Statutory Accounting Principles (E) Working Group
March 29, 2008

The Working Group held a HEARING to address comments on previously exposed issues. The following actions were taken during the hearing:
· Ref #2006-29: FAS 150: Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (FAS 150)
o Final - Adopted the exposed nonsubstantive changes to Issue Paper No. 99-Nonapplicable GAAP Pronouncements (Issue Paper No. 99) rejecting FAS 150 as not applicable to statutory accounting as insurers do not readily issue securities or financial instruments within the scope of FAS 150.
· Ref #2006-30: FAS 158: Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R)
o Action - 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 language for other items discussed during the Hearing.
· Ref #2007-14: Accounting for Debt Securities Subsequent to an Other-Than-Temporary Impairment
o Final - Issue Paper No. 131-Accounting for Certain Securities Subsequent to an Other-Than-Temporary Impairment was adopted as final. The Working Group also directed staff to draft the SSAP for review during the 2008 Summer National Meeting.
· Ref #2007-21: SOP 97-1: Accounting by Participating Mortgage Loan Borrowers (SOP 97-1)
o Final - Adopted the exposed nonsubstantive revisions to SSAP No. 40-Real Estate Investments as final.
· Ref #2007-25: FAS 159: The Fair Value Option for Financial Assets and Financial Liabilities (FAS 159)
o Referred - Although no comments were received on the exposure, the Working Group noted that matching assets and liabilities at fair value may be a key element discussed by the Separate Account Subgroup in their consideration of SOP 03-1: Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts. Thus, the Working Group referred this item to the Fair Value Subgroup for further consideration.
· Ref #2007-28: FIN 46R; FSP FIN 46R-4; FSP FIN 46R-5: Variable Interests
o Re-exposed - Re-exposed nonsubstantive revisions to SSAP No. 25-Accounting for and Disclosures about Transactions Affiliates and other Related Parties including a footnote discussed and added during the Hearing. In addition, a nonsubstantive revision to SSAP No. 22-Leases (SSAP No. 22) was exposed, rejecting FSP FIN 46(R)-4 as not applicable to statutory accounting.
· Ref #2007-29: FSP SOP 78-9-1: Interaction of AICPA Statement of Position 78-9 and EITF Issue No. 04-5 (FSP SOP 78-9-1)
o Final - Adopted the exposed nonsubstantive change to Issue Paper No. 99 rejecting FSP SOP 78-9-1, as final.
· Ref #2007-30: SOP 03-5: Financial Highlights of Separate Accounts: An amendment to the Audit and Accounting Guidance Audits of Investment Companies (SOP 03-5)
o Final - Adopted the exposed nonsubstantive change to Issue Paper No. 99 rejecting SOP 03-5, as final.
· Ref #2007-31: Remove Reference to Health Reserves Guidance Manual
o Final - Adopted the exposed nonsubstantive change to SSAP No. 54-Individual and Group Accident and Health Contracts (SSAP No. 54) and SSAP No. 55-Unpaid Claims, Losses and Loss Adjustment Expenses (SSAP No. 55), removing reference to the Health Reserves Guidance Manual (HRGM) as final until such time that a maintenance process is developed. In addition, the Working Group directed staff to draft a memo to the Accident and Health Working Group.

Next, the Working Group moved to their regular MEETING and reviewed the Maintenance Agenda - PENDING LISTING, taking the following actions:
· Ref #2008-01: FAS 149: Amendment of Statement 133 on Derivative Instruments and Hedging Activities (FAS 149)
o Exposed - Moved item to the Nonsubstantive Active Listing and exposed nonsubstantive changes to SSAP No. 86-Accounting for Derivative Instruments and Hedging Activities revising paragraph 11 to clarify the definition of an 'underlying', paragraph 55 to update the adopted GAAP guidance, and paragraph 7 of Exhibit B, to update previously adopted guidance regarding the assessment of hedge effectiveness.
· Ref #2008-02: SOP 04-1: Auditing the Statement of Social Insurance (SOP 04-1)
o Exposed - Moved item to the Nonsubstantive Active Listing and exposed a nonsubstantive change to Issue Paper No. 99 rejecting SOP 04-1 as not applicable to statutory accounting.
· Ref #2008-03: Discounting of Loss Adjustment Expense Reserves Acquired in a Transfer
o Exposed - Moved item to the Nonsubstantive Active Listing and exposed revisions to clarify existing guidance within SSAP No. 65-Property and Casualty Contracts conveying that property and casualty loss reserves shall not be discounted.
· Ref #2008-04: FAS 160: Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 (FAS 160)
o Exposed - Moved this item to the Nonsubstantive Active Listing and exposed a nonsubstantive change to Issue Paper No. 99 rejecting FAS 160 as not applicable to statutory accounting.
· Ref #2008-05: FSP FAS 13-2 Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction (FSP FAS 13-2)
o Exposed - Moved this item to the Nonsubstantive Active Listing and expose nonsubstantive 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.
· Ref #2008-06: Clarification of SSAP No. 63 Regarding Intercompany Pooling Arrangements
o Exposed - Moved this item to the Nonsubstantive Active Listing and exposed nonsubstantive changes to SSAP No. 63-Underwriting Pools and Associations Including Intercompany Pools related to state review, participation percentage, intercompany reporting, and related intercompany disclosures. The Working Group requested comments from Interested Parties, industry and regulators.
· Ref #2008-07: Allow Audited IFRS or Foreign GAAP Prepared Financial Statements as an Acceptable Basis for Valuing Investments in SSAP No. 48.
o Exposed - Moved this item to the Nonsubstantive Active Listing and exposed a nonsubstantive change to SSAP No. 48-Joint Ventures, Partnerships and Limited Liabilities Companies (SSAP No. 48) to allow foreign GAAP or IFRS audits and value the non-U.S. SSAP No. 48 minor/noncontrolled investment in US GAAP equity derived from the audited footnote reconciliation to U.S. GAAP.
· Ref #2007-34: Use of Audited Tax Basis Financial Statements
o Exposed - Moved this item to the Nonsubstantive Active Listing and exposed a nonsubstantive change to the SSAP No. 48 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 an example of audited tax basis financials statements and their use for valuation. Also, the Working Group directed staff to research Schedule BA to determine an estimated impact for these types of investments.

Next, the Working Group reviewed the Maintenance Agenda - SUBSTANTIVE LISTING, ACTIVE REPORT, taking the following actions:
· Ref #2001-29: SSAP No. 23-Foreign Currency Translation (SSAP No. 23)
o Exposed - The Working Group exposed a recommendation to move this item to the disposed listing. This exposure will provide a final opportunity for interested parties and regulators to submit concerns or proposals on this issue before this item is removed from the maintenance agenda.
· Ref #2002-20: Valuation and Reporting of Residual Interests
o Exposed - Moved item to the Nonsubstantive Active Listing and proposed nonsubstantive revisions to SSAP No. 43-Loan-Backed and Structured Securities (SSAP No. 43) to clarify the inclusion of beneficial interests within SSAP No. 43 and the treatment of such beneficial interests.
· Ref #2004-01: Clarification of SSAP No. 41 on several issues including NAIC Designation Equivalent for NRSRO-Rated Surplus Notes
o Exposed - The Working Group exposed issues 1, 3, 4, 6, and 7. If comments are not received indicating that these are pertinent issues, the Working Group plans to dispose of these issues during the 2008 Summer National Meeting. With regards to Issue 2, the Working Group exposed nonsubstantive revisions to SSAP No. 41-Surplus Notes (SSAP No. 41), paragraph 10.a.1 to make the Accounting Practices and Procedures Manual treatment for NRSRO rated surplus notes consistent with the Purposes and Procedures Manual of the NAIC Securities Valuation Office, for valuation of NRSRO rated bonds. (Issue 5 has previously been addressed by the Working Group.)
· Ref #2004-11: 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 (SSAP No. 98)
o Exposed - The Working Group exposed SSAP No. 98 for comment.
· Update on FIN 48 Subgroup (2006-18: FIN 48 - Accounting for Uncertainty in Income Taxes)
o Update - The FIN 48 Subgroup held a conference call on March 5, 2008. A subgroup update report was provided.
· Ref # 2006-21: FSP FTB 85-4-1: Accounting for Life Settlement Contracts by Third-Party Investors
o Deferred - A comment letter from the ACLI was received in February 2008. This comment letter discussed accounting method, investment presentation and disclosure. The Working Group referred this comment letter to the Valuation of Securities Task Force.
· Ref #2007-26: FAS 156: Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140 (FAS 156)
o Exposed - The Working Group exposed Issue Paper 134-Servicing Assets/Liabilities, An Amendment of SSAP No. 91 for comment.
· Update on Fair Value Subgroup - (Ref #2007-24: Fair Value Measurements - FAS 157)
o Update - The Fair Value Subgroup conducted an initial conference call on February 11, 2008 and a subsequent conference call on March 3, 2008. A subgroup update report was provided.
· Update on Separate Account Subgroup (Ref #2007-27: Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts - SOP 03-1)
o Update - The Separate Account Subgroup conducted an initial conference call on February 6, 2008 and a subsequent conference call on March 6, 2008. A subgroup update report was provided.

Next, the Working Group reviewed the Maintenance Agenda - NONSUBSTANTIVE LISTING, ACTIVE REPORT, taking the following actions:
· Ref #2007-32: EITF 06-5: Accounting for Purchases of Life Insurance--Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin 85-4 (EITF 06-5)
o Deferred - The Working Group deferred exposure of modifications to SSAP No. 21-Other Admitted Assets (SSAP No. 21), paragraph 6, until after an additional referral from the Emerging Accounting Issues Working Group is discussed.
· Ref #2007-36: Goodwill in a Merged Subsidiary
o Exposed - The Working Group exposed nonsubstantive changes to SSAP 68-Business Combinations and Goodwill, paragraph 13, to clarify the guidance related to the treatment of goodwill for subsequent merger activity.

Next, the Working Group reviewed any other matters:
· Discussed a blanks proposal submitted to the Blanks Working Group on behalf of the American Health Insurance Plans, noting approval 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.

Comment deadline for issues newly exposed from the MEETING or re-exposed at the HEARING is April 30, 2008.