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Flashcards in GAAP vs. SAP Deck (20)
1

SAP vs. GAAP: DAC

SAP: no deferring of expenses
GAAP: DAC asset to defer recognition of expenses to match recognition of EP

2

SAP vs. GAAP: Nonadmitted Assets

SAP: Assets that are not highly liquid
GAAP: No such category

3

SAP vs. GAAP: DTAs

SAP: Strict admissibility test
GAAP: Fully recognizes DTA

4

SAP vs. GAAP: Invested Assets

SAP: High class bonds, redeemable preferred stocks - amortized cost; lower rated bonds and preferred stocks -- min (fair value, amortized); common stock -- fair value;
GAAP: AFS (fair value), HTM (amortized cost), HFT (fair value)

5

Available for sale (AFS)

Purchased with intention to sell before maturity, but after a year; held at market value

6

Held to maturity (HTM)

Intent and ability to hold until maturity; held at amortized cost

7

Held for trading (HFT)

Purchased with intention of selling within hours or days; held at market value

8

SAP vs. GAAP: Prospective reinsurance

SAP: Reserves net of anticipated recoveries
GAAP: establishes an asset to recognize ceded reinsurance recoverables

9

SAP vs. GAAP: Retroactive reinsurance

SAP: ceded reserves are negative write-in liabilities
GAAP: ceded reserves are treated as reinsurance recoverable asset

10

SAP vs. GAAP: Structured settlements

SAP: Purchase price of annuity is paid loss, claim is closed
GAAP: If release not signed, insurer is contingently liable -- treated like reinsurance

11

SAP vs. GAAP: Anticipated SalSub

SAP: Option to record reserves gross or net of anticipated SalSub
GAAP: Insurer must subtract amounts

12

SAP vs. GAAP: Reserve discounting

SAP: Rarely, only WC -- claims with fixed and reasonably determinable payment patterns
GAAP: Allows SAP discount, but also alternative rate if reasonable

13

SAP vs. GAAP: Goodwill

SAP: Difference between purchase price and statutory surplus
GAAP: Difference between purchase price and fair value of net assets

14

P-GAAP

Purchase GAAP; when one company buys another, value of assets/liabilities need to be accounted for at fair value

15

Fair value of Loss/LAE Reserves

Mark-to-model approach, 3 components:
Expected value of nominal future cash flows
Reduction to reflect time value of money, plus load to reflect illiquidity
Risk adjustment

16

Value of In-Force

VBIF calculated by determining fair value of liabilities to be incurred in connection with UEPR

17

Goodwill

Difference between purchase price of a company and book value; dependent on Accounting framework

18

SAP focus in Annual Statement

Balance sheet

19

GAAP focus in Annual Statement

Income sheet

20

Premium deficiency reserve

When related only to UEPR:
Expected (LLAE + Div + DPAC) - Investments