Deferred & Uncollected Premiums
 

Deferred & Uncollected premiums are reduced from the statutory reserve, and therefore nondeductible in the tax reserves. What is the treatment of these on the income side? They are also generally treated as not included in gross premiums as well as a deduction? I can't find consistent language on this and we acquired a company who is treating this differently than our parent company.

Generally speaking, there is no bottom-line effect from premium accrual items in statutory accounting. The premium recognized in the income statement is offset by an increase in reserve and the increase in loading on the premium receivable. In 2020, if you attended the Life Annual Statement session, please refer to Chapter 4 of the textbook for additional details and examples.

Lisa Mullen
Regulatory Education Director at Sovos

Yes, so in that sense once you've reduced your statutory reserve by the deferred and uncollected premiums, you should also have a M-adjustment to gross premiums for the D&U premiums? You would exclude from both places for taxable income?

Rebecca,

Chapter 4, pages 9 and 10 of our Life Annual Statement textbook illustrates an example of the accounting for the premium accrual items on the statutory income statement; showing there is no bottom line impact. The increase in premiums is offset by an increase in reserves and an increase in loading. Also, please refer to SSAP 51R Life Contracts as it provides the guidance on premium income recognition. As it relates to your tax question, I recommend you consult your tax department for the appropriate tax treatment.

Thank You,
Lisa Mullen
Regulatory Education Director at Sovos