Survey shows analysts’ expectations about financials after LDTI

KPMG surveyed analysts from insurance industry research firms, rating agencies, and investment banks to understand what information they want from life insurers, in particular what information they need in order to make specific comparisons of the performance of companies within the industry. The much-debated and unquestionably complex new standard revises accounting rules under US generally accepted accounting principles (US GAAP) for a host of long-duration insurance contracts, such as traditional and limited-pay life policies, fixed and variable annuities, disability-income polices, and more.

Key findings:

• Most of all, analysts want better data to compare company performance
• Variation in approaches with respect to discount rates  were the greatest concern for comparability
• Analysts want life insurers to do more to educate them about the impact of LDTI

The road to LDTI implementation will be long, the costs will be significant, and the standard will present complex challenges for insurers. Nevertheless, we believe the rule also presents opportunities for providing financial statement us­ers with more useful information about the amount, timing, and uncertainty of cash flows related to long-duration contracts as insurers will be required to review and revise assumptions and calculations relating to such financial measures as cash flows, the measurement and impacts of certain risks and benefits, and enhancement of certain disclosures.