NAIC Annual Statement: Overview

Question 1

What’s the purpose of the Annual Statement?

Answer 1

The NAIC Annual Statement (A/S) provides a standardized format for which insurer submit their financials. The following parties use the A/S for different reasons:

1. Regulators: to monitor financial strength for solvency purposes
2. Investors: to monitor profitability

Question 2

What is the Assets page?

Answer 2

The Assets page summarizes the insurer’s assets contained in various schedule in the A/S (and write-in assets) as of a given point in time (typically 12/31).

Question 3

What is the Liabilities, Surplus and Other Funds page?

Answer 3

The Liabilities, Surplus and Other Funds page summarizes the insurer’s liabilities and surplus as of a given point in time (typically 12/31).

Question 4

What is the Statement of Income page?

Answer 4

The Statement of Income summarizes the insurer’s revenues and expenses which were incurred for a given period of time (typically 1/1 - 12/31).

Question 5

What is the Cash Flow page?

Answer 5

The Cash Flow page summarizes the various transactions which the insurer had for a given period of time (typically 1/1 - 12/31). This is particularly valuable to the actuary as it lists direct changes to surplus (e.g. change in nonadmitted assets).

Question 6

What is the Underwriting and Investment Exhibit page?

Answer 6

The Underwriting and Investment Exhibit page summarizes premiums and unearned premium changes (for direct, ceded, and assumed) by line of business, paid losses and change in loss reserves by line of business, and expenses.

Question 7

What is the Exhibit of Net Investment Income page?

Answer 7

The Exhibit of Net Investment Income summarizes the insurer’s investment income from various asset classes for a given period of time (typically 1/1 - 12/31).

Question 8

What is the Exhibit of Capital Gains (Losses) page?

Answer 8

The Exhibit of Capital Gains (Losses) summarizes the insurers realized and unrealized capital gains (losses) during a given period of time (typically 1/1 - 12/31).

Question 9

What is Schedule F?

Answer 9

Schedule F summarizes the insurers ceded and assumed reinsurance contracts. This is particularly interesting to the actuary as it’s used to determine the provision for reinsurance.

Question 10

What is Schedule P?

Answer 10

Schedule P summarizes the insurers loss and loss adjustment expense data for the latest two (2) to ten (10) years in aggregate and by line of business. This is particularly interesting to the actuary as it can be used to diagnose the insurer’s reserves.

Question 11

What is Schedule T?

Answer 11

Schedule T summarizes the insurer’s premium and losses by state. This is particularly interesting to the actuary as it can be used to diagnose a shift in the insurer’s exposure (e.g. an increase in catastrophic exposure).

Question 12

What is included in the General Interrogatories?

Answer 12

The General Interrogatories include:

1.

Question 13

What is Schedule A?

Answer 13

Schedule A summarizes the insurer’s real estate assets as of a given date (typically 12/31).

Holdings of this class are typically small for P&C insurer’s due to insurer’s liquidity demand. These assets made up less than 1% of all P&C insurer assets (as of 2023).

Question 14

What is Schedule B?

Answer 14

Schedule B summarize mortgage assets (owned by the insurer) as of a given date (typically 12/31).

Holdings of this class are typically small for P&C insurer’s due to insurer’s liquidity demand. These assets made up less than 5% of all P&C insurer assets (as of 2023).

Question 15

What is Schedule BA?

Answer 15

Schedule BA summarizes other long-term invested assets as of a given date (typically 12/31).

Holdings of assets in this class made up less than 10% of all P&C insurer assets (as of 2023).

Question 16

What is Schedule D?

Answer 16

Schedule D summarizes the insurer’s bonds and stocks as of a given date (typically 12/31). This is information is used in determining the risk based capital (RBC) requirement.

These are the most abundant assets held by P&C insurers due to their liquidity and lack of credit risk. These assets made up nearly 50% of all P&C insurer assets (as of 2023).

Question 17

What is Schedule DA?

Answer 17

Schedule DA summarizes the insurer’s short-term assets as of a given date (typically 12/31).

Holdings of assets in this class made up between 5% and 10% of all P&C insurer assets (as of 2023).

Question 18

What is Schedule DB?

Answer 18

Schedule DB summarizes derivate assets (e.g. options, caps, floors, collars, swaps, and forwards) as of a given date (typically 12/31).

Holdings of assets in this class made up less than 1% of all P&C insurer assets (as of 2023).

Question 19

What is Schedule DL?

Answer 19

Schedule DL summarizes securities lending assets as of a given date (typically 12/31).

Holdings of assets in this class made up less than 1% of all P&C insurer assets (as of 2023).

Question 20

What is Schedule E?

Answer 20

Schedule E summarizes cash equivalent assets as of a given date (typically 12/31).

Holding of assets in this class made up between 5% and 10% of all P&C insurer assets (as of 2023).