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The Financial Analysis Handbook Working Group is responsible for maintaining the Financial Analysis Handbook. The Handbook is available in separate Life/Health, Property/Casualty and Health editions. The Handbook is a tool to assist the analyst in conducting a comprehensive financial analysis of an insurance company, particularly multi-state domestic companies.
The Handbook provides guidance for three different levels of annual statement analysis; quarterly statement analysis; and the analysis of CPA reports, management's discussion and analysis, actuarial opinions and other information.
The following briefly describes the major components of the Handbook.
Level 1 - Procedures
This section of the Handbook defines the minimum financial analysis procedures to be completed for all domestic insurers. It relies on Analytical tools available only to regulators as well as IRIS ratios, Company Profile Reports, Management’s Discussion and Analysis, Holding Company filings and selected other general procedures.
Level 2 - Procedures
This section of the Handbook guides the analyst through virtually every section of the insurer’s Annual and Quarterly Statement. It is benchmark-oriented in that it incorporates financial ratios, as well as quantifiable thresholds, to assist the analyst in conducting a thorough financial analysis. It also focuses on significant changes from period to period.The text and ratio calculation aspects of the Procedures are automated on I-SITE.
Level 3 - Procedures
This section of the Handbook describes specific procedures the analyst may complete when specific concerns surface about a particular insurer or specific aspect of an insurer’s financial condition. In contrast to the Level 2 Procedures which are quantitative and benchmark-oriented, the Level 3 Procedures are more subjective and require judgment on the part of the analyst regarding which procedures to perform and how far to probe.
2008 Charges
- Develop, enhance, and update the NAIC Financial Analysis Handbook (FAH) for changes to the NAIC Annual/ Quarterly Statement blanks, as well as coordinate and analyze input received from other state regulators. This charge will be accomplished via conference calls.
Charges that Represent New Objectives and Goals, Representing New NAIC Programs
- Review current guidance in the NAIC Financial Analysis Handbook regarding the analysis of reserve liabilities for life insurance companies and make appropriate revisions based on the finalized principles-based reserving standards.
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