Description: Performance measurement is not the primary purpose of either GAAP or statutory accounting. This article discusses alternative methods of reporting used by life insurance companies to better measure financial performance.

Description: We explore the considerations regarding discount rates in the new US GAAP Targeted Improvements, including selection of observable rates and methods for extrapolations rates where there is no observable data.

Description: S&P Global released its initial version of proposed changes regarding its Insurer Risk-Based Capital Adequacy methodology and assumptions on Dec. 6th, 2021. Unlike prior guidance notes or criteria releases, the proposed changes comprehensively updated the current S&P rating criteria released in 2010. These updates would directly impact many insurers. S&P Global anticipates that 10 percent of existing ratings in the insurance sector would be impacted and the change would lead to more positive rating implications than negative impact. This article focuses on the proposed changes on the S&P risk-based capital (RBC) vs. the current model, then simulate impacts to a representative U.S. life insurer through an illustrative case study.

Description: A discussion of alternative meanings to “Best” in best estimate. When one is trying to estimate a result that is normally distributed, the mean, median and mode will all equal one another. However if the results are not normally distributed, different variance metrics will result in different “best” estimates. When different parts of a financial statement use different criteria for measuring best estimates and different processes for handling variances, the results can be volatile, unpredictable and perhaps unreasonable.

Description: This article provides an EV overview, current industry usage, key considerations illustrated by MetLife’s strategic spin-off of Brighthouse Financial, as well as implementation notes.

Description: A discussion of the use of stochastic modeling in Embedded Value financial reporting

Description: The implementation of the IFRS 17 insurance accounting standard has brought significant changes to the financial reporting landscape of insurance companies. With new disclosure requirements and altered profit analysis, understanding and interpreting future profitability have become a topic of concern for the industry. While stability remains a key objective for insurance companies, the earning patterns might become more volatile especially when the contractual service margin (CSM) is exhausted, and a loss component (LC) needs to be established. Reinsurance, a common risk mitigation tool, can play a pivotal role in managing earnings volatility and minimizing losses for onerous measurement units. In this article, we propose a new key performance indicator (KPI) called “loss recoverability” to assess the performance of reinsurance treaties in achieving these objectives. We explain how this KPI can be utilized in multiple scenarios to evaluate the effectiveness of reinsurance strategies and pursue stability in earning patterns.

Description: An Overview of Embedded Value and its uses, its advantages versus other financial reporting methodologies, recent trends and an outlook into the future.

Description: A discussion of European CFO Embedded Value Guidelines

Description: This article examines potential approaches to the calculation of the risk adjustment component, with a focus on a case study related to a UL product.