1. Fall Midwest IASA Conference
Council Bluffs, Iowa
September 12-13, 2019

2. Agenda
Annual Statement Reporting
RBC

3. Annual Statement reporting

4. Shared Revisions General Interrogatories – Part 1
Clarification added to , in annual and , in quarterly (assets managed by unaffiliated individual/firms)
Questions apply only to INVESTED assets

5. Shared Revisions General Interrogatories – Part 1
“Grandfathered” Schedule BA Investments
35.
By assigning FE to a Schedule BA non-registered private fund, the reporting
Entity is certifying the following elements of each self-designated FE fund.
a. The shares were purchased prior to January 1, 2019.
b. The reporting entity is holding capital commensurate with the NAIC
Designation for the security.
c. The security had a public credit rating(s) with annual surveillance assigned
by an NAIC CRP in its legal capacity as an NRSRO prior to Jan. 1, 2019.
d. The fund only or predominately holds bonds in its portfolio.
e. The current reported NAIC Designation was derived from the public credit
rating(s) with annual surveillance assigned by an NAIC CRP in its legal
capacity as an NRSRO.
f. The public credit rating(s) with annual surveillance assigned by an NAIC
CRP has not lapsed.
Has the reporting entity assigned FE to Schedule bA non-regulated private funds that complied with the above criteria?
Yes [ ] No [ ]

6. Shared Revisions Notes to Financials #5 - Investments
5F, 5G, 5H, 5I (repurchase and reverse repurchase agreements)
Eliminates much of the detail listing of transactions, instead using a narrative approach
Revisions to SSAP No. 103R
5L(4)
Requires disclosure of collateral received and reflected as assets in financial statements
Applies to LAH/Fraternal and Property/Casualty
5L(4) also separates between general account and separate accounts or protected cell per SSAP No. 1

7. Shared Revisions Note to Financials #5 - Investments
5O – Structured Notes
Eliminated because of new Schedule BA reporting
Revisions to SSAP No. 21; Issue Paper No. 160
Note to Financials #8 - Derivatives
New disclosure from adoption of SSAP No. 108 – Derivative Hedging Variable Annuity Guarantees

8. Shared Revisions Note to Financials #9 - Taxes
Instructions and illustration additions for Repatriation Transition Tax (RTT) and Alternative Minimum Tax (AMT) Credit
INT 18-03: Additional Elements Under the Tax Cuts and Jobs Act
Notes to Financials #10 – SCAs
Loss tracking

9. Shared Revisions Notes to Financials #12 - Retirement
New disclosures, but also some reduction of previous disclosures
From revisions to SSAP No. 92 and No. 102
Notes to Financials #20 – Fair Value
Fair Value
Elimination of disclosure of transfers between Level 1 and Level 2
Elimination of discussion of company policy for recognizing Level transfers
From revisions to SSAP No. 100R

10. Shared Revisions Notes to Financials #21 – Other Items
Amount that could be realized on life insurance where reporting company is owner and beneficiary or has otherwise obtained rights to control policy
From revisions to SSAP No. 21

11. Shared Revisions
Summary Investment Schedule

12. Investment Schedules Schedule B – Parts 1 and 2
P/C and Health companies now required to categorize mortgage loans into same sub-classifications as LAH/Fraternal companies

13. Investment Schedules Schedule BA
New reporting categories for all insurers
Fixed or Variable Interest Rate Investments that have the Non-Registered Private Funds with Underlying Assets Having Characteristics of:
Bonds:
NAIC Designation Assigned by the Securities Valuation Office (SVO)
Unaffiliated
Affiliated
NAIC Designation Not Assigned by the SVO
Unaffiliated
Affiliated

14. Investment Schedules Schedule BA
New reporting categories for all insurers
Joint Ventures, Partnerships or Limited Liability Company Interests for Which that have the Underlying Assets Have the Characteristics of:
Bonds:
NAIC Designation Assigned by the Securities Valuation Office (SVO)
Unaffiliated
Affiliated
NAIC Designation Not Assigned by the SVO
Unaffiliated
Affiliated
This reporting is no longer just for LAH/Fraternal companies.

15. Investment Schedules Schedule BA
Investments in structured settlement income streams (structured settlements) to be reported on Schedule BA
Classify as “Any Other Class of Asset”
Revisions to SSAP No. 21; Issue Paper No. 160
Reporting company acquires legal right to receive payments

16. Investment Schedules Administrative Symbols
NR – not rated; has been replaced with ND – not designated
YE – Year-end carry over
Assigned to annual update securities SVO unable to update at year-end; SVO extends existing designation with YE administrative symbol
IF – Initial filing
Initial filing cannot be process by year-end; company self-assigns designation with IF administrative symbol

17. Investment Schedules Transactions not eligible for FE SCA investments
Catastrophe-link bonds
Shares of specified funds
Regulatory transactions
Credit tenant loans (CTL)
Replication (synthetic asset) transactions (RSATS)
Working Capital Finance Investments (WCFI)

18. Investment Schedules Bonds
Flow chart determining the NAIC Designation for structured securities no longer in statement instructions
Elimination of Modified Filing Exempt (MFE)
Effective March 31, 2019
Securities previously qualifying as MFE are now considered FE securities
SSAP No. 43R and IAO Manual revised

19. Investment Schedules Bonds (cont’d)
Mortgage reference securities to be reported in “U.S. Special Revenue and Special Assessment….” category
From revisions to SSAP Nos. 26R and 43R

20. Investment Schdules Bonds Revision of bond characteristics codes
“4” restricted to SSAP No. 43R items
“5” limited to variable interest payments
“6” capture of mortgage reference securities reported under scope of SSAP No. 43R
Specifies some other structured securities and weather derivatives not be reported as bonds, but as derivatives
Deletes specific reference to inclusion of insurance-linked securities, IOs, mortgage-referenced securities not actually backed by a pool of assets

21. Investment Schedules Bonds Realized gain/(loss)
Instructions for securities called where consideration received is less than par
References SSAP No. 26R
Difference between BACV and par value at time of disposal

22. Investment Schedules
Bonds received as property dividend or capital contribution
Must use SSAP No. 25 to determine if economic transaction
Reported actual cost should be the initial recognized value
Both revisions to SSAP No. 26R
If qualifies as economic transaction, record at fair value as outlined in SSAP No. 25
SSAP No. 72 also revised

23. Investment Schedules Freddie Mac Single Security Initiative
INT 19 – 02
Reporting entities permitted to exchange “45-day securities” for “55-day securities” without any material change to the securities
Interprets SSAPs No. 26R and No. 43R
Exception to exchange and conversion guidance; continuation of the amortized cost basis of the security surrendered to the new security received in the exchange
No gain/loss recognized on exchange
Permits reporting entities to adjust the security’s basis (decrease) for the float compensation received.

24. Investment Schedules Bonds – Bank Loans
Report as affiliated or unaffiliated, as well as issued or acquired

25. Investment Schedules
; Revises SSAP No. 43R for reporting different lots of same CUSIP with different NAIC designation
Option
Report in aggregate at the lowest NAIC designation, or
Report separate aggregations by NAIC designation
Adopted at August Meeting

26. Investment Schedules Stocks Market Indicator no longer being used
Column removed from the reporting of common stock
No longer part of NAIC Designation for preferred stock
Includes those with underlying characteristics of preferred stock on Schedule BA
Existing electronic columns indicate where fair value was obtained

27. Investment Schedules Preferred Stock
“P” and “RP” prefixes no longer used as part of NAIC Designation
Reporting category used to designate separate perpetual preferreds from redeemable preferreds

28. Investment Schedules Common Stock New reporting categories
Separation of publicly traded and other
Unit Investment Trusts, Closed-End Funds
Both defined in SSAP No. 30R; adoption of Issue Paper 158

29. Investment Schedules Common Stock Addition of NAIC Designation column
To be used ONLY for fund investments assigned a designation by SVO
Funds that only or predominately hold fixed income assets
Foreign (non-SEC registered) open-end funds
Allowed to be reported as mutual funds in Schedule D
# used in Code column to identify
Foreign open-end funds defined as funds governed and authorized in accordance with regulations established by the applicable foreign jurisdiction

30. Investment Schedules Schedule DB Part A Part B
New reporting categories for hedging effective instrument for variable annuity guarantees under SSAP No. 108
New section for SSAP No. 108 Adjustments
Part B
Parts A and B – Verification
New line for reporting SSAP No. 108 adjustments
New Part E
Reporting of specific derivatives and the hedging programs subject to SSAP No. 108
18 columns of reporting

31. Investment Schedules Item 2018-18, effective 12/31/2019 SSAP No. 2
Regardless of maturity date, derivatives not reported as cash equivalents or short-term investments; report in Schedule DB
SSAP No. 26R
Securities meeting para 3 definition BUT contractual amount paid at maturity & at risk for other than failure of borrower to pay contractual amount due (structured notes), excluded from 26R reporting
Report as derivative under SSAP No 86 in Schedule DB

32. Investment Schedules Item 2018-18, effective 12/31/2019 SSAP No. 43R
Guidance added for mortgage-referenced securities
Must be issued by government sponsored enterprise
Currently only offered by Freddie Mac and Fannie Mae 12/31/2019
SSAP No. 86
Inclusion of structured notes

33. Investment Schedules
; Revises several SSAPs for affiliated (related party) transactions
Applies concepts of SSAP No. 25 to investment SSAPs
Includes situation when transaction between related parties is conducted through a non-related intermediary
Adopted at August meeting

34. Investment Schedules Supplemental Investment Risks Interrogatories
New instructions for funds for Line 2 – Single 10 largest exposures
For non diversified funds, identify actual exposures and aggregate with directly held investments to determine 10 largest exposures
New disclosure of ten largest fund managers

35. LAH/Fraternal Statement
LAH and Fraternal combined into one statement beginning 2019
New format for Analysis of Operations
Separate reporting page for types of insurance
Individual life, group life, individual annuities, group annuities, A&H
Summary page (grand total page)
Applies to general and separate accounts

36. LAH/Fraternal Statement
Analysis of Operations, Individual Life
Analysis of Operations, Group Life

37. LAH/Fraternal Statement
Analysis of Operations – Individual & Group Annuities

38. LAH/Fraternal Statement
Analysis of Operations – A&H

39. LAH/Fraternal Statement
Analysis of Operations – Summary page
Addition of Appendix containing definitions of the lines of business
Expense allocation instructions moved to the Appendix
Elimination of Interest Sensitive (1) and Annuity Operations supplements (2)
Information now provided in the Analysis of Operations

40. LAH/Fraternal Statement
Analysis of Reserves
Same division of business types as used or Analysis of Operations
Same columnar format
Exhibit 6 – A&H Business
New columnar reporting (lines remained the same)

41. LAH/Fraternal Statement
General Interrogatories
Does company use derivatives to hedge variable annuity guarantees subject to fluctuations

42. LAH/Fraternal Statement
Note #32 – Analysis of Annuity Actuarial Reserves and Deposit Type Contract Liabilities by Withdrawal Characteristics
New line added to reporting format to identify surrender charges over 5% in the current year that will be less than 5% in the subsequent year for Individual Annuities
New sections added for
Group Annuities
Deposit-Type Contracts
From revisions to SSAP No. 52

43. LAH/Fraternal Statement
New Note #33 – Analysis of Life Actuarial Reserves and Deposit Type Liabilities by Withdrawal Characteristics
Disclosure of account value, cash value and reserve
Separate reporting for general account and separate account nonguaranteed
Revisions from SSAP No. 51R

44. LAH/Fraternal Statement
Asset Valuation Reserve (AVR)
Revision of AVR factors
Revisions related to Life RBC factor changes in 2018 due to the Tax Cuts and Jobs Act
VM-20 Reserves Supplement
Which products are to be reported on which lines
More specific than previous
Columnar reporting revisions, including the reporting of deferred premium asset

45. LAH/Fraternal Statement
Separate Accounts
Assets page
Deletion of Contract Loans reporting line
SSAP No. 49 – Policy Loans and SSAP No. 56 – Separate Accounts indicate that all policy loans are to be reported in the general accounts

46. Property/Casualty Note #31A(1) – High Deductibles
Annual Statement Line of Business Column split
Line #
Description

47. Property/Casualty State Page – Exhibit of Premiums & Losses
New Line 29 for reporting of International business
Previously treated as a write-in
Created crosscheck problems
Although new line will appear on all state pages, provide data ONLY on the “Other Alien” page and the “Grand Total” page
Consistency with Underwriting and Investment Exhibit pages
For printing purposes, the font size for the page was also reduced

48. Property/Casualty Changes to Actuarial Opinion requirements
Mostly instructional changes
Definition of “qualified actuary”
Changes to Exhibit B, which is data captured
To be voted upon on August Blanks Working Group conference call
Still Pending

49. Health Statement
No Health-specific revisions!!!

50. Risk-Based Capital

51. All RBC Formulas New RBC procedures Preamble (exposed for comment)
C0, R0, H0
Renamed Insurance Affiliates and Misc. Other
No formula changes
Health Stop Loss Interrogatories
Split between specific stop loss and aggregate stop loss

52. Property/Casualty RBC
PR017 & PR018
Annual updating of Line 1 factors
Updating of Line 4 factors
Industry Loss & Expense RBC%
Asset Concentration
Indicate reporting of unaffiliated preferred stock only
Instructions
Correct overlooked 2018 instructional change for treatment of affiliated bonds

53. Property/Casualty RBC
Excessive Premium Growth
Revisions to match instructions with reporting format calculation
Was conflict between instructions and formula computation for selected average growth rate
Instructions changed to match formula calculation

54. Life/Fraternal RBC Combined the two RBCs into one
Reference changes on LR024 because of statement Exhibit 6 changes
Growth Operational Risk eliminated
Revised cash flow modeling for variable annuities and similar products for C-3
Transition for 2019; two options available

55. Health Asset Concentration Growth Operational Risk removed
Correct bond and preferred stock lines descriptions
Growth Operational Risk removed

56. Questions

57. Contact Information
Connie Jasper Woodroof
x5761