Accounting – Documents

1980s

  • 1984 – AICPA – Accounting by stock life insurance companies for annuities, universal life insurance, and related products: and accounting for nonguaranteed premium contracts; Issues paper – 120p
  • 1985 – AICPA – Audits of stock life insurance companies: Industry audit guide; Audit and accounting guide American Institute of Certified Public Accountants. Committee on Insurance Accounting and Auditing – 250p

1990s

  • 1990 – AICPA – Practice Bulletin 8 – Application of FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, to Insurance Enterprises – 13p

2000s

  • 2000 – AICPA – Audit and Accounting Guide: Life and health insurance entities,  American Institute of Certified Public Accountants. Life Insurance Audit Guide Task Force – 394p

2010s

  • 2016 0929 – FASB – Draft – Proposed Accounting Standards Update – 172p

CPA – Certified Public Accountant

  • 1964 – SOA – Relationship Between Actuaries and Certified Public Accountants, tsa64v16pt2d12 – Society of Actuaries – 25p

Accounting – Index

MVA – Market Value Accounting

  • Market value accounting presents the real economic “worth” of the insurance operation, and shows how that worth can and does change when the external environment changes.
    • This information is valuable on a going concern basis as well as on a sale or liquidation basis, since an insurance company cannot be managed indefinitely as a pyramid scheme.

—  Joseph J. Buff, Research Associate with Morgan Stanley

1986 – SOA – Corporate Modeling and Forecasting (Practical Aspects of the Valuation Actuary Recommendations), Society of Actuaries – 42p

  • 1992 – SOA – A Market-Value Accounting Framework for Insurance Companies, by Mark W. Griffin, The Financial Reporter, no. 15 (March):1-2, 1992, [letter to editor], FR, 5/92, p. 20 – Society of Actuaries 
  • 1993 – SOA – A Market Value Balance Sheet: Why and How, by M. C. Modisett, arch93v126 – Society of Actuaries – 14p

IASB – International Accounting Standards Board

  • Life Committee of the IASB
    • 1986 – AAA – American Academy of Actuaries – Yearbook – 406p

    • 1986 – SOA – American Academy of Actuaries Committee on Principles and Practices for Dividends and Other Non-Guaranteed Elements, rsa86v12n219 – Society of Actuaries – 22p

    • 1987 – SOA – Status Of The Valuation Actuary In The United States, VASP876, Society of Actuaries – 50p

    • 1987 – SOA – Contracts With Nonguaranteed Charges: IASB Recommendations And Annual Statement Requirements, rsa87v13n4b3 – Society of Actuaries – 34p

    • 1988 – SOA – VASP – C-3 Risk and Liability Hedging, VASP889 – Society of Actuaries – 70p
    • 2006 0524 – IASB – Paper 4A: Universal Life Contracts – 37p
  • LIFE COMMITTEE OF THE IASB
    • The function of the Committee is to develop actuarial standards of practice in the life insurance area.
    • In accordance with procedures prescribed by the Interim Actuarial Standards Board, this Committee is responsible for the development of Recommendations and Interpretations (To be announced)
    • Subcommittee on Dividends and Other Non-Guaranteed Elements

—  William T. Tozer, Senior Vice President, 1966 – Product Risk Management, Kentucky Central Life

1986 – AAA – American Academy of Actuaries – Yearbook – 406p

  • 2006 0524 – IASB – Paper 4A: Universal Life Contracts – 37p
    • Purpose of this paper
      • 1. This paper discusses the treatment of universal life contracts. 
    • What is universal life insurance?
      • 5. The American Council of Life Insurers (ACLI) defines universal life insurance (or adjustable life) as ‘A type of permanent life insurance1 that allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums.
      • This policy also permits you to reduce or increase the death benefit more easily than under a traditional whole life policy.
        • To increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health.’2
      • 1 The ACLI defines permanent life insurance as ‘Life insurance designed to provide lifelong financial protection.
        • As long as you pay the necessary premiums, the death benefit will be paid.
        • Most permanent policies have a feature known as cash value that builds up, tax deferred, over the life of the policy and can be used to help fund financial goals, such as retirement or education expenses.’
      • 2 http://www.acli.org/ACLI/Consumer/Glossary/Default.htm – <Bad Link>
    • 2004 – Report – ACLI / IAA – Renewal Premiums and Discretionary Participation Features of a Life Insurance, A Joint Research Project – 52p
    • FASB – SFAS 97  – Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments.

Fair Value Accounting

  • Fair Value?
  • I have always felt that the arguments for failing to carry assets at fair value are weak. (See "Fair-Value-Accounting : What's in Store?" June Update)
  • The supposed inability to value liabilities on an appropriate basis and the reliance on the long-term nature of these liabilities to justify the ignorance of current market conditions have led to confusing balance sheets and increased the tendency to overlook very real short-term financial concerns.
  • The solution may not be easy, but one must be found .
    • An appropriate solution should incorporate the following characteristics:  (p3)

--  Lee A . Zinzow

1992 08 - The Actuarial Update - 8p

  • Bob. We should discuss tomorrow if you are available. This is clearly inconsistent with what Martin told the Board, and "inconsistent" is a kind characterization. Thanks. Mike.

AIG - Sent: 03/13/2008  07:54:04 PM

To: Robert Willumstad - From: michael sutton - CC: Martin Sullivan, Frank G Zarb

Subject: Fw: AIG Financial Times Article - Fair Value Accounting - Attachments: 3-13-08 Financial Times Article,pdf

2008 0313 – FT (Financial Times) – AIG Urges ‘Fair Value’ Rethink –

  • 2008 0313 – email – AIG – Bob. We should discuss tomorrow if you are available. This is clearly inconsistent with what Martin told the Board, and “inconsistent” is a kind characterization. Thanks. Mike (FRBNY-TOWNS-R1-193865) – 2p

FRBNY-TOWNS-R1-193865 - https://fcic-static.law.stanford.edu/cdn_media/fcic-docs/2008-03-16_AIG_Email_from_Michael_Sutton_to_Robert_Willumstad_regarding_AIG_FT_Article.pdf

  • 1992 06 - The Actuary - Fair Value Accounting : What's in Store?, by S . Michael McLaughlin - 8p

Surplus

  • The availability of surplus sometimes constrains the growth of an insurance company.
    • To optimize growth, a company under such constraint must develop equivalent profit standards for all opportunities that use surplus, such as sales of insurance products, acquisition of investments, or development of a sales force.

1981 – SOA – Insurance Company Growth, Society of Actuaries – 50p

  • 1977 – SOA – Surplus Needs of Life Insurance Companies, rsa77v3n420 – Society of Actuaries – 28p
  • 1986 – SOA – Determination of Appropriate Surplus Levels, rsa86v12n25 – Society of Actuaries – 46p

IFRS – International Financial Reporting Standards

  • APPENDIX – The nature of contracts with discretionary participating features
    • US2 – In the US, almost all participating business is sold by mutual insurance companies.
      • In addition, certain Universal Life Contracts, while often non-participating in contract form, do have discretionary elements similar to participating contracts and we believe they should be treated similarly to Participating Contracts.

 —  2006 1221 – Letter – GNAIE to IASB – re: IASB consideration of Insurance Contracts Phase II: Unconditional obligation requirements in relation to the accounting for future participating benefits – 9p

Mark to Market Accounting

  • 2012 0105 – OFR – A Survey of Systemic Risk Analytics – 165p
    • (p19) – Sapra (2008) considers issues arising from historical and mark-to-market accounting for both insurance companies and banks.
      • 2008 – AP – Do accounting measurement regimes matter? A discussion of mark-to-market accounting and liquidity pricing,” by Haresh Sapra, Journal of Accounting and Economics, 45(2-3), 379-387 – 17p
  • Mr. BACHUS. Thank you. Mr. Liddy, mark-to-market, I think, is good in concept, but insurance and banking CEOs are telling me that it is not working well in a distressed market. I would like your comments on modifications others have proposed, and general modifications, and how it might help AIG to increase the likelihood of the taxpayers being fully reimbursed.
  • Mr. LIDDY. Yes, sir. I think mark-to-market is a good concept, run amok. On balance, knowing what something is worth every day is a good thing, but it presumes that there’s a market. It presumes that there’s a willing buyer and a willing seller.
  • When liquidity completely dries up, there’s not a willing buyer, so you have to keep marking the value of the assets down to an unwilling buyer level.
  • In insurance companies, we have a long liability. We will insure your life.
    • And we will match it with a long dated asset.
    • Those long dated assets, like commercial mortgage-backed securities and residential mortgage-backed securities, because they’re long-dated, they are not liquid right now, and they have been buffeted in value, unlike anything most of us have ever seen.
    • So as a result of that, AIG and many other insurance companies have had to write the value of those assets down, and it has caused great stress on the liquidity.  (p63)

2009 0318 – GOV (House) – American International Group’s Impact on the Global Economy: Before, During, and After Federal Intervention

For another, life insurance companies suffered large losses on a mark-to-market basis during the crisis from the decline in equity prices, as well as falling prices of mortgage and other fixed income securities that were being sold by others facing immediate cash needs.

  • As a result, in early 2009, some had negative tangible equity value on a mark-to-market basis.
  • This was reflected in the price of their shares, which, on average, dropped 75% over the course of the crises.
  • A few applied for TARP assistance for additional capital.
  • But they faced little or no financial distress because their liabilities, principally obligations to make payment on policies, were long term.
  • They could and did wait for markets to return to more normal levels.  (p30)

2013 10 – AP – Five Years Later: Lessons from the Financial Crisis – 67p

  • The badly mistaken belief by some that mark-to-market accounting has no adverse implications for life insurance companies and more recently the cramdown provisions in the proposed bankruptcy legislation that would result, certainly could result in the unwarranted downgrades to life insurers’ AAA-rated residential mortgage-backed securities investments.
  • Those actions were all well intended, but in each instance, they occurred with little or no understanding of their effects on life insurance companies.

— Frank Keating, President and CEO, The American Council of Life Insurers

2009 0317 – GOV (Senate) – Perspectives on Modernizing Insurance Regulation – [PDF-160p, VIDEO-Senate-Error]

  • 2009 0312 – GOV – MARK-TO-MARKET ACCOUNTING: PRACTICES AND IMPLICATIONS 
    • [PDF-420p. VIDEO-CSPAN]
    • ACLI Letter (p308-309)
    • ABA Letter (p310-
    • House – COMMITTEE ON FINANCIAL SERVICES SUBCOMMITTEE ON CAPITAL MARKETS, INSURANCE, AND GOVERNMENT SPONSORED ENTERPRISES