Spring 2019 Q10
Honestly, I'm pretty lost on the material at the moment, so please bear with me if there are simple answers to this.
1) I was confused at first because I thought real estate would be non-admitted because they're illiquid (as sort of demonstrated in the examiner's report for part (b)). I suppose the NAIC might just define real estate as admitted but not liquid, though, for some reason?
2) I was also confused why deferred agent balances were considered admitted and when they would be considered non-admitted. I think Odomirok pg. 29 answered the first part (I didn't really know the definition of deferred nor when a balance would be admitted/not), but I'm not sure how a deferred balance could be non-admitted (which seems possible based on Table 2 on pg. 25), because the definition seems to imply that the payment would be 3 months late, but deferred means the due date still hasn't happened yet.
Comments
Actually, maybe the definition of admitted vs. non-admitted on pg. 26 clears things up a bit, as real estate can eventually be sold to meet liabilities, even if it takes time? But then furniture maybe could too..
I think I'll just have to take some things like this as they are rather than trying to understand everything. Spent a bit too long on this. But thinking things through like this has helped me out (so there may be more posts like this in the future, sorry), and it's helped me to look at the source material and see the usefulness of it for the first time.
Yes, for high-ranked topics, it's often helpful to consult the source material. I didn't put every little detail in the wiki (otherwise, I'd just be essentially copying the source text into the wiki.) I focus on what is most likely to be tested, but to fill in fine details in background knowledge, the source text is the place to go.
As you mentioned, it's also good to avoid getting bogged down in one particular reading. There are some accounting facts you just have to accept without getting too hung up on the reasoning behind them. While it's generally good to understand the underlying reasons for things, you have to use judgment in how long to spend on each individual topic because there's so much to learn. Writing out your thoughts in the forum is a good way to think through things. (Plus, we're not accountants so we don't necessarily need to go as deeply into this as an accountant would.)
Would you like me to provide an answer your original question? Or are you satisfied with what you found in the source text?
That's true, thank you. I would appreciate answers if you have them, but no worries if not. I'm slightly more interested in my second question and can accept that the 1st question is just something like "it is what it is".
On your question 2, "deferred" here means "due, but not yet received." If the agents' balance is more than 90 days deferred, then it is non-admitted.
For part b, I understand that adjusted liabilities=total liabilities-deferred agents' balances. However, in part a. deferred agents' balances is not included as part of the 2017 statutory liabilities calculation, so I am confused as to why deferred agents' balances needs to be subtracted from 2017 statutory liabilities if it was never part of the liability calculation to begin with. Can someone help explain this?
Deferred agents' balances are premium owed to the company, but not yet remitted by its agents. The company (arguably) will not be liable for loss and expense arising from this premium, at yearend. The premium is probably larger than the loss and expense it portends. But IRIS 9 just takes a shortcut and reduces liability by the full amount of unremitted premium, leaving the liabilities specifically at the yearend point.