SB304

Montana State Fund Financial Presentation

September 23, 2003

Definitions

   •GAAP – Generally Accepted Accounting Principles

•GASB – Governmental Accounting Standards Board (Governmental GAAP)

•SAP – Statutory Accounting Principles (an Other Comprehensive Basis of Accounting)

•NAIC – National Association of Insurance Commissioners

•RBC – Risk Based Capital

Accounting Differencesbetween GASB and NAIC-SAP

Financial Statements

  

Investments

GASB:

All Bonds and Stocks carried at Fair Market Value.

Unrealized gain/loss on Investments is included in Investment Income (Net Income impact).

NAIC:

Bonds carried at Book Value.

Stocks carried at Fair Market Value.

Unrealized gain/loss on Stocks is a direct adjustment to Surplus (no Net Income impact).

  

Accounting Differences

  

Accounting Differences

Non-Admitted Assets

GASB:

All assets carried on Balance Sheet at net realizable value.

NAIC:

Non-liquid assets are written off the Balance Sheet as a direct adjustment to Surplus. Examples of non-liquid assets are: Intangibles, majority of Fixed Assets, Notes Receivable, and A/R > 90 Days.

  

Accounting Differences

Deferred Acquisition Costs (DAC)

GASB:

Matching of expenses with revenues by recognizing acquisition expense over the period premiums are earned.

NAIC:

Recognizing the acquisition expense as it is incurred.

  

Reconciliation of Audited GASB Surplus

to Audited Statutory Surplus at June 30, 2002

Audited GASB Surplus $ 180,715

Reconciling Items:

Unrealized Gain on Bonds 2,107

Unrealized Loss on Equities (9,819)

Net Effect of Cumulative Change in

Non-Admitted Assets (5,047)

Net Income Difference between Methods (9,457)

Statutory Accounting Ending Surplus $ 158,499

Fiscal Year 2002New Fund

Audited NAIC

Financial Results

FY 2002 New Fund Balance Sheet – NAIC

NAIC (000’s)

Total Invested Assets $559,101

Other Assets $15,823

Total Assets $574,924

Losses and Loss Adjustment Expense $346,400

Other Liabilities $70,025

Total Liabilities $416,425

Surplus $158,499

FY 02 Income Statement Information

FY 2002 Income Statement Information

New Fund NAIC (000’s) FY01 FY02

Net Earned Premium $74,510 $92,972Investment Inc/Realized Gains $33,643 $33,464Loss & LAE $83,196 $99,583Underwriting Expense $12,957 $15,024Net Income before Dividends $11,582 $11,795Dividends $4,995 $4,001Net Income $6,587 $7,793Surplus $150,880 $158,499

Financials As of 3rd Quarter FY 2003

  Actuals Projected

Third Quarter Year-End(In 000's) March 31, 2003 June 30, 2003

Net Earned Premium $87,694 $111,000Loss & LAE ($100,342) ($132,303)Underwriting Expense ($11,212) ($18,543)Investment Income $21,883 $29,069Other Income/(Expense) ($461) ($655)

Net Income/(Loss) Before Dividends ($2,438) ($11,432)

Policyholder Dividends ($3,000) ($3,000)

Net Income/(Loss) After Dividend: ($5,438) ($14,432)

New Fund (NAIC) Financial Results

Financials As of 3rd Quarter FY 2003

  Actuals Projected

Third Quarter Year End(In 000's) March 31, 2003 June 30, 2003

Net Loss After Dividend ($5,438) ($14,432)

Surplus at Beginning of Year $158,499 $158,499

Unrealized Gain/(Loss) on Equities ($8,573) ($5,600)Change in Non Admitted Assets ($691) ($1,000)Aggregate Write In $0 ($10)

Surplus End of Period $143,797 $137,457

New Fund Surplus Changes

MSF by the Numbers

MSF Reserve to Surplus Ratio

2.79

2.092.6

2.27 2.26 2.182.16

0

0.5

1

1.5

2

2.5

3

1997 1998 1999 2000 2001 2002 2003 est.

Year

Fiscal Year 2002Old Fund

Audited GASB

Financial Results

FY 2002 Old Fund Balance Sheet

GASB (000’s)

Total Invested Assets $114,756Securities Lending Collateral $16,600 Other Assets $2,434Total Assets $133,790

Losses and Loss Adjustment Expense $90,900

Securities Lending Liability $16,600Other Liabilities $1,424Total Liabilities $108,924

Net Assets $24,866

Old Fund FASBFY 2002 Old Fund

Old Fund (000’s) FY01 FY02

OFLT Revenue $113 $28Investment / Other Income $13,047 $10,090Paid Benefits and Expenses $2,173 $626Net Income before Transfer to NF $10,987 $9,492

Net Assets before Transfer to NF $29,547 $32,274less: Transfer to NF ($6,765) ($7,408)

Net Assets after Transfer to NF $22,782 $24,866

FY 2003 Old Fund Balance Sheet

As of March 31, 2003 GASB (000’s)

Total Invested Assets $102,993Securities Lending Collateral $6,172 Other Assets $1,796Total Assets $110,961

Losses and Loss Adjustment Expense $80,140

Securities Lending Liability $6,172Other Liabilities $19,291Total Liabilities $105,603

Net Assets $5,358

Old Fund FASBFY 2003 Old Fund

Projected Operating ResultsOld Fund (000’s) FY 2003 Projected

OFLT Revenue $-Investment / Other Income $6,130Paid Benefits and Expenses ($4,447)Net Income before Transfer to NF $1,683

Net Assets before Transfer to NF $24,866less: Transfer to NF ($22,268)

Net Assets after Transfer to NF $4,281

FY03 Old Fund TransferFY 2003 Old Fund

Transfers

Transfers During FY 2003SB 19 4,000$

HB 363 5/29/2003 9,090 HB 363 6/16/2003 9,178

Total Transfers in FY 2003 22,268$