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Date July 7, 2011
Look and Feel of the 2011 Annual Statement
Inquiring Minds Want to Know
by Connie Jasper Woodroof, SrtoneRiver Liaison to the NAIC
For the last six months, most of us have been wondering what the 2011 Annual Statement will look like. During a June 30th conference call, the Blanks Working Group put the finishing touches (we hope) on the annual statement, supplements, and the corresponding instructions. I wish I could say everything is complete and ready to go, but past experience indicates that might not be the case. Although StoneRiver, Inc. takes all reasonable steps to ensure that the information in this document is current and correct, it neither warrants nor guarantees its accuracy.
The number of proposals adopted this year was nearly overwhelming, so let’s take a look at what was finalized during the call. Full details can be found by visiting the Blanks Working Group website at http://www.naic.org/committees_e_app_blanks.htm. Remember, some changes had already been adopted prior to this call.
Balance Sheet
The instructions for the Premium and Considerations and the Health Care and Other Amounts Receivable lines on the Assets page now clarify that premiums receivable for government insured plans are to be reported in the premium line and not in the health care receivable line (Proposal 2011-28).
New inset amounts disclosing information regarding the medical loss ratio were added to the Liabilities page via Proposal 2011-31.
Schedule D
As has been the case for the last several years, regulators adopted several proposals that expand the level of detail reported in the investments schedules and in particular, the different parts of Schedule D.
Credit Tenant Loans will no longer be a bond reporting category with the adoption of Proposal 2011-02. In addition, this proposal changes most of the indicators used in the Collateral Type column. Companies should carefully review the indicator changes and corresponding instructions for applicability to their bond portfolio.
The Code column on Schedule D – Part 1 will now contain the option of entering a “$” (dollar sign) to indicate certificates of deposit at or under the FDIC limit. This change resulted from the adoption of Proposal 2011-03.
Proposal 2011-04 increases the number of indicators available for reporting in the Foreign Code column. An “E” will be used to indicate US securities issued in a foreign country other than Canada, but denominated in US dollars. As a reminder, another new foreign indicator, “B,” had already been added for 2011.
Schedule DL
The addition of this new schedule in 2010 resulted in a quite a few questions regarding its completion. Proposal 2011-20 implements instructional changes to clarify reporting, increases the line categories that can be used for reporting, and adds a new Code column. Part of the instructional change includes the calculation of the average daily balance to be reported. Companies utilizing Schedule DL should review all changes carefully.
Schedule B
Proposal 2011-06 slightly changes the definition of “Mortgages with Restructured Terms” by eliminating the reference to a benchmark commercial loan pricing matrix that no longer exists. The reference to the matrix was part of a decision process that offered the matrix as an “or” option. That option will no longer exist.
Summary Investment Schedule
Two new lines and two new columns were added to this schedule through the adoption of Proposal 2011-07. The new lines reflect reporting for derivatives and securities lending, mimicking new lines that were added to the Assets page last year. The first of the two new columns will report securities lending amounts by category for those securities that are reported in total on Line 9. The second column is a new total column.
General Interrogatories
Proposal 2011-19 adds a question to Part 2 of the Fraternal General Interrogatories asking if there are any outstanding assessments in the form of liens against policy benefits that have increased surplus. Fraternals indicating a “yes” response are then required to furnish the dates of the original lien and the total outstanding balance.
Notes to Financials
Another area that has seen a tremendous amount of change in the past few years is the Notes to Financials. This year is no exception.
Proposal 2011-08 changed the order of the reporting within Note 9, Income Taxes. The previous Note 9A(6) was added at year-end 2010 and was not data captured. That disclosure is now 9A(5) and will be data captured. Please note that current efforts by the Statutory Accounting Principles Working Group (SAPWG) on SSAP No. 101 will replace the current SSAP 10R. If completed prior to December 31, 2011, disclosures for Note 9 will most likely change.
Proposal 2011-12 reflects new disclosure requirements in Note 10 as a result of adopted revisions to SSAP No. 25.The addition to Note 10 indicates whether any guarantees to affiliates are reported in Note 14.
Two different proposals addressed changes to Note 14. The instructions and illustrations for Note 14A were modified by Proposal 2011-10 to be consistent with adopted revisions to SSAP No. 5R regarding guarantees to third parties. In addition, the proposal states that Note 14E in the Property/Casualty statement, which provides information on product warranties, will now be data captured.
Proposal 2011-11 modified the disclosure requirements of Note 14B because of the implementation of SSAP No. 35R at 1/1/2011 which include a reconciliation of assets recognized from paid and accrued premium tax offsets and policy surcharges from the previous year-end to the current year-end.
Note 15 was revised with the adoption of Proposal 2011-13 to reflect changes to SSAP No. 22. The new instructions require the disclosure of any lease agreements that have been terminated early or where the lessee is no longer using the lease property benefits, as well as any liability reported in those circumstances.
Some revisions to Note 20 disclosures were adopted in 2010 too late to be implemented for that year. Proposal 2011-09 implements those changes. Additional columns and some row title clarifications were added. All companies should review the reporting format, instructions, and illustrations for 20A, 20A(2) and 20B for changes appropriate to them.
Revisions to Note 21H regarding disclosure of retained assets were adopted for the LAH, Fraternal and Health companies through Proposal 2011-17. The actual disclosure requirements for Notes 21H(2) and 21H(3) were implemented in 2010, however now those data elements will be captured in the electronic filing.
With the adoption of Proposal 2011-31, medical loss ratio disclosure has been added to Note 24 and will be data captured in the electronic filing. This change incorporates the disclosure recently adopted by the SAPWG to SSAP No. 66 and provides a crosscheck between the statement and the Supplemental Health Care Exhibit – Part 1. There were some revisions to the original proposal, so review the adopted version carefully.
Five-Year Historical Data
LAH and Fraternal companies will now find new crosschecks for the realized and unrealized capital gains (losses) lines on this set of pages. The crosschecks indicate the amount to be report should tie to the amounts reported on Page 4 of each statement, column 1, which is the net of tax amount. This change was accomplished through the adoption of Proposal 2011-18.
Reinsurance Schedules – F and S
Letters of credit are often used as security in reinsurance transactions. Proposal 2011-15 adds disclosure about letters of credits to Schedule F in the Property/Casualty and Title statements and Schedule S in Life, Health and Fraternal statements. Disclosure will be accomplished with the addition of Letter of Credit Code column. The code inserted into the column will indicate wheter a single, non-syndicated letter of credit; a syndicated letter of credit; or multiple letters of credit are being reported. Companies indicating the use of syndicated letters of credit will provide further information on bank participation in a new footnote to the reinsurance schedule. The adopted version of this proposal differs from what was originally proposed, so be sure to review the new items carefully. Additionally, two of the proposals adopted for the Title Statement changed some of the instructions for the reinsurance schedules in the LAH, Health, Property/Casualty and Fraternal statements. The objective was consistent wording across all sets of instructions, rather than actual reporting changes.
Supplemental Health Care Exhibit
Proposal 2011-30 brings several changes to this supplement that was added to reporting requirements during 2010. The adopted changes add some new columns, modify instructions and add crosschecks. The adopted proposal changed significantly from the original proposal and should be reviewed carefully. Note: It is very likely we will see more changes, quite possibly last minute changes, adopted for the Supplemental Health Care Exhibit for 2011 reporting.
Title Companies
Several proposals were adopted that affect only the Title insurers. I have chosen to just list the proposals by number and not summarize them. Full details can be found at the Blanks website provided above. Those proposals were: 2011-21, 2011-22, 2011-23, 2011-24, 2011-25, 2011-26, and 2011-27.
In Summary
There were a couple of items that were adopted for 2012, but we’ll save those for another discussion. I wish I could say the 2011 Statement is now final, but we all now that would be pushing my luck. All we can do is wait and keep our fingers crossed! Live long and prosper!
Although StoneRiver, Inc. takes all reasonable steps to ensure that the information in this document is current and correct, it neither warrants nor guarantees its accuracy.
StoneRiver, Inc. does not render legal services or advice. This newsletter is not intended to substitute for legal advice, which can be rendered only by an attorney.