Statutory Earnings
Revenue based on conservative reserve requirements of various states. Statutory earnings do not meet generally accepted accounting principles (GAAP). A role of state regulation is to make certain that insurers have enough money set aside in statutory reserves to pay all future claims and that the company will remain solvent. For this reason, regulators take a conservative approach to setting reserve requirements. But because an increase in reserves translates into lower earnings for a stock insurer, investors, and securities analysts argue that they are not helpful in gauging the health of a company for investment purposes. Therefore, insurers calculate statutory earnings for regulators and another set of earnings, based on natural reserves, for investors.
Popular Insurance Terms
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Top state regulator of the insurance business who is either elected to office or appointed by a state to safeguard the interests of policyowners. ...
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Type of policy with premiums that are fully paid up within a stated period. For example, a 20-payment life insurance policy has 20 annual premium payments, with no further premiums to be ...
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