Notes to financial statements
Note 16: Statutory Accounting Practices
Our underwriting operations are required to file financial statements with state and foreign regulatory authorities. The accounting principles used to prepare these statutory financial statements follow prescribed or permitted accounting principles, which differ from GAAP. Prescribed statutory accounting practices include state laws, regulations and general administrative rules issued by the state of domicile as well as a variety of publications and manuals of the National Association of Insurance Commissioners. Permitted statutory accounting practices encompass all accounting practices not so prescribed, but allowed by the state of domicile.
At Dec. 31, 1998 and 1997, permitted property-liability transactions related to the disposal of certain real property acquired as security increased statutory surplus by $12 million and $20 million, respectively, over what it would have been had prescribed accounting practices been followed.At Dec. 31, 1998 and 1997, permitted property-liability transactions related to the discounting of certain assumed reinsurance contracts increased statutory surplus by $33.7 million and $37.6 million, respectively. At Dec. 31, 1998 and 1997, permitted life insurance transactions related to the release of capital gains related to a coinsurance contract and the related establishment of a voluntary investment reserve increased statutory surplus by $18 million and $23 million, respectively.
On a statutory accounting basis, our property-liability underwriting operations reported net income of $196.4 million in 1998, $1.15 billion in 1997 and $759.2 million in 1996. Our life insurance operations reported statutory net income of $24.1 million, $21.0 million and $28.8 million in 1998, 1997 and 1996, respectively. Statutory surplus (shareholder's equity) of our property-liability underwriting operations was $4.7 billion and $4.8 billion as of Dec. 31, 1998 and 1997, respectively. Statutory surplus of our life insurance operation was $201 million and $195 million as of Dec. 31, 1998 and 1997, respectively.
