NAIC's Assets Drop on Investment Decline

The value of the National Association of Insurance Commissioners' assets fell by $5.6 million, or 7.7%, from year-end 2007 to year-end 2008, according to the association's annual statement, with a decline in investments accounting for most of the drop.

The NAIC had $67.3 million in assets at the end of 2008, compared with $72.9 million at 2007's close, according to an independent audit conducted by Mayer Hoffman McCann P.C. of Leawood, Kan. and included in the annual report.

Investments fell to $38.9 million from $43.6 million a 10.8% slide. Accounts receivable, less an allowance for doubtful accounts, fell $326,497. The net value of property and equipment dropped from $13.1 million to $10.9 million.

Over the same period, the NAIC's total expenses rose 3.1%, to $66.8 million. Total revenues also grew, by 4% to $68.3 million.

The NAIC did not immediately respond to messages seeking comment.

Bill Boyd, financial regulation manager for the National Association of Mutual Insurance Companies, said the NAIC needs to do a better job of reducing its operating expenses and conserving capital, much as insurance companies have had to do in the current economic climate.

"That a large NAIC delegation has just been in Switzerland may suggest that more concentration on thrift is needed," Boyd said. "The NAIC has a reserve that is very large in comparison to its annual budget, and it is appropriate that this be preserved by economy in travel and expenses."

In December, the NAIC approved a $73.1 million budget for 2009. The budget anticipates $73.1 million in revenues, a 7.1% increase, and $70.7 million in expenses, 6% higher than in 2008. It calls for a 74.4% liquid reserve ratio, up from 67.6% for the end of 2008 (BestWire, Dec. 8, 2008).

Insurance industry representatives criticized that budget as too spending-heavy at a time when insurance companies have had to make cutbacks. They particularly decried a 22.7% rise in the travel budget and funding for international staff and services.

NAIC leaders defended the budget, saying the increase is needed to fund member services and state participation in NAIC activities. Commissioners have said the NAIC provides important statistical and technology-based services that would otherwise be cost-prohibitive to individual states.

(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com)

Copyright (C) 2009 by A. M. Best Company, Inc.