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Balance |
Contract |
Shadow required under the new guidance? |
Reason |
Deferred acquisition costs (DAC)
|
Universal-life type contracts
Long-duration participating products
|
No
No
|
DAC is no longer amortized based on profit emergence
|
Deferred sales inducements (DSI) amortization
|
Universal-life type contracts
Certain investment contracts
|
No
No
|
DAC (and therefore DSI) is no longer amortized based on profit emergence
|
Unearned revenue liability (URR) amortization
|
Universal life-type contracts
|
No
|
DAC (and therefore URR) is no longer amortized based on profit emergence
|
Other balances amortized on a basis consistent with the new DAC amortization model (e.g., present value of future profits (PVFP) and cost of reinsurance)
|
Universal-life type contracts
Long-duration participating contracts
|
No
No
|
DAC (and therefore these other balances amortized on a basis consistent with DAC) are no longer amortized based on profit emergence
|
Other balances not amortized on a basis consistent with the new DAC amortization model (e.g., PVFP and cost of reinsurance)
|
Universal-life type contracts
Long-duration participating contracts
|
Depends
Depends
|
If the policy election is to amortize balances based on profit emergence, “shadow” adjustments would still be required
|
PVFP loss recognition testing
|
Nonparticipating traditional and limited-payment contracts
|
Depends
|
The loss recognition test for the PVFP associated liability for future policy benefits will have a potential shadow adjustment only to the extent that investment yields continue to be used to project future cash flows available in the recovery analysis
|
Premium deficiency loss recognition testing
|
Nonparticipating traditional and limited-payment contracts
|
No
|
The loss recognition test for the liability for future policy benefits is based on a net premium ratio cap and no longer incorporates consideration of investment yield
|
Certain additional liabilities for annuitization, death or other insurance benefits (formerly SOP 03-1 liabilities) that are MRBs under ASU 2018-12
|
Guaranteed minimum benefits in addition to account balance in variable annuities, general account annuities, and other products
|
No
|
These features are now required to be carried at fair value rather than measured using a benefit ratio that references investment margins
|
Terminal dividends
|
Certain participating life insurance contracts
|
No
|
Terminal dividends are no longer amortized based on estimated gross margins
|
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