do not identify the location of authoritative guidance regarding the topical issue Proposes to incorporate information on face of IP to assist users in quickly finding current authoritative literature with relevant SSAP 91

92 . Questions? Comments? Thoughts?