Financial Analysis Handbook 2020 PDF

NAIC Financial Analysis Solvency Tools n io Financial Analysis Handbook 2019$nnual/20204Xarterly ut rib ist 2020...

NAIC Financial Analysis Solvency Tools n io Financial Analysis Handbook 2019$nnual/20204Xarterly ut rib ist 2020 rD t fo No The NAIC is the authoritative source for insurance industry information. Our expert solutions support the efforts of regulators, insurers and researchers by providing detailed and comprehensive insurance information. The NAIC offers a wide range of publications in the following categories: Accounting & Reporting Special Studies Information about statutory accounting principles and the Studies, reports, handbooks and regulatory research procedures necessary for ¿ling ¿nancial annual statements conducted by NAIC members on a variety of insurance- n and conducting risk-based capital calculations. related topics. 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All rights reserved. fo ISBN: 978-1-64179-062-8 Printed in the United States of America No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any storage or retrieval system, without written permission from the NAIC. t No NAIC Executive Of¿ce NAIC Central Of¿ce NAIC Capital Markets 444 North Capitol Street, NW 1100 Walnut Street & Investment Analysis Of¿ce Suite 700 Suite 1500 One New York Plaza, Suite 4210 Washington, DC 20001 Kansas City, MO 64106 New York, NY 10004 202.471.3990 816.842.3600 212.398.9000 -- Date: January 1, 2020 To: Users of the NAIC’s Financial Analysis Handbook From: NAIC Staff This edition of the NAIC Financial Analysis Handbook is to be used in conjunction with the 2019 Annual and 2020 Quarterly Financial Statements. The following summarizes the most significant changes since the prior edition: I. Introduction A. Department Organization and Communication The following two additions were made to the chapter: x n Guidance was added to incorporate communication and pre-receivership considerations for troubled insurance companies and to address when it may be appropriate for analysts to utilize the Troubled Insurance Company Handbook. io x Compensation guidance and recommended salary ranges for financial analysts was added. III.A.4. Risk Assessment – Analyst Reference Guide Guidance was developed to address different ways in which an analyst can gain efficiencies in conducting and ut documenting the analysis of insurance risks associated with intercompany pooling arrangements. III.B.9. Strategic Risk Repository – Analyst Reference Guide For all business types, guidance was added to assist in assessing current and prospective risks related to Parental Guarantees and/or Capital Maintenance agreements. rib V. Domestic and/or Non-Lead State Analysis – Holding Company Procedures (Non-Lead State) Procedures and guidance were incorporated to the Non-Lead State Procedures and Analyst Reference Guide that assists analysts in assessing the Corporate Governance Annual Disclosure (CGAD) or leveraging the lead state’s analysis of the CGAD. ist VI.C. Group-Wide Supervision – Insurance Holding Company System Analysis Guidance (Lead State) Guidance was added to address how to efficiently document the legal entity and holding company analysis for an insurer that is also the ultimate controlling party of an insurance group. VI.D Group-Wide Supervision – Corporate Governance Annual Disclosure Procedures The procedures were updated to address the sharing the CGAD filing analysis with domestic states and when it’s rD appropriate for the non-lead states to leverage the lead state’s analysis the CGAD filing. VI.E. Group-Wide Supervision – Enterprise Risk Management Process Risks Guidance The Form F procedures were updated to address the sharing the analysis of the Form F with domestic states and when it’s appropriate for non-lead states to leverage the lead state’s analysis of the Form F. Other changes were made to certain Annual and Quarterly Risk Repository chapters including the following: fo x During 2018, the Blanks (E) Working Group adopted a change to combine the Life and Fraternal financial statement blanks into a single blank. The quarterly Fraternal repositories were eliminated beginning first quarter 2019. The remaining repositories were eliminated in annual 2019. x Certain annual quantitative ratios were eliminated to avoid triggering multiple outside of benchmark results for the same financial measure. Additionally, certain annual and quarterly benchmark and materiality t thresholds were updated to be consistent with benchmarks provided in other Financial Analysis Solvency Tools. No If you have questions regarding the Financial Analysis Handbook, contact Ralph Villegas, Life/A&H Financial Analysis Manager at (816) 783-8411, [email protected], or Rodney Good, Property/Casualty Financial Analysis Manager at (816) 786-8430, [email protected], or Bill Rivers, Health Financial Analysis Program Manager at (816) 783-8142, [email protected]. n io ut rib ist rD t fo No  PROCEDURES OF THE FINANCIAL ANAYLSIS SOLVENCY TOOLS (E) WORKING GROUP IN CONNECTION WITH PROPOSED AMENDMENTS TO THE FINANCIAL ANALYSIS HANDBOOK The following establishes procedures of the Financial Analysis Solvency Tools (E) Working Group (“the Working Group”) for proposed changes, amendments and/or modifications to the NAIC Financial Analysis Handbook (“the Handbook”). 1. The Working Group may consider relevant proposals to change the Handbook at any conference call, interim or national meeting (“the meeting”) throughout the year as scheduled by the Working Group. 2. If a proposal for suggested changes, amendments and/or modifications is submitted to, or filed with, NAIC staff support it may be considered at the next regularly scheduled meeting of the Working Group. 3. The Working Group publishes a formal submission form and instructions that can be used to submit n proposals and is available on the Group’s webpage. However, proposals may also be submitted in an alternate format provided that they are stated in a concise and complete format. In addition, if another NAIC committee, task force or working group is known to have considered this proposal, that io committee, task force or working group should provide any relevant information. 4. Any proposal that would change the Handbook will be effective for analysis conducted in the year following the NAIC Fall National Meeting (i.e. of the preceding year) in which it was adopted (e.g., a ut change proposed to be effective January 1, 2019 must be adopted no later than the 2018 Fall National Meeting). 5. Upon receipt of a proposal, the Working Group will review the proposal at the next scheduled rib meeting and determine whether to consider the proposal for public comment. The public comment period shall be thirty days unless extended by the Working Group. The Working Group will consider comments received on each proposal at its next meeting and take action. Proposals under consideration may be deferred by the Working Group until the following scheduled meeting. The Working Group may form an ad hoc group to study the proposal, if needed. The Working Group may also refer proposals to other NAIC committees for technical expertise or review. If a proposal has been ist referred to another NAIC committee, the proposal will come off the Working Group’s agenda until a response has been received. 6. NAIC staff support will prepare an agenda inclusive of all proposed changes. The agenda and relevant materials shall be sent via e-mail to each member of the Working Group, interested regulators and rD interested parties and posted to the Working Group’s webpage approximately 5-10 business days prior to the next regularly scheduled meeting during which the proposal would be considered. 7. In rare instances, or where emergency action may be required, suggested changes and amendments can be considered as an exception to the above stated process and timeline based on a two-thirds majority consent of the Working Group members present. fo 8. NAIC staff support will publish the Handbook on or about February 1 each year. NAIC staff will post to the NAIC Publications Web site any material subsequent corrections to these publications. t No  EXAMINATION OVERSIGHT (E) TASK FORCE FINANCIAL ANALYSIS SOLVENCY TOOLS (E) WORKING GROUP SUBMIT TO NAIC – KC By June 1, 2020 Financial Analysis Handbook Proposed Revision Form INSTRUCTIONS FOR NAIC USE ONLY DISPOSITION 1. Complete this form for EACH Handbook proposal. Under "Identification of Item(s) to be Changed," include section & page number, line or item [ ] ADOPTED identifier. [ ] REJECTED 2. All attachments should be presented in a format wherein new language is [ ] DEFERRED underscored and deletions struck through. [ ] OTHER (SPECIFY) 3. Please consider whether this revision proposal is also addressed elsewhere [ ] n in the Handbook. 4. CAUTION: before completing this form, please read additional instructions on reverse side of this form. io DATE: NOTES NAME: TITLE: ut STATE: ADDRESS: TELEPHONE: CONTACT PERSON : rib HANDBOOK SECTION NAME AND NUMBER TO WHICH PROPOSAL APPLIES [ ] Life/A&Hͬ&ƌĂƚĞƌŶĂů [ ] Property & Casualty ist If STATEMENT TYPE SPECIFIC, ALSO IDENTIFY THE TYPE: [ ] Title [ ] Health rD IDENTIFICATION OF ITEM(S) TO BE CHANGED fo REASON OR JUSTIFICATION FOR CHANGE ** (STATE, IN SPECIFIC TERMS, THE BENEFIT TO BE DERIVED FROM THIS PROPOSAL) t No ** This section must be completed on all forms. © 2014-2020 National Association of Insurance Commissioners  Additional Instructions and Information The Financial Analysis Solvency Tools (E) Working Group meets via conference call throughout the year to consider proposed changes to the NAIC Financial Analysis Handbook (Handbook). Suggestions to the Handbook should be submitted by June 1, 2020. Send proposals via email to Ralph Villegas, Life/Health Financial Analysis Manager, [email protected], or fax to 816-460-7563; or send to Rodney Good, Property/Casualty Financial Analysis Manager, [email protected], or fax to 816-460-0176. Original copies may be sent to: National Association of Insurance Commissioners Financial Analysis & Examination Unit Financial Regulatory Services Department n 1100 Walnut Street, Suite 1500 Kansas City, MO 64106-2197 io For questions, call the Financial Analysis & Examination Unit at (816) 842-3600. Proposed Revisions ut x During the Working Group’s review, changes proposed via this form will be considered along with an analysis conducted by the NAIC Financial Analysis & Examination Unit of the effectiveness and usefulness of procedures, ratio limits and language. rib x The NAIC Financial Analysis & Examination Unit also studies adopted changes to the Annual Statements and provides revision proposals to the Working Group. The NAIC Financial Analysis & Examination Unit automatically makes changes to the Handbook for minor changes, such as for page and line numbers. x ist The Handbooks are automated on i-Site+. The Handbook is intended to be a dynamic tool. The Working Group is interested in feedback on both analytical and software features. Please contact the NAIC Help Desk at (816) 842-3600 before submitting a form. Many enhancements have been proposed which could not be implemented. Also, some proposals may relate to existing features that the Help Desk may be able to explain. rD t fo No ** This section must be completed on all forms. © 2014-2020 National Association of Insurance Commissioners  Financial Analysis Handbook 2019 Annual / 2020 Quarterly Preface The NAIC Financial Analysis Handbook (Handbook) was developed and released by the Financial Analysis Handbook Working Group (n.k.a. Financial Analysis Solvency Tools Working Group) of the Examination Oversight (E) Task Force in 1997 for Property/Casualty and Life/A&H, and in 2004 for Health. In 2017, the Handbook was revised to incorporate a risk-focused framework approach for financial analysis. This analysis framework identifies and assesses risks based on the nine branded risk classifications to complete and document an overall assessment of the financial solvency condition of the insurer and insurance holding company group. The Handbook does not include state-specific information or regulations, and does not establish guidelines that insurance companies must follow. Parameters or benchmarks utilized are not regulatory requirements to be complied with by insurance companies. n io ut rib ist rD t fo No  Financial Analysis Handbook 2019 Annual / 2020 Quarterly Table of Contents I. Introduction A. Department Organization and Communication.......................................................................................... 3 B. Interstate Communication and Cooperation............................................................................................ 11 C. External Information................................................................................................................................. 14 D. NAIC Information....................................................................................................................................... 18 E. SAP vs. GAAP............................................................................................................................................. 21 F. Prioritization of Work............................................................................................................................... 24 II. Risk-Focused Financial Analysis Framework.................................................................................................... 2ϵ III. Annual/Quarterly Worksheets, Repositories and Analyst Reference Guides n A. Risk Assessment (All Statement Types) io 1. Annual Risk Assessment Worksheet................................................................................................... 39 2. Quarterly Risk Assessment Worksheet............................................................................................... 46 3. Quarterly Quantitative Assessment of Non-Troubled Insurers (excludes Title)................................ 53 4. Analyst Reference Guide..................................................................................................................... 55 ut 5. Insurer Profile Summary Example...................................................................................................... 74 6. Template for Planning Meeting with Financial Examiner................................................................... 80 B. Risk Classification Repositories rib 1. Credit Risk Repository a. Property & Casualty Annual......................................................................................................... 83 Property & Casualty Quarterly..................................................................................................... 96 b. Life, A&H and Fraternal Annual.................................................................................................. 100 Life, A&H and Fraternal Quarterly.............................................................................................. 112 ist c. Health Annual............................................................................................................................. 116 Health Quarterly......................................................................................................................... 130 d. Analyst Reference Guide............................................................................................................ 134 2. Legal Risk Repository rD a. Repository Annual (All Statement Types).................................................................................. 145 Repository Quarterly (All Statement Types).............................................................................. 158 b. Annual Audited Financial Report Worksheet............................................................................ 164 c. Annual Management’s Discussion & Analysis Report Worksheet............................................. 169 d. Analyst Reference Guide............................................................................................................ 171 3. Liquidity Risk Repository fo a. Property & Casualty Annual....................................................................................................... 182 Property & Casualty Quarterly................................................................................................... 190 b. Life, A&H and Fraternal Annual.................................................................................................. 193 Life, A&H and Fraternal Quarterly.............................................................................................. 204 c. Health Annual............................................................................................................................. 208 Health Quarterly......................................................................................................................... 218 t d. Analyst Reference Guide............................................................................................................ 221 No 4. Market Risk Repository a. Property & Casualty Annual....................................................................................................... 230 Property & Casualty Quarterly................................................................................................... 245  Financial Analysis Handbook 2019 Annual / 2020 Quarterly Table of Contents b. Life, A&H and Fraternal Annual.................................................................................................. 249 Life, A&H and Fraternal Quarterly.............................................................................................. 266 c. Health Annual............................................................................................................................. 271 Health Quarterly......................................................................................................................... 285 d. Analyst Reference Guide............................................................................................................ 289 5. Operational Risk Repository a. Property & Casualty Annual....................................................................................................... 299 Property & Casualty Quarterly................................................................................................... 313 b. Life, A&H and Fraternal Annual.................................................................................................. 316 Life, A&H and Fraternal Quarterly.............................................................................................. 332 c. Health Annual............................................................................................................................. 336 n Health Quarterly......................................................................................................................... 355 d. Analyst Reference Guide............................................................................................................ 358 io 6. Pricing & Underwriting Risk Repository a. Property & Casualty Annual....................................................................................................... 371 Property & Casualty Quarterly................................................................................................... 376 b. Life, A&H and Fraternal Annual.................................................................................................. 379 ut Life, A&H and Fraternal Quarterly.............................................................................................. 387 c. Health Annual............................................................................................................................. 391 Health Quarterly......................................................................................................................... 399 d. Analyst Reference Guide............................................................................................................ 403 rib 7. Reputational Risk Repository a. Repository Annual (All Statement Types).................................................................................. 414 Repository Quarterly (All Statement Types).............................................................................. 419 b. Analyst Reference Guide............................................................................................................ 422 8. Reserving Risk Repository ist a. Property & Casualty Annual....................................................................................................... 426 Property & Casualty Quarterly................................................................................................... 432 i. Statement of Actuarial Opinion Worksheet.................................................................. 434 ii. Analyst Reference Guide.............................................................................................. 445 rD b. Life, A&H and Fraternal Annual.................................................................................................. 460 Life, A&H and Fraternal Quarterly.............................................................................................. 473 i. Statement of Actuarial Opinion Worksheet.................................................................. 475 ii. Analyst Reference Guide............................................................................................... 481 c. Health Annual............................................................................................................................. 498 Health Quarterly......................................................................................................................... 503 i. Statement of Actuarial Opinion Worksheet.................................................................. 504 fo ii. Analyst Reference Guide............................................................................................... 508 9. Strategic Risk Repository a. Repository Annual (All Statement Types).................................................................................. 524 Reporitory Quarterly (All Statement Types)............................................................................... 546 b. Analyst Reference Guide............................................................................................................ 553 t C. Special Analysis Procedures and Worksheets No 1. Captives and/or Insurers Filing on a U.S. GAAP Basis Worksheet (P&C).......................................... 564 2. XXX/AXXX Captive Reinsurance Transaction Procedures (Life)........................................................ 567  Financial Analysis Handbook 2019 Annual / 2020 Quarterly Table of Contents 3. Title Insurer Worksheet (Title).......................................................................................................... 569 IV. Supplemental Analysis Guidance A. Financial Analysis and Reporting Considerations.................................................................................... 575 B. Notes to the Financial Statement............................................................................................................ 616 C. Health Insurance Industry Overview....................................................................................................... 670 V. Domestic and/or Non-Lead State Analysis A. Holding Company Procedures (Non-Lead State)..................................................................................... 693 B. Form A Procedures.................................................................................................................................. 696 n C. Form D Procedures.................................................................................................................................. 704 D. Form E (or Other Required Information) Procedures............................................................................. 710 E. Extraordinary Dividend/Distribution Procedures.................................................................................... 712 io F. Analyst Reference Guide......................................................................................................................... 713 VI. Group-Wide Supervision ut A. Framework.............................................................................................................................................. 729 B. Roles and Responsibilities of Lead State/Group-Wide Supervisor.......................................................... 736 C. Insurance Holding Company System Analysis Guidance (Lead State).................................................... 742 1. Group Profile Summary Example...................................................................................................... 765 rib 2. Non-Insurance Company Grid Template.......................................................................................... 774 D. Corporate Governance Disclosure Procedures....................................................................................... 775 E. Enterprise Risk Management Process Risks Guidance............................................................................ 780 F. Own Risk and Solvency Assessment (ORSA) Procedures....................................................................... 794 G. Form F – Enterprise Risk Report Procedures.......................................................................................... 798 H. Periodic Meeting with the Group Guidance............................................................................................ 800 ist I. Targeted Examination Procedures and Guidance................................................................................... 802 J. Supervisory Colleges Guidance............................................................................................................... 804 1. Crisis Management Plan Sample....................................................................................................... 823 K. Group Code Assignment.......................................................................................................................... 826 rD t fo No No t fo rD ist rib ut io n I. Introduction n A. Department Organization and Communication B. Interstate Communication and Cooperation io C. External Information D. NAIC Information ut E. SAP vs. GAAP F. Prioritization of Work rib ist rD t fo No No t fo rD ist rib ut io n  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction A. Department Organization and Communication Organization Chart The organizational structure of a state insurance department varies by state. There are several basic functions that are performed by all departments. It is important for the analyst to understand the purpose of each function and the information obtained that may assist the analyst in the financial monitoring and solvency surveillance process. Due to the variance in organizational structure, the chart below depicts typical state insurance department functions rather than trying to highlight a typical organizational structure. Chart of State Insurance Department Functional Units Commissioner of Insurance n Financial Market Company Financial io Condition Conduct Licensing & Analysis Examinations Examinations Admissions ut Consumer Policy/Forms Rate Enforcement Affairs Analysis Filings Agent Licensing Legal rib ist In many states, more than one of the above functions may be performed or supervised by the same individuals. For example, the financial analysts may also perform financial examinations, and financial examiners may also perform market conduct examinations. Additionally, some state insurance departments rely on the Attorney General’s office for legal assistance rather than having separate department counsel. rD Risk-Focused Financial Condition Examinations The insurance code in most states allows the state insurance department to examine insurers as often as the insurance commissioner deems appropriate and requires that each insurer be examined at least once every three to five years (as determined by each state). Risk-focused financial condition examinations performed by the state insurance departments include full-scope periodic examinations and limited-scope or targeted fo examinations, which focus on the review and evaluation of an insurer’s business process and controls (including the quality and reliability of corporate governance) to assist in assessing and monitoring its current financial condition and prospective solvency. Through the risk-focused financial condition examinations, the state insurance department gains knowledge about all aspects of the insurer, including its risk management practices and key business activities, which can be useful information to incorporate into the department’s ongoing solvency analysis. t The results of a financial condition examination are documented in an examination report that assesses the No financial condition of the insurer and sets forth findings of fact (together with citations of pertinent laws, regulations and rules) with regard to any material adverse findings disclosed by the examination. Examiners complete Exhibit AA – Summary Review Memorandum (SRM), or something similar, at the conclusion of the © 2014 - 2020 National Association of Insurance Commissioners 3  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction A. Department Organization and Communication exam. The SRM includes discussion of potential ongoing or prospective solvency concerns, corporate governance, examination adjustments, risk mitigation strategy issues, report findings, management letter comments, responses to issues raised by financial analysts, subsequent events and other residual risks the examiner may want to communicate to state insurance department personnel. The SRM is a useful tool to communicate information and findings to the analyst, chief examiner and other state insurance regulators. The final section of the SRM, prioritization level and changes to the supervisory plan, provides discussion of the examiner’s overall conclusions regarding ongoing monitoring, including specific follow-up recommended to the analyst. Additionally, key documents should be available to analysts, including examination reports and management letter comments, which may also include corrective actions required to be taken by the insurer and/or recommendations for improvements. n Market Conduct Examinations io The market conduct examination focuses on such areas as sales, advertising, rating and the handling of claims. Market conduct examinations evaluate an insurer’s business practices and its compliance with statutes and regulations relating to dealings with policyholders and claimants. The results of a market conduct examination are documented in an examination report, which summarizes examination findings so that the insurer’s ut performance can be assessed. The report may also recommend a corrective action to deal with significant problem areas. Because financial conditions and market conduct problems are often interrelated, the examinations are frequently conducted simultaneously. Market conduct examinations are conducted by financial condition examiners in many of the states, usually an impact of the size of the state insurance rib department. Risk-Focused Financial Analysis Risk-focused financial analysis provides continuous off-site monitoring of the state’s domestic insurers’ financial condition, significant internal/external changes relating to all aspects of the insurer, maintains a prioritization ist system, provides input into the state insurance department’s priority of each insurer, works with the examination staff to develop an ongoing Supervisory Plan and updates the Insurer Profile Summary (IPS), providing department management with timely information of significant events relating to the domestic insurers in assessing prospective risks. The analyst should refer to all available information in order to monitor the insurer’s statutory compliance and solvency on a continuous basis in coordination with the periodic on-site rD field examination process. As part of the analysis process and the review of the examination report and summary review memorandum, the analyst should incorporate into his/her analysis information gained about the corporate governance and risk management processes of the insurer. If desired, regulators can request the IPS, if applicable, for non-domestic insurers from the domestic or lead state. As a result of concerns identified during the risk-focused financial analysis process, the insurance department may take a variety of actions, including but not limited to contacting the insurer seeking explanations or fo additional information, obtaining the insurer’s business plan, requiring additional interim reporting from the insurer, calling for a targeted or limited-scope financial condition examination, engaging an independent expert to assist in determining whether a problem exists, meeting with the insurer’s management, obtaining a corrective plan from the insurer, and/or restricting, suspending, or revoking an insurer’s Certificate of Authority. Financial Analyst Salary Guidelines t The compensation guidelines in this section of the Handbook were developed in recognition of the importance No of compensation particularly as it affects an Insurance Department’s ability to hire and retain well-qualified employees. The guidelines were developed based on surveys of analyst pay across Insurance Departments, as well as external comparisons to other similar professions, including other financial regulators, internal auditors 4 © 2014 - 2020 National Association of Insurance Commissioners  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction A. Department Organization and Communication and external auditors. In using the information below, the following are brief descriptions of the associated positions listed: Financial Analyst Financial analysts are responsible for conducting a risk-focused financial analysis on assigned insurers under the supervision of an analyst supervisor. The financial analyst reviews annual and quarterly insurer financial statements and all related supplemental regulatory filings to assess and monitor the current financial condition and prospective financial solvency of insurance companies. Senior Financial Analyst Senior financial analysts are responsible for conducting a risk-focused financial analysis on assigned insurers under the supervision of the supervising analyst. The senior financial analyst reviews annual and quarterly n insurer financial statements and all related supplemental regulatory filings to assess and monitor the current financial condition and prospective financial solvency of more complex and higher priority insurance companies. Senior financial analysts may also be asked to provide guidance, support and training to financial analysts. io Supervising and Assistant Chief Analyst A supervising or assistant chief analyst is responsible for supervising the financial analysts and senior financial analysts conducting a risk-focused financial analysis on assigned insurers. This position provides input on ut technical matters, acts as a reviewer of the work performed by the financial analysts and senior financial analysts, and ensures that analyst work is an appropriate execution of the risk-focused analysis approach. Chief Analyst rib This position is responsible for overall staff performance and development and should serve as the department’s main point of contact for analysis and ongoing monitoring of regulated entities. This position should oversee company assignments and priority ratings. This position should work under the general direction of a commissioner or deputy commissioner and should oversee a consistent risk-focused financial analysis process across the department. ist Use of Salary Tables The salary tables included below generally require certain adjustments before being applied by a state or jurisdiction in setting analyst compensation. Factors to consider in setting analyst compensation include: rD x Specific job responsibilities and expectations x Location or market based adjustments x Complexity of industry x Specialization requirements (e.g., reinsurance/investment/information technology [IT] specialist) x Travel expectations (including consideration of amount of travel and in consideration of work from home or other similar arrangements) x Retirement and other benefits (not included in table) fo Salary Range Position Low end High end Financial Analyst $ 46,000 $ 75,000 Senior Financial Analyst $ 57,000 $ 90,000 t Supervisor/Assistant Chief Analyst $ 80,000 $ 130,000 Chief Analyst $ 92,000 $ 150,000 No Note: The data above is based on a national average and is not appropriate to be applied to all locations without consideration of market and cost of living variances. © 2014 - 2020 National Association of Insurance Commissioners 5  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction A. Department Organization and Communication Company Licensing and Admissions An insurer that wishes to obtain a Certificate of Authority to write business in a state must generally complete an application indicating the line(s) of business it plans to write and submit the application (along with other information, including the most recent Annual Financial Statement, Audited Financial Report, Actuarial Opinion, etc., to support its financial condition of the insurer) to the insurance department for review and evaluation. In addition, insurance departments frequently request information supporting the insurer’s experience and expertise in writing the line(s) of business requested, background information regarding the insurer’s management and board of directors, a business plan, and a multi-year pro-forma financial projection. After reviewing this information and any other information obtained, the insurance department makes a determination on whether to issue a Certificate of Authority. The Uniform Certificate of Authority Application, also known as the UCAA or Uniform Application, is a process n designed to allow insurers to file copies of the same application for admission to numerous states. The National Treatment and Coordination (E) Working Group currently maintains and updates the UCAA application. Each io state that accepts the UCAA is designated as a uniform state. While each uniform state still performs its own independent review of each application, the need to file different applications in different formats has been eliminated for all states that accept the uniform application. The Uniform Application is available to any insurer in good standing with its domiciliary state, regardless of size. Currently, all 50 states and the District of Columbia ut are uniform. The UCAA includes three applications. The Primary Application is for use by newly formed companies seeking a Certificate of Authority in their domicile state and by companies wishing to re-domesticate to a uniform state. The Expansion Application is for use by companies in good standing in their state of domicile that wish to rib expand their business into a uniform state. The Corporate Amendments Application is for use by an existing insurer for requesting amendments to its certificate of authority. Consumer Affairs Consumer Affairs is responsible for developing and distributing information regarding insurance products and ist the insurance industry to consumers. Consumer Affairs is also generally responsible for addressing complaints filed with the insurance department by policyholders and claimants against insurers and agents. Detailed statistics regarding complaints, both in number and type of complaint, and the resolutions may be maintained as a part of this function. Complaints are recorded on the Complaints Database System if filed with the NAIC. rD Enforcement Punitive actions taken against companies, agents, and other licensees found to be in violation of the insurance code are handled by the enforcement function. This function issues orders, and levies fines and other penalties based on the results of investigations performed by other functions within the insurance department. Detailed records are maintained by the department on all regulatory actions taken against companies, agents, and other licensees. In addition, regulatory actions are also recorded in the Regulatory Information Retrieval System (RIRS) fo database if filed with the NAIC. Policy/Forms Analysis and Rate Filings Every state requires an insurer to file policy forms for most lines of business for review and/or approval prior to t selling the policies. The primary purpose of this review is to determine statutory compliance regarding policy provisions and benefits. No Information regarding premium rates, including actuarial rate development assumptions, is generally required to be filed with the insurance department for certain lines of business. Some states are “file and use” states, which allow insurers to begin selling policies at the rates filed as soon as the filing is made. In other states, rates 6 © 2014 - 2020 National Association of Insurance Commissioners  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction A. Department Organization and Communication must be approved by the insurance department prior to use by the insurer. Rate filings, including the actuarial assumptions, are reviewed for reasonableness and statutory compliance as a part of this function. The NAIC’s System for Electronic Rate and Form Filing (SERFF) is an electronic platform used by industry for form submittal, document management and state insurance regulatory review that accelerates the pace of market- entry for new and renewing products, while ensuring compliance with consumer protection requirements. The NAIC’s Speed to Market (EX) Working Group governs the SERFF product. Agent/Producer Licensing Agents must be licensed by the insurance department in order to write business in the state. The agent licensing function administers tests for agents, reviews new and renewal applications from agents, and performs background checks on agents. In addition, many states have continuing education requirements for agents, and n agent licensing monitors compliance with these requirements. Detailed records of licensed agents are maintained by agent licensing, including information regarding the insurers for which the agents produce io business. The National Insurance Producer Registry (NIPR) is a nonprofit affiliate of the NAIC. NIPR developed and implemented the Producer Database (PDB) and the NIPR Gateway. The PDB is an electronic database consisting of information relating to insurance agents and brokers (producers). The PDB links participating state regulatory ut licensing systems into one common repository of producer information. The PDB also includes data from the RIRS to provide a more comprehensive producer profile. The NIPR Gateway is a communication network that links state insurance regulators with the entities they regulate to facilitate the electronic exchange of producer information. Legal rib Legal is generally involved in the review of proposed changes of control of insurers and other holding company transactions and frequently supports the other functions. Legal may also draft statutes and regulations to assist the insurance department in regulating insurers, agents, and other licensees; hold administrative hearings ist between the commissioner and insurers, agents, and other licensees; and represent the department in judicial and other proceedings. Intra-Departmental Communication rD Communication with other divisions or areas within the state insurance department on a timely basis is an important element of effective solvency surveillance and is essential to the coordination of results of the risk- focused surveillance approach. Upon identifying a problem or concern during the risk-focused financial analysis process, the financial analyst should communicate this information to other divisions within the department. In addition, other divisions within the department should communicate certain information to the financial analyst so that the analyst has all of the relevant information available regarding the insurer being analyzed. (Refer to the example of an IPS in the Analyst Reference Guide for Risk Assessment.) fo To assist in the coordination of risk-focused financial condition examination, state insurance regulators use the NAIC’s Financial Exam Electronic Tracking System (FEETS). FEETS allows state insurance regulators to call an examination of a multistate insurer, facilitate coordination via various functionality within the program, communicate the completion of an examination, and share the completed version of the state insurance department’s examination report. Use of FEETS on iSite+ is required by the NAIC when calling examinations on t multistate insurers and is recommended for all examinations. No © 2014 - 2020 National Association of Insurance Commissioners 7  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction A. Department Organization and Communication Communication from the Financial Analyst to Financial Examiners The analyst may identify concerns as a result of the risk-focused financial analysis process that, when communicated to the financial condition examinations division, may lead to a targeted or limited scope financial condition examination. In addition, since the risk-focused analysis and examinations are interactive processes, the analyst should be familiar with the insurer’s current financial condition; including any changes in its operations since the last periodic financial condition examination as well as the insurer’s exposure to branded risks, which include prospective risks. In communicating information to the examiners for examination planning, the analyst should review the examiner’s Exhibit B–Examination Planning Questionnaire to note any items already accumulated and provide access to relevant information that has already been obtained by the analyst function and is available at the n state insurance department. Communication between examiners and analysts should occur for examination planning and at the conclusion of the examination. Specifically, regarding exam planning, results of ongoing analysis procedures should be shared io with the financial examiners to assist in examination planning through a coordination meeting. An email exchange alone, between analyst and examiner, is not considered sufficient communication in planning an examination. During the preplanning process of each examination, the analyst should communicate areas of concern and specific issues to address during the examination. To assist in communication, the analyst should ut provide a current copy of the, IPS as well as other supporting analyst work papers and other documentation already on file at the department to communicate current or prospective concerns or observations and suggested procedures. rib Regarding exam follow-up the financial analyst should participate in a collaborative follow-up meeting or conference call at the end of the examination to discuss the following: x Examination results and/or findings x Insurer’s prioritization level x x ist Ongoing supervisory plan and the completed Summary Review Memorandum Re-assessment of branded risks as contained in the IPS Such information may be shared by providing and discussing the current IPS, as well as other supporting analysis documentation necessary to support the branded risk assessment or other issues noted in the analysis. rD Statutory violations identified as a part of the analysis should be communicated to the enforcement division for the issuance of appropriate penalties and/or corrective orders against the insurer. Additionally, solvency related concerns, when communicated to the legal division, may result in the restriction, suspension, or revocation of an insurer’s Certificate of Authority. The avoidance of redundancy in the risk-focused analysis and examination is of critical importance for an enhanced and more efficient overall regulatory process that will benefit both regulators and industry. An fo efficient regulatory process fosters clarity and consistency, which results in a better understanding of how individual insurers operate across the different aspects of the regulatory spectrum, including the areas of financial analysis, financial examination and other solvency-related regulation. The information that insurers submit to the insurance department which are received and reviewed by the analysts as well as the analysts’ final work product should be documented in a clear and consistent format that t can be easily understood and utilized by analysts, their supervisors, and financial examination staff. In particular, No workpapers supporting and summarizing the analysts’ risk-focused analysis, an outline of mapping of what documentation was reviewed and a summary of conclusions reached, i.e. an updated Insurer Profile Summary, should be maintained in a manner that can be easily shared and discussed during the pre-examination planning meeting with the examiner. 8 © 2014 - 2020 National Association of Insurance Commissioners  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction A. Department Organization and Communication Refer to the III.A.4 Analyst Reference Guide for further guidance on communication between analysts and examiners. Communication from Other Divisions or Areas to the Financial Analyst In addition to intra-department communication, which originates within the financial analysis division, it is equally important that the department’s procedures be designed to ensure relevant information and data received by the other divisions within the department be directed to the financial analysis division. The following are some examples of information or data that may be received by other divisions within the department (including an indication of the functional unit that would likely have received the information or data), which should be directed to the financial analysis division for consideration as a part of the financial analysis process: 1. Information from Risk-Focused Financial Examination: n a. If recently completed, the SRM, financial condition examination reports and management letter comments that include significant adjustments to the financial information reported to the department, io corrective actions required to be taken by the insurer, and/or recommendations for improvements based on examination results. (See above) b. If an examination is in progress, communication from examination staff should include information on ut the planning, progress and preliminary findings, based on the phase of the examination Risk-Focused Financial Examination. c. Any relevant information obtained in planning the financial examination stage. 2. Market conduct examination reports containing corrective actions required to be taken by the insurer as a rib result of violations in sales, advertising, rating, and/or claim practices, which might be an indication of financial problems or lead to the risk of financial losses through class action suits or regulatory fines (market conduct examinations). 3. An increase in the number or type of complaints filed by policyholders, claimants, employees, agents, or third parties that could indicate liquidity or internal control problems (consumer affairs). ist 4. Corrective orders and other regulatory actions taken against an insurer and fines and penalties levied (enforcement). 5. New policy form filings or expansion into new lines of business, including high-risk and long-tail lines of business, which might imply planned rapid growth to obtain premiums in order to improve liquidity or cover rD prior losses (policy/forms analysis). 6. Requests for significant premium rate increases, which might be an indication of insufficient rates to cover losses and expenses in the past (rate filings). 7. An increase in the licensing of agents, including managing general agents or third party administrators, which could indicate planned rapid expansion or relaxed underwriting standards (agent licensing). fo 8. The use of managing general agents or third party administrators, which might be an indication that the insurer is not in control of its operations (agent licensing). 9. Information that management personnel of an insurer (including officers, directors, or any other persons who directly or indirectly control the operations of the insurer) fail to possess and demonstrate the competence, fitness, and reputation deemed necessary to serve the insurer in such a position (legal). t 10. The unexpected resignation of an insurer’s officer(s), director(s), or other key management personnel, which No might indicate internal turmoil or dissatisfaction with the insurer’s goals or operating practices (legal). © 2014 - 2020 National Association of Insurance Commissioners 9  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction A. Department Organization and Communication Intra-Department Communication System Intra-department communication in most state insurance departments is primarily informal due to the size of the department and the location of personnel. The commissioner may hold periodic meetings with the division heads to discuss current developments and concerns in each division. In some states, division heads prepare monthly activity reports highlighting current developments which are circulated to the other divisions within the department. Departments should have a formal structured mechanism to assure appropriate ongoing intra- department communication. Adequate controls should be implemented to assure that recommendations, decisions, actions, and results are effectively communicated and documented. Among the key objectives of a department’s intra-department communication system are the following: 1. Key insurance department officials should possess all relevant information to permit decisions to be made on a timely basis. n 2. The department should assure that all levels of staff have the appropriate knowledge, information, and feedback to effectively perform the assigned functions. io 3. Managers within various functional units or divisions should be responsible for the proper internal communications and documentation of decisions and actions taken under their authority. 4. The department should establish procedures to assure that orders and directives are effectively ut communicated to the appropriate staff and that the staff observes such orders and directives. Considerations for Troubled Insurance Companies rib In troubled or potentially troubled insurance company situations, proactive and timely communication to the appropriate persons within the department and with non-domiciliary state departments (for multistate companies) is critical. It is also important that the non-domiciliary state communicate with the domestic regulator prior to taking any action against the insurer. In certain circumstances, it may also be appropriate to communicate certain information with other parties (e.g., other regulatory bodies, company management, state guaranty funds, etc.). Establishing a coordinated communication system among the relevant parties will help ist facilitate the domestic regulator’s surveillance of the troubled or potentially troubled insurance company. The Troubled Insurance Company Handbook provides additional guidance to assist in enhancing a state’s monitoring and surveillance of troubled insurance companies, including communication and coordination of troubled or potentially troubled insurance companies. rD At some point, the insurance department may determine that a corrective action plan cannot be implemented or completed successfully. Under these circumstances, the department may determine that the appropriate course of action is to place the troubled company in receivership. The Troubled Insurance Company Handbook outlines specific steps the department should take at all times during the development and implementation of a corrective action plan to prepare itself for this eventuality. This includes knowledge and control over the company’s assets, determining and reviewing the company’s obligations, operational considerations, information gathering, data/IT systems, other jurisdiction/regulatory considerations, etc. In addition to the fo Troubled Insurance Company Handbook, the Receiver’s Handbook for Insurance Company Insolvencies provides detailed information and guidance regarding pre-receivership considerations. t No 10 © 2014 - 2020 National Association of Insurance Commissioners  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction B. Interstate Communication and Cooperation Coordination of Regulatory Efforts The operations of an insurance company often are not limited to one jurisdiction. Therefore, state insurance departments need to coordinate its regulatory efforts with those of other state insurance departments where its insurers do business. The Troubled Insurance Company Handbook states that opportunities to coordinate efforts should be sought throughout the entire process, from the monitoring and surveillance of insurers through regulatory actions regarding identified troubled insurers. Coordinated activities may take various forms, including: x Communication of information regarding the troubled company with other departments through established department procedures x Participation in coordinated examinations n x Lead states coordination in situations involving troubled insurance groups with affiliated insurers x Assignment of specific regulatory tasks to different insurance departments to achieve efficiency and io effectiveness in regulatory efforts and to share personnel resources and expertise x Establishment of task forces consisting of personnel from various insurance departments to carry out coordinated actions ut Additionally, in some cases, coordination on nonfinancial issues may also be necessary. This is quite common when dealing with health entities because regulatory agencies, such as the federal Centers for Medicare & Medicaid Services (CMS), maintain authority in dealing with issues related to Medicare and Medicaid products and certain comprehensive health care issues under the federal Affordable Care Act (ACA). rib Accreditation Standards and Guidelines The NAIC Financial Regulation Standards and Accreditation Program indicates that a state insurance department should generally follow and observe the procedures set forth in the Troubled Insurance Company Handbook. The Troubled Insurance Company Handbook provides guidance regarding communication with other state insurance ist departments about domestic insurers identified as troubled. Once the department has identified an insurance company as troubled or potentially troubled, the department should make efforts to communicate proactively with other state insurance regulators where the insurance company has a significant amount of written, assumed or ceded insurance business and with states in which affiliates of the troubled company are domiciled or those states where the troubled company has significant market share. Department files should contain rD written evidence of such communication(s). To a lesser exent, oral verification may provide such evidence. Regulatory Information The department should establish and implement procedures to ensure that regulatory actions are reported to the Regulatory Information Retrieval System (RIRS), summary information on consumer complaints is reported to the Complaints Database System (CDS), and that the status of receivership actions is reported to the Global fo Receivership Information Database (GRID). These databases are discussed in more detail in section I.D. NAIC Information. Interdepartmental Communication t Effective interdepartmental action requires timely and effective communication among the various state insurance departments. Insurance departments should develop methods of multilateral communication in order No to coordinate the prompt sharing of pertinent information regarding troubled insurers that may impact other jurisdictions. Open lines of communication may provide additional information to a department to assist in its surveillance, as well as, provide information to other state insurance departments. Such communications should be established to foster cooperation among the various state insurance departments, so that each department © 2014 - 2020 National Association of Insurance Commissioners 11  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction B. Interstate Communication and Cooperation works toward the satisfactory resolution of all troubled insurer situations, regardless of the insurer’s domicile, license, or operating status. Communications to other state insurance departments regarding troubled insurers should be made in an atmosphere of appropriate confidentiality. Knowledge by outsiders of actual or contemplated regulatory activities may cause undue negative consequences to the insurer (e.g., cancellation of policies or unavailability of reinsurance coverage), which may diminish the insurer’s ability to receive assistance or to remain solvent. The Troubled Insurance Company Handbook indicates that the effects on policyholders in all jurisdictions that may result from the actions of a department should be considered. Although the department should consider any adverse consequences that could possibly result from making certain information known to other state departments, those possible disadvantages may be outweighed by the advantages gained from sharing information and working with the other state insurance departments. n An insurance department may go beyond routine communications to allow other departments to participate in decision-making activities related to an insurer that operates in more than one jurisdiction. Any such joint action depends on the nature of the decisions to be made and the relative impact on a particular jurisdiction. However, io cooperation of this nature can significantly improve communications between departments, and the resulting increased knowledge of the insurer’s condition and circumstances can lead to more effective regulatory action. The NAIC and its various committees, task forces, and working groups may also provide a means for facilitating ut coordination and communication among the various departments. For example, the NAIC Financial Examiners Coordination (E) Working Group promotes coordination by assisting and advising domiciliary regulators and exam coordination states as to what might be the most appropriate regulatory strategies, methods and actions regarding financial examinations of holding company groups. The Financial Analysis (E) Working Group functions as a peer review by identifying insurance companies of national significance that are or may be financially rib troubled and determining whether appropriate regulatory action is being taken. The NAIC may also assist in organizing and facilitating other cooperative regulatory efforts, such as the formation of working groups to address specific troubled insurance company situations. Redomestication and Acquisition—Communication of Regulatory Actions and Analysis ist Communication between states in situations where a company has redomesticated or is being acquired by a party that owns other insurers since the last annual analysis is an important step in conducting effective solvency oversight. In addition to the review of the application for redomestication or Form A, the state insurance regulator should engage the domestic state insurance regulator of the former state in the case of rD redomestication or the lead state or domestic state(s) of other insurers in the new group in the case of Form A in communication to request the Insurer Profile Summary (IPS), supervisory plan and other relevant solvency monitoring information to effectively incorporate insights from the other domestic state’s supervisory plan into the current analysis. In these situations, it is imperative that state insurance regulator concerns and supervisory plans be appropriately transitioned to avoid losing regulatory insights accumulated over years of oversight. Communication should include (but not be limited to) such items as: x fo IPS and supervisory plan, including analysis detail for significant risks x History of regulatory actions x History of communication with the insurer/group x Assessment of senior management, board of directors and corporate governance t x Findings (i.e., Summary Review Memorandum (SRM), exam report and management letter) from the most No recent financial and market conduct examinations, including the status of the resolution to issues identified x Assessment of Enterprise Risk Management (ERM) 12 © 2014 - 2020 National Association of Insurance Commissioners  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction B. Interstate Communication and Cooperation x Group Profile Summary (GPS) and Supervisory Plan from the holding company analysis, including detail on any significant risks obtained from the lead state x Assessment of Own Risk and Solvency Assessment (ORSA) Summary Report, if applicable, and Form F n io ut rib ist rD t fo No © 2014 - 2020 National Association of Insurance Commissioners 13  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction C. External Information In addition to the NAIC information, there are a number of external sources of information available credit rating agencies, industry analysts and external news sources. The analyst should refer to these sources of information in order to increase his or her knowledge of the insurer’s financial position and to corroborate the financial information filed by the insurer with the NAIC and state insurance departments. These sources of information are all available through direct purchase or subscription order from the credit rating agencies and/or industry analysts. Following is a discussion of a few of the major sources of external information available. Credit Rating Agencies There are ten credit rating agencies currently registered with the U.S. Securities and Exchange Commission (SEC) as Nationally Recognized Statistical Rating Organizations (NRSROs) under the Credit Rating Agency Reform Act of n 2006. Each has its own unique methodology for assigning ratings. The rating agencies also produce other types of financial information that may be helpful to the analyst. The following is a current list of NRSROs and the classes of ratings for which the rating agency is currently registered. Specific details on the rating agency’s rating io methodology and other types of financial information available can be found on the agency’s Website. Rating Agency Classes of Ratings A.M. Best Rating Services, Inc. insurance companies issuers of asset-backed securities ut www.ambest.com corporate issuers DBRS, Inc. financial institutions issuers of asset-backed securities www.dbrs.com insurance companies issuers of government securities rib corporate issuers Egan-Jones Ratings Company financial institutions corporate issuers www.egan-jones.com insurance companies Fitch Ratings, Inc. financial institutions issuers of asset-backed securities www.fitchratings.com insurance companies issuers of government securities HR Ratings de Mexico, S.A. de C.V. www.hrratings.com Japan Credit Rating Agency, Ltd. ist corporate issuers financial institutions corporate issuers financial institutions issuers of government securities corporate issuers rD www.jcr.co.jp insurance companies issuers of government securities Kroll Bond Rating Agency, Inc. financial institutions issuers of asset-backed securities www.krollbondratings.com insurance companies issuers of government securities corporate issuers Moody’s Investors Services, Inc. financial institutions issuers of asset-backed securities www.moodys.com insurance companies issuers of government securities fo corporate issuers Morningstar Credit Ratings, LLC financial institutions issuers of asset-backed securities www.morningstarcreditratings.com corporate issuers S&P Global Ratings financial institutions issuers of asset-backed securities www.standardandpoors.com insurance companies issuers of government securities t corporate issuers No Other rating organizations not registered as NRSROs may provide useful information to the analyst in addition to a NRSRO ratings report, or when a rating is not provided by a NRSRO. Examples of non-NRSROs include Demotech, Inc. and Weiss Ratings, LLC. 14 © 2014 - 2020 National Association of Insurance Commissioners  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction C. External Information Industry Analysts In addition to the rating agencies, many of the investment houses and stock research firms do considerable research on the insurance industry. The following paragraphs briefly describe several sources. 1. Investment Houses—The major Wall Street firms dedicate considerable resources toward researching insurance industry issues. In general, much of this research is oriented towards emerging issues facing the industry. Specific insurance company research is also available but is generally limited to companies with publicly traded debt or equity securities. 2. Ward’s Results—Annually, Ward Financial Group publishes a financial reference series entitled Ward’s Results, available in separate Life, Health & Annuity and Property/Casualty editions. The books include financial benchmarks for U.S. domiciled insurers, including unique peer group benchmarks. Each company is n grouped into peer groups that consider the insurer’s asset size, premium volume, geographic mix of business and ownership structure. In addition to peer group benchmarks, the books also include top performing stock company and mutual company benchmarks. io Securities and Exchange Commission Filings Insurers that offer debt or equity securities to the public must register with the SEC and fulfill various reporting ut requirements. Where applicable, the various SEC filings provide significant background information about the insurer and can assist the analyst in corroborating the information filed by the insurer with the NAIC or state insurance departments. Most of the filings are available through SEC’s Electronic Data Gathering Analysis and Retrieval (EDGAR) system via the SEC’s website (www.sec.gov) at no charge, as well as on CD-ROM. While the rib SEC filing requirements are quite comprehensive, the following summarizes three of the SEC filing forms that may be of particular interest to the analyst. 1. Form 10-K is used to fulfill the SEC’s annual reporting requirements. The 10-K must be filed with the SEC within 90 days after the company’s year-end for a non-accelerated filer. Accelerated filers must file the 10-K 60 or 75 days after their fiscal year-end, depending on whether they are considered a large filer. Information ist incorporated into the 10-K includes: x Item 1– Business x Item 1A – Risk factors rD x Item 1B – Unresolved staff comments x Item 2 – Properties x Item 3 – Legal proceedings x Item 4 – Mine safety disclosures x Item 5 – Market for registrant’s common equity, related stockholder matters and issuer purchases of fo equity securities x Item 6 – Selected financial data x Item 7 – Management’s discussion and analysis of financial condition and results of operations x Item 7A – Quantitative and qualitative disclosures about market risk t x Item 8 – Financial statements and supplementary data No x Item 9 – Changes in and disagreements with accountants on accounting and financial disclosure x Item 9A – Controls and procedures © 2014 - 2020 National Association of Insurance Commissioners 15  Financial Analysis Handbook 2019 Annual / 2020 Quarterly I. Introduction C. External Information x Item 9B – Other information x Item 10 – Directors, executive officers and corporate governance x Item 11 – Executive compensation x Item 12 – Security ownership of certain beneficial owners and management and related stockholder matters x Item 13 – Certain relationships, related transactions and director independence x Item 14 – Principal accounting fees and services x Item 15 – Exhibits and financial statement schedules n 2. Form 10-Q is used to fulfill the SEC’s quarterly reporting requirements. The 10-Q must be filed with the SEC within 40 days for an accelerated filer and 45 days for a non-accelerated filer after the end of each of the first three fiscal quarters and must include a condensed income statement, a condensed balance sheet, and an io abbreviated statement of cash flow. 3. Form 8-K is used to report material events or corporate changes that have not yet been reported. The 8-K is required after any of the following events occur (see SEC website for a complete list): ut x Section 1: Registrant’s Business and Operations o Entry into or Termination of a Material Definitive Agreement o Bankruptcy or Receivership rib x Section 2: Financial Information o Completion of Acquisition or Disposition of Assets o Results of Operations and Financial Condition o Material Impairments x x Section 3: Securities and Trading Markets o o Notice of Delisting ist Material Modification to Rights of Security Holders Section 4: Matters Related to Accountants and Financial Statements rD o Changes in Registrant’s Certifying Accountant x