J.P.摩根-美股保险行业-LDTI对保险公司有负面的影响，但较高的费率降低了影响-2022.5.31-25页.docx

Life Insurance Accounting Update LDTI has Negative Implications for Insurers, but Higher Rates Reduce Impact This is a follow up to a series of reports we have published on upcoming changes in accounting for long duration-insurance contracts. ASU 2018-12 (or LDTI), the FASB’s new accounting rule for long-duration products, becomes effective on 1/1/23 and will drive changes in GAAP financial statements as well as in metrics used by investors in analyzing life insurance stocks. As with most accounting updates, the changes do not affect cash flows or underlying economics. Still, we expect the new rule to reduce book values and modestly increase volatility in short-term earnings. Conversely, the rule should make total book values less volatile and more reflective of reality as well as reduce the frequency of large charges. ASU 2018-12 has negative implications for insurers’ financial statements but is helpful to investors. We view the new standard positively overall as it improves the accuracy and timeliness of balance sheet assumptions, enhances comparability among firms, simplifies some complex aspects of current GAAP (especially DAC amortization), and significantly expands disclosure. Requiring reserves to be valued using current interest rates (with marks reflected in AOCI) would better match accounting for liabilities and assets and make total book values a more useful valuation metric versus the current practice of relying primarily on BVs ex. AOCI. Changes in GAAP accounting could also cause investors to rely more on cash flows. Provisions on liability measurement and standardized discount rate to affect traditional liabilities. Unlike current GAAP, whereby assumptions are locked in unless there is a premium deficiency, insurers will have to unlock benefit reserves more regularly and use standard interest rates (widely understood to be yields on ‘A’ corporate bonds) to discount various liabilities. Changes in assumptions and future cash flows will be reported as