Accounting Practices and Procedures (E) Task Force
March 30, 2008

The Accounting Practices and Procedures Task Force met on Sunday, March 30, 2008. During this meeting, the Task Force took the following actions:

Action Items (See the below for details of the actions at each group):

• Adopted Interim Minutes
• Received the report of the Emerging Accounting Issues Working Group;
• Adopted the report of the Statutory Accounting Principles Working Group;
• Adopted the report of the Blanks Working Group.

Adopted Interim Minutes

• The Task Force reviewed and adopted the interim minutes from a February 14, 2008 e-mail vote and a March 18, 2008 phone call.

Emerging Accounting Issues Working Group:

• Exposed the following tentative consensus positions for comment:
• Rejecting EITF 06-7 on Bifurcated Conversion Option as not applicable to statutory accounting.
• Adopting EITF 06-8, on Buyer’s Continuing Investment with modification.
• Adopting with modifications on EITF 06-9 on changes in the reporting period of an investee.
• Rejecting EITF 07-3 on Nonrefundable Advance Payments on research activities are expensed as incurred.
• Adopting EITF 02-11 on Reverse Spinoffs.
• Referred to the Statutory Accounting Principles Working Group INT 07-05: EITF 06-10: Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life.
• Deferred action on Balance Sheet Presentation of Funding Agreements issued to a Federal Home Loan Bank (FHLB) and requested Interested Parties to provide additional information as discussed during the meeting.
• The deadline for submission of comments or new items is April 30, 2008 .

Statutory Accounting Principles Working Group:

• Adopted the following changes as final:
• Rejected FSP SOP 78-9-1 ( Interaction of SOP 78-9 and EITF 04-5), SOP 03-5 (Financial Highlights of Separate Accounts)andFAS 150 (Financial Instruments with Characteristics of both Liabilities and Equity) as not applicable to statutory accounting.
• Incorporate guidance in SSAP No. 40 (Real Estate) on participating mortgage loans (SOP 97-1).
• Issue Paper No. 131—Accounting for Certain Securities Subsequent to an Other-Than-Temporary Impairment.
• Deleted references to the Health Reserves Guidance Manual until a maintenance process is developed. Directed staff to draft a memo to the Accident and Health WG.
• Re-exposed minor modifications SSAP No. 25 (Transaction with Affiliates) to include implicit and explicit variable interest entities within the example of related parties and expanding disclosure and rejecting FIN 46R, FSP FIN 46R-5 and FSP FIN 46R-4 and a change to SSAP No. 22 (Leases) rejecting FSP FIN 46R-4 as not applicable to statutory accounting
• Modified Issue Paper No. 132—Accounting for Pensions, A Replacement of SSAP No. 89 and Issue Paper No. 133—Accounting for Postretirement Benefits Other Than Pensions, A Replacement of SSAP No. 14 related to Consolidated/Holding Company Plans. The Working Group directed staff to develop additional language.
• Exposed the following issues with an April 30, 2008 comment deadline:
• Revisions to SSAP No. 86 (Derivatives) to reflect the impact of FAS 149: Amendment of Statement 133.
• Rejecting SOP 04-1 (Auditing Social Insurance); FAS 160 ( Noncontrolling Interests in Consolidated Financials) as not applicable to statutory accounting.
• Clarifications to the existing guidance within SSAP No. 65 (Property and Casualty) that property and casualty loss adjusting expense reserves shall not be discounted.
• Revisions to SSAP No. 22 incorporating guidance regarding the review of assumptions and projected timing of income tax cash flows with reference that FSP FAS 13-2 is adopted for statutory accounting.
• SSAP No. 63 (Pooling) related to state review, participation percentage, intercompany reporting, and related intercompany disclosures, and specifically requested comments.
• Changes which would allow foreign GAAP or IFRS audits for valuing the non-U.S. SSAP No. 48 (Joint Ventures and LLCs) for minor/noncontrolled investments with audited footnote reconciliation to U.S. GAAP.
• Changes regarding the use of audited tax basis financial statements for non SCA minor/noncontrolled investments in SSAP No. 48 entities. In addition, the Working Group requested that Interested Parties provide examples and directed staff to research Schedule BA to determine an estimated impact for these types of investments.
• SSAP No. 98––Treatment of Cash Flows When Quantifying Changes in Valuation and Impairments, An Amendment to SSAP No. 43––Loan Backed and Structured Securities
• A recommendation to move an old issue on Foreign Currency Translation to the disposed listing.
• Providing residual interests guidance within SSAP No. 43—Loan-Backed and Structured Securities.
• Changes to SSAP No. 41 (Surplus Notes) on NRSRO-Rated Surplus Notes, in addition, comments on other issues in which no changes were proposed.
• Issue Paper 134—Servicing Assets/Liabilities, An Amendment of SSAP No. 91 for comment.
• Clarifying the guidance related to the treatment of goodwill for subsequent merger activity.
• Received updates from the FIN 48 ( Uncertainty in Income Taxes) Subgroup, the Fair Value Subgroup and the Separate Account Subgroup . FAS 159 (Fair Value Option) was referred to the Fair Value Subgroup for further consideration.
• Referred an ACLI comment letter on accounting for life settlement contracts to the Valuation of Securities Task Force.
• Deferred action on an issue related to the admissibility of corporate owned insurance policies until the additional referral from the Emerging Accounting Issues Working Group is discussed.
• Reviewed a blanks proposal submitted to the Blanks Working Group on behalf of AHIP on the extra contractual obligations disclosure noting support provided the proposal is adjusted as discussed during the meeting.
• Received a Principles-Based Reserving update. The Working Group will submit comments on proposed language for the Valuation Manual ‘Maintenance Process’ exposed for comment by the Life and Health Actuarial Task Force.
• Mr. Fritsch also noted that the Working Group intends to expose one additional item on fair value (2008-08) by email vote.

Blanks Working Group:

• A dopted the following blanks proposals:
• Add “other related parties” to the Notes to Financial Statement # 10 title description (2007-48BWG).
• Replacing Long Term Care Experience reporting forms and instructions with new ones. (2007-49BWG).
• Modify the instructions for Schedule D, for consistency (2007-50BWG).
• Add instructions for the new disclosure adopted by SAPWG for SSAP 72 to the Notes to Financial Statement #13, as #13 (4) (2007-52BWG).
• Deferred (2007-51BWG) which adds instructions to Schedule E, Part 1 regarding the crosschecking to the parenthetical amount reported as cash on the Assets Page.
• Exposed twenty-four new proposals for comment. Comment period ends May 1, 2008.
• Adopted the listing of editorial changes.
• Received a report from the Schedule T Subgroup.
• Received a status update regarding the impact to the blanks and instructions due to principles based reserving.
• Discussed the memorandum from the Accounting Practices and Procedures Task Force directing the Blanks Working Group to add “situs of the contract” as a premium allocation basis for groups of less than 500 members to the Schedule T instructions for life and annuity business (2007-42BWG). The Working Group members adopted modifications to the proposal. The modifications are consistent with the direction of the Task Force, to include the “situs of the contract” definition as “the jurisdiction in which the contract is issued or delivered as stated in the contract.”
• Notified members that a proposal is expected from Market Regulation (D) Committee to add a question to the Supplemental Exhibits and Schedules to add Interrogatories asking if a market conduct supplement will be filed.