Some of the principal differences between statutory accounting practices and GAAP are described below.

Under GAAP, acquisition costs are capitalized and amortized over the life of the book of policies or contracts. These costs can be amortized in proportion to anticipated premiums (in the case of traditional life insurance) or in proportion to estimated gross profits (in the case of deposit-type contracts, such as universal life and deferred annuities). As discussed previously, under statutory accounting practices, these costs are expensed in the year incurred.

With GAAP, purchases of furniture, equipment and similar assets are treated as assets and are depreciated over their useful lives. Under statutory accounting practices, except for computer hardware and related operating systems, these purchases are charged directly against surplus in the year of purchase. The statutory accounting treatment of computer systems purchases is similar to the GAAP treatment.

Using statutory accounting practices, federal income taxes are charged as incurred (based on the net taxable income reported in the company�s federal income tax returns). Under GAAP, in addition to the charge for federal income taxes incurred, a net deferred-tax liability (or asset) is established to recognize the estimated future tax effects of temporary differences between the measurements of revenue and expenses and of assets and liabilities required under the applicable tax laws and the measurements of these items required under GAAP. A deferred-tax liability (or the increase in such a liability during a year) increases the federal tax charge against income; the reverse is true for a deferred-tax asset.

The effect of the deferred-tax approach is to adjust the federal tax charge in the GAAP financial statement so that it is consistent with the pretax revenue and expense and the asset and liability measurements reflected in the GAAP statement, rather than the comparable measures in the federal income tax return. As an example, if a company uses accelerated real estate depreciation for tax purposes but straight-line depreciation for GAAP statement purposes, a deferred-tax liability would be recorded for the excess of accelerated tax depreciation over financial reporting depreciation.

Valuation allowances are established under GAAP accounting to adjust asset values for improvements in value deemed to be other than temporary. These valuation allowances reflect the losses that company management expects to realize on the sale or other disposition of the asset, on foreclosure (in the case of mortgage loans), on the borrower�s failure to meet scheduled payments, or from shortfalls of cash flows (on investment real estate). The establishment of a valuation allowance or the increase in such an allowance is recorded as a charge to income.

Traditionally, valuation allowances that are part of specific categories of assets have not been established under statutory accounting practices. Instead, an asset valuation reserve is established as a liability. The purposes of the AVR are to absorb both realized and unrealized gains and losses on substantially all invested assets other than policy loans and to serve as a general reserve for possible asset losses. (Gains and losses that are due to changes in the level of interest rates since the date of the investment�s acquisition are captured in the interest maintenance reserve [IMR], a companion reserve to the AVR.) Each year the AVR is increased by formula-based contributions and by the realized and unrealized net capital gains on securities, mortgages, and real estate, and it is decreased by the capital losses on these investments. The formula contributions vary depending on the relationship of the AVR balance to the defined maximum level. If the reserve balance is small compared to the defined maximum, a larger annual contribution is required than if greater than the defined maximum.

Although statutory accounting does not call for the establishment of valuation allowances for individual investments or investment categories, there is a growing trend among companies to establish such allowances and to reduce the carrying values for those assets in their statutory financial statements. Any such reduction in asset value, which would be treated as an unrealized capital loss in statutory accounting, would reduce the company�s AVR and would have no current-year effect on the company�s earnings or surplus.

One final note on asset valuation: Responding to the savings and loan and bank failures of the late 1980s, in 1993 the SEC and FASB adopted a requirement (FASB 115) that, except in rare circumstances, securities be carried at market value. This requirement will apply only to GAAP financial statements. Insurers and other financial institutions are unhappy about the new standard because it will force an insurer�s surplus accounts, as the residual balancing account on the balance sheet, to become more volatile.

Policy reserves are computed differently under SAP and GAAP. Historically, statutory policy reserves were computed using interest rates, mortality tables, and valuation standards prescribed by state statutes and regulations, while GAAP policy reserves for insurance contracts were computed using interest, mortality, and persistency assumptions established by the company�s actuary at policy issue (usually based on the company�s own experience). More recent trends in statutory practices have expanded the range of acceptable interest and mortality assumptions, which in turn permit the application of somewhat more actuarial judgment. In addition, the statutory and GAAP approaches to accumulation-type products (for example, universal life and deferred annuities) tend to be similar.

Investment in a subsidiary is treated for statutory purposes as a common stock, but the value of the investment is usually based on cost adjustments for the life insurance company�s share of income or losses after the date of acquisition. (If the subsidiary is also an insurance company, a statutory measure of income or loss is used.) GAAP requires consolidation (inclusion of the subsidiary on a line-by-line basis) of all majority-owned subsidiaries unless control is likely to be temporary or does not rest with the majority owner. This GAAP accounting practice has the effect of increasing each applicable asset, liability, revenue, and expense measure in the life insurance company�s financial statements by the corresponding amounts from the operations of majority-owned subsidiaries.

The concept of nonadmitted assets applies only to the statutory balance sheet. Under the insurance laws or some state regulations, certain assets or portions thereof are considered to have no value for statutory reporting purposes and are reflected as a direct reduction of surplus. Some examples of nonadmitted assets are equipment and furniture (discussed above), prepaid expenses, agent debit balances, and travel advances.

Statutory accounting practices do not impose significant restraints on the establishment of reserves for specific concerns or contingencies, although sometimes such a reserve must be treated as a designated element of surplus, rather than as a liability. (This is consistent with the focus on achieving a conservative measurement of a company�s financial position.) In general, any losses that arise from establishing a special reserve or provision are charged directly against surplus under statutory accounting practices.

Under GAAP, accounting for such a loss contingency can occur only if it is probable that both an asset has been impaired (or a liability has been incurred) and the amount of the loss can be estimated with reasonable accuracy. In contrast to statutory accounting practices, these losses are charged against income in the current year, rather than being charged directly to shareholder equity, and they are reported as a reduction of an asset or as a liability.

The previous section covered the principal differences between statutory accounting practices and GAAP accounting practices. These are the substantive differences between the two different approaches to life insurance financial reporting. In addition to these, there are also differences in the form of presentation of statutory and GAAP financial statements.

The basic statutory financial statement (the so-called "blue blank") has the three basic statement forms (a balance sheet, an income statement, and a cash flow statement) plus a large set of supplementary exhibits, schedules, and notes. The form of this package, which is prescribed in precise detail by the NAIC, tends to be specific to life insurance companies, quite detailed, and resistant to change. (This resistance to change is evident in the new lines, new pages, and new exhibits or schedules that are added instead of reformatting or eliminating existing material.) The GAAP financial statement is also composed of the three basic statement forms, plus a set of explanatory notes. Compared with the blue blank, however, the form of this package is much less oriented to the life insurance industry, has much less detail, and permits more tailoring of the notes to a company's specific circumstances.

Each stock company prepares a statutory financial statement and a GAAP financial statement. A mutual company must prepare a statutory financial statement, and some also prepare a hybrid type of statement using the GAAP format and statutory numbers. This hybrid statement permits clearer public communication, and it is used, for example, in annual corporate reports, and sales prospectuses.

To highlight the differences between SAP and GAAP, the illustrative balance sheets in table 30-1 and the income statements in table 30-2 compare the GAAP numbers for a hypothetical company with the statutory numbers in a hybrid format. Each table is presented after a discussion of the main entries on each statement.

Table 30-1 presents illustrative GAAP and statutory (hybrid format) balance sheets for a hypothetical life insurance company. The text that follows describes each of the main entries on that balance sheet, along with the reasons for differences between the GAAP and statutory amounts.

The illustration in table 30-1 is for a large stock life insurance company without a downstream, majority-owned, noninsurance subsidiary. As explained earlier, under GAAP reporting, such a subsidiary would have to have been consolidated on a line-by-line basis, with a resulting distortion of the GAAP-statutory comparisons for the life insurance company being illustrated.

Fixed-maturity investments consist of publicly traded debt securities, privately placed debt securities, and redeemable preferred stock. Fixed maturities that are intended to be held to maturity are generally carried at amortized cost under GAAP. The difference, if any, between the original cost and the face amount and maturity value of the investment is reduced ratably over the life of the security. When a fixed-maturity investment is purchased at an amount above its face value, that premium is amortized to reduce the value to its final redemption value. The annual amortization of premium is recorded as a reduction of interest income. If a fixed-maturity investment is purchased at an amount below its face value, the discount is accrued each year by increasing the value of the security and the interest income.

Fixed maturities are carried in the annual statutory statements at values determined primarily by the NAIC Valuation of Securities manual; in GAAP statements fixed maturities are generally carried at amortized cost or, if in or near default, at market value. The GAAP carrying values of publicly traded securities are adjusted for sustained impairments in value by actual writedowns; privately traded debt securities generally reflect such adjustments by means of a valuation allowance, although the use of writedowns is also acceptable. The GAAP and statutory amounts may differ because of differences between the NAIC values and the company�s estimates of value, and either amount might be larger.

Equity securities consist primarily of common stocks and nonredeemable preferred stocks. Under statutory accounting, equity securities are reported at the values published in the NAIC Valuation of Securities manual, which is the NAIC market-value determination for each stock. For GAAP, common and nonredeemable preferred stocks are reported at market; temporary changes in those securities� market value are recognized as unrealized gains or losses in shareholder equity. Equity securities include investments in subsidiaries that, for statutory purposes, are usually reported on the equity basis (that is, cost adjusted for the company�s share of income or losses after the date of acquisition). GAAP requires consolidation (including the subsidiary on a line-by-line basis) of majority-owned subsidiaries. This has the effect for GAAP of increasing the corresponding assets, liabilities, revenues, and expense line items and reducing the equity securities amount. In general, except for companies with consolidated subsidiaries, the GAAP and statutory amounts for this line should be very close.

Mortgage loans on real estate are generally reported under SAP at the unpaid principal balances, net of unamortized premiums or discounts. Premium amortization or discount accrual on mortgage loans is spread over the life of the loan in a manner similar to that for fixed maturities. Under GAAP, mortgage loans are similarly reported, less an allowance for amounts estimated to be uncollectible. The change in this valuation allowance is reported as a realized investment gain or loss. In general, therefore, the GAAP measure of this asset will be less than the statutory measure.

Real estate reported in the statutory financial statements includes three categories: real estate occupied by the company, investment real estate, and real estate acquired to satisfy debt. Under SAP, real estate occupied by the insurer and investment real estate are carried at cost, less accumulated depreciation and encumbrances (mortgage or other debt related to the property). Real estate acquired when a mortgage loan is foreclosed (not repaid) is valued at the estimated fair value of the property at the time of the acquisition, but it is not valued at more than the unpaid balance of the foreclosed loan.

On a GAAP basis, real estate is classified as either an investment or as real estate used in the insurer�s operations (which is treated as property and equipment), depending on its primary use. Real estate investments are reported at cost, less accumulated depreciation and an allowance for impairment of value. Rent earned from real estate is recorded as investment income when earned and reported with related expenses on an accrual basis. Depreciation on real estate is recorded as part of the operating cost of the property. Real estate encumbrances are treated as liabilities.

If there are no encumbrances on owned real estate, the GAAP numbers will tend to be lower (because of the different treatment of real estate used in the company�s operations), but this difference may be more than offset by the amount of encumbrances.

Policy loans are loans collateralized by the cash values of the underlying policies and are stated at unpaid principal balances. Policy loans receive the same treatment in statutory and GAAP accounting.

Short-term investments are investments maturing within one year such as commercial paper and money market instruments. They are carried at amortized cost. Short-term investments receive the same treatment in statutory and GAAP accounting.

Other invested assets are invested assets not included in the aforementioned investment categories. The principal investments are real estate joint ventures and partnerships. These assets are valued on an equity basis (cost adjusted for the company�s share of income or losses after the date of acquisition). In the absence of real estate encumbrances, the GAAP and statutory amounts should be similar.

Cash and cash equivalents in statutory accounting are limited to monetary items, such as cash, demand deposits, and savings deposits. In GAAP, cash and cash equivalents include monetary items and Treasury bills, commercial paper, money market funds, and federal funds sold. (Federal funds are commercial bank deposits at Federal Reserve Banks. Any excess reserve that one bank maintains on deposit can be lent on an overnight basis to another member bank.) Cash and cash equivalents are valued similarly under statutory and GAAP accounting. The GAAP amount will be larger than the statutory amount if the company holds any of the types of investments treated as cash and cash equivalents by GAAP but not by SAP.

Deferred policy acquisition costs are capitalized and amortized for GAAP reporting. Under statutory accounting, these expenses are charged against income in the year in which they are incurred.

Accrued investment income is income earned but not yet received on investments. It includes interest income on bonds, mortgage loans, policy loans, short-term investments, and dividends declared on common and preferred stock investments. Accrued investment income is treated similarly under statutory and GAAP accounting, and therefore there should be no material differences in this asset amount under the two accounting methods.

Premiums and other receivables are principally premiums due from policyowners but not yet paid by the balance sheet date. In the case of statutory accounting, this entry also includes the net premiums (the premiums determined without provision for expenses) on traditional life insurance policies and annuity contracts that are due between the statement date and the next policy anniversary. This modification of due premium is necessary because the statutory reserves on these policies are determined on the assumption that the full net annual premium is paid on the policy anniversary. In addition, this line includes fees and policy charges due under universal life and annuity contracts. Because statutory accounting includes an expanded definition of due premiums (to balance the traditional statutory reserve calculation methodology), the statutory amount will be considerably greater than the GAAP amount. (For other types of businesses, statutory and GAAP financial treatment is similar.)

Property and equipment is property owned and occupied by the company, leasehold improvements, furniture and fixtures, and computer equipment. Under GAAP accounting, purchases of property and equipment are treated as assets and are depreciated over their useful lives. Under statutory accounting, except for computer systems, these expenditures are charged directly against surplus in the year of purchase. The statutory accounting treatment for computer systems is similar to the GAAP treatment. Typically, the GAAP amount for property and equipment is much larger than the statutory amount.

Other assets are miscellaneous assets that don�t fall into the categories discussed above. These assets have generally comparable accounting treatments. Therefore the amounts shown in the statutory and GAAP financial reports should be similar if the same assets are used in both reports. There may be some differences, however, because of different definitions for some of the balance sheet entries discussed above. For example, assets under corporate-owned life insurance would be included in this item in statutory reporting but might be classified as investment assets in GAAP.

Separate account assets are segregated from those of the general account for the purpose of funding variable life insurance, variable annuities, pensions, and other benefits. The assets of separate accounts are similar to those of the insurer and may consist of fixed maturities, stocks, short-term investments, mortgages, and real estate. The investments of separate accounts are usually valued based on fair market value.

Except for real estate encumbrances, which are netted against the related real estate for statutory reporting and treated as a liability for GAAP reporting, separate account assets receive similar treatment in statutory and GAAP reporting. Therefore these amounts should be the same unless the company has a separate account with leveraged real estate. In that case the GAAP amount will be greater by the amount of the outstanding debt.

Policyowners� account balances and future policy benefits are an insurance company�s principal liabilities and represent the reserves established to provide future benefits that will become payable under the provisions of the insurance policies and annuity contracts in force. The GAAP reserves and account balances will ordinarily exceed comparable statutory amounts.

Other policyowners� funds, for statutory reporting, include amounts deposited and accumulated for guaranteed interest contracts, dividends left on deposit (dividend accumulations), and other items of a similar nature. Certain policyowner obligations that are treated as other policyowner funds for statutory reporting are included in policyowner account balances for GAAP, and therefore the GAAP amount for this item will usually be less than the statutory amount. For example, the liability for supplementary contracts without life contingencies is included on this line for statutory reporting and in policyowners� account balances for GAAP reporting.

Policyowners� dividends payable are the company�s liability for dividends due but not paid prior to the end of the accounting period, plus a provision for the accrued portion of dividends that will become payable in the following year. For statutory reporting on individual policies, the accrued portion is the full amount of dividends that will be payable in the following calendar year on policies in force at the end of the year. For GAAP reporting on individual policies, the accrued amount is the portion of the dividend that would have accrued since the last policy anniversary if the dividend had accrued evenly over the policy year. (The remainder of the liability is, in effect, a part of the GAAP reserve for future policy benefits.) In these circumstances, the GAAP amount for this item will be less than the statutory amount. For group insurance contracts, the accrued portion of the dividend under both GAAP and statutory reporting is determined for the elapsed portion of the year and is based on the experience of the period.

Short-term and long-term debt represent contractual obligations to pay money on demand or on a fixed or determinable date. For statutory reporting, long-term debt, such as mortgages and other debts on real property, is netted against the related asset. GAAP reports such debt as a liability. Accordingly, the GAAP amount will usually be larger than the statutory amount.

Federal income taxes payable have a current component and, for GAAP only, a deferred component. Current federal income taxes payable are accrued taxes as of the statement date. Deferred taxes, which apply only to GAAP reporting, were discussed in detail earlier in this chapter. Statutory and GAAP reporting methods for current taxes are similar; the only difference should be in reporting the deferred-tax item under GAAP.

Other liabilities represent liabilities that are not related to the policyowners, such as general expenses due and accrued, commissions due and accrued, and employee and agent postretirement benefit liabilities. GAAP and SAP treat amounts due and accrued and qualified pension plan liabilities the same way. With respect to other postretirement benefits (for example, pension benefits in excess of the federal qualified plan limits and postretirement life and health insurance benefits), there is a difference between GAAP and statutory reporting. Moreover, in some cases, the statutory reporting is not well defined. The tendency in statutory reporting is to move toward the GAAP model of earlier recognition of these costs. Until this happens, however, the GAAP amount for this liability will usually exceed the statutory amount.

Separate account liabilities consist of the reserves established for the variable life insurance, variable annuities, pensions, and other benefits funded through separate accounts. The reserve amounts vary directly with the investment performance of the separate account assets. The separate account liabilities will generally be smaller than the separate account assets, usually an indication that a portion of the company�s surplus is invested in these accounts. The measure of the separate account liabilities under GAAP reporting is larger than the measure under statutory reporting.

The asset valuation reserve is a general purpose investment reserve that is unique to statutory financial reporting. The purpose and basis of this reserve was described earlier.

Commitments and contingencies are items that are not recorded in the financial statements but that do have a risk of loss. A loss contingency may be recognized through a charge to income. Disclosure of the accrual of and sometimes the amount of the loss contingency is necessary. In cases where no amount has been charged to income or the exposure to loss exceeds the amount accrued, additional disclosure of the contingency may be necessary. Commitments and contingencies, including such items as future commitments to lend funds and financial guarantees, are disclosed in the footnotes of both GAAP and statutory financial statements.

Shareholders� equity is common stock, capital in excess of par, and retained earnings/surplus. Common stock represents the par value of the common stock issued; capital in excess of par is the amount in excess of the par value paid for the stock when the stock was first issued to owners or investors; retained earnings/surplus is the company�s accumulated net income or loss, less any shareholder dividends paid. The net unrealized investment gains entry under GAAP represent the unrealized gains (or losses) on certain equity securities that have not been reflected in the financial statements. The difference between GAAP and statutory total shareholder equity amounts is the net effect of all of the differences between these two sets of accounting practices.

Table 30-2 shows statutory and GAAP income statements for the same hypothetical company. The following are descriptions of the several lines of the illustrative income statements and the reasons for any differences between the GAAP and statutory amounts.

Premiums are defined very differently in statutory and GAAP reporting. Under statutory reporting, both premiums received under traditional life and health insurance policies and deposits under universal life and annuity accumulation contracts are classified as premiums. Under GAAP reporting, only the premiums associated with traditional life and health policies are classified as premiums; the other premiums are treated like bank deposits�that is, there is no income amount recorded when the deposits are received or any charge for deposits withdrawn. Under both statutory and GAAP reporting, premium amounts include payments on both new and renewed business, and these amounts are reduced by premiums paid on reinsurance purchased (ceded). The statutory amount will be larger than the GAAP amount primarily because of this definitional difference and secondarily because the total premiums for traditional life insurance are somewhat greater. (See discussion above for balance sheet item "premiums and other receivables.")

Universal life and investment-type product policy fee income, a GAAP-only concept, represents the amount of fee income for the period related to these types of products. This fee income includes premium-based charges, mortality charges and withdrawal charges on surrender of policies or contracts. This item arises from the basic deposit-type treatment of these contracts under GAAP.

Investment income, net, is the largest component of revenues under GAAP and the next-to-the-largest component under statutory accounting. The sources of investment income are interest income, dividends, and other income earned on investments. Investment income is presented net�that is, expenses related to the investment are subtracted from the related income. On a statutory basis, real estate is reported net of encumbrances; therefore the interest expense on such debt reduces statutory investment income. Similarly, the effect of consolidating certain investments on a line-by-line basis for GAAP reporting versus the equity presentation for SAP will create additional differences between GAAP and statutory investment income.

Investment gains (losses), net, are measured differently under statutory and GAAP reporting. With respect to the gain (loss) on investments sold or otherwise disposed of during the year, the accounting treatment is similar under statutory and GAAP reporting, although the numbers may differ if the assets sold or disposed of have specific valuation allowances under GAAP. Realized and unrealized gains (losses) on investments held by the company are included in this item for statutory reporting. Under GAAP reporting, unrealized gains (losses) are not included in this item but instead are credited (charged) directly to capital. In addition, in GAAP reporting, provisions for, or increases in, valuation allowances and writedowns on invested assets are included in realized gains and losses.

Commissions, fees, and other income are miscellaneous sources of income not included in the above items. They can be created the same way under GAAP and SAP. When there are differences, GAAP tries to match them with the associated coverage period whereas SAP tries to match them with the associated premium-paying period.

Policyowner benefits paid or provided for represent the amounts paid or set aside for death benefits, annuity benefits, surrender benefits, and matured endowments. These benefits are reported on an incurred basis under both SAP and GAAP. They include benefit payments due but unpaid at the balance sheet date, reported claims for which payment has been delayed pending completion of processing, claims resisted, and an estimate of the claims incurred during the year that had not been reported to the company by the balance sheet date. This item also includes the increases in reserves for policyowner benefits (for statutory reporting) and the increases in reserves for traditional life insurance policies (for GAAP reporting). Under GAAP, surrenders of accumulation-type products are treated as a return of a deposit and not included in this item. Accordingly, the GAAP amount should be less than the statutory amount.

Interest credited to policyowners� account balances is the amount of interest credited to policyowner account balances for accumulation-type products. It is recognized separately only for GAAP reporting.

Allocation to (from) AVR is the current period�s charge (credit) for the net increase (decrease) during the accounting period in the asset valuation reserve for fixed maturities, common and preferred stock, mortgage loans, real estate, and joint ventures. (See earlier discussion of the AVR.) This applies only to statutory reporting.

Policyowner dividends are the charges for dividends to policyowners for the accounting period. This entry includes dividends paid in cash, as well as dividends applied to pay premiums or to increase policy values. Under statutory accounting, the charge is determined as the apportionment for dividends to be paid during the following year, adjusted for the difference between the dividends paid during the year and the apportionment at the end of the preceding year. Under GAAP accounting, the charge is the amount of dividends becoming due and payable during the current accounting period plus (less) the increase (decrease) in year-end dividend accruals. The statutory and GAAP amounts should not differ materially.

Other operating costs and expenses include operating and other pretax costs that do not fall into the earlier categories. Under statutory reporting, this item is composed principally of operating expenses. Under GAAP it also includes the interest on encumbrances. Operating expenses can be influenced to some extent by either shortening or lengthening the period over which acquisition costs are recovered. By increasing the length of the acquisition cost deferral period, an insurer can lower the operating expenses and consequently increase the reported gain from operations. Similarly, shortening the deferral period for acquisition costs will usually increase the operating costs and reduce gains from operations.

Federal income tax expense is the charge against earnings for federal income taxes. In statutory reporting, this is basically the charge for taxes payable on the operations during the accounting period. In GAAP reporting, the amount of this item is essentially the federal tax charge that would have been incurred on the amount of GAAP pretax income.

Like the income statement, the cash flow statement presents the several elements of the company�s cash flow for the fiscal year ending on the statement date. The GAAP (and hybrid statutory) cash flow statement divides the life insurance company�s cash flow into three parts:

The cash flow statement is very important for nonfinancial businesses because cash usually represents a scarce resource in business operations and investment. (Business growth usually entails growth of inventories and receivables with commensurate cash requirements.) For life insurance companies, the cash flow statement has traditionally not been of great importance because the normal operations of these companies typically produce strong, positive cash flows. In the early 1990s, interest in life insurance companies� liquidity and in cash flow statements was heightened by the failures of two major life companies that were attributed largely to policyowner "cash runs" that could not be satisfied by these companies� (relatively inflexible) portfolios of invested assets.

The cash flow statement in the blue blank statutory accounting form does not follow the three-part breakdown of the GAAP (and hybrid statutory) report. Rather, it resembles an income statement form but with each line item measured on a cash basis.

In addition to the three standard statement forms, each audited GAAP statement (and each hybrid statement), contains a set of notes that enhance or explain the statements in general or that provide additional data or explanations for specific line items. The statutory blue blank has a more abbreviated set of notes but contains several exhibits and many supporting schedules. These notes, exhibits, and schedules support or expand on specific entries in the three basic blue blank financial report forms and provide additional operational information.

The supplementary information in both the GAAP (and hybrid) financial statements and the statutory blue blank includes the following: