Actuarial Notes

Property/Casualty Annual Statement Instructions: Insurance Expense Exhibit

By National Association of Insurance Commissioners · 2025

Study guide: Exam 6U

The instructions in the NAIC's Property/Casualty Annual Statement Instructions for the Insurance Expense Exhibit (IEE), which all property/casualty insurers prepare and file each year. The exhibit allocates expenses (Part I), allocates elements of total profit or loss to lines of business net of reinsurance (Part II) and allocates elements of profit or loss to lines of business on a direct basis (Part III), to help users evaluate the profitability of a reporting entity's operations by line of business.

On the syllabus

  • Exam 6U — objective C3; NAIC 2025 Annual Statement Instructions, Insurance Expense Exhibit, pp. 730-736 (as the content outline states it)

Insurance Expense Exhibit

  • The exhibit is prepared by all property/casualty insurers and filed no later than April 1 of each year; the regulators use aggregate data to develop elements of profitability of the industry by line of business and by state.
  • General
    • Each individual reporting entity, whether or not a member of a group, completes the exhibit, and entities that file a Combined Annual Statement also complete a Combined IEE.
    • Amounts in Parts I, II and III are reported to the nearest thousand and ratios to the nearest fourth place as percentages.
    • Expense groups and the allocation of expenses to lines of business follow the Uniform Classification of Expenses in the Appendix of the Annual Statement Instructions.
  • Interrogatories
    • Interrogatory 3 is used to explain any item requiring special comment and to disclose the method of allocation for any item in Parts II and III not allocated by means defined in the Uniform Classification of Expenses.

Part I Allocation to Expense Groups

  • Part I allocates Other Underwriting Expenses in the annual statement into Acquisition, Field Supervision and Collection Expenses; General Expenses; and Taxes, Licenses, and Fees.
  • Its data are taken from or reconciled to Part 3 of the Underwriting and Investment Exhibit.

Part II Allocation to Lines of Business Net of Reinsurance

  • Part II allocates elements of total profit or loss, net of reinsurance, to lines of business, with lines of business displayed vertically and income and expense categories horizontally.
  • Where amounts cannot be allocated directly and accurately, the methods in the Uniform Classification of Expenses are used, and a reasonable method is applied and disclosed in Interrogatory 3 where those instructions define none.
  • Prescribed formulae allocate investment gain to lines of business as Investment Gain on Funds Attributable to Insurance Transactions (Column 35) and Investment Gain Attributable to Capital and Surplus (Column 39), built from mean net loss and loss adjustment expense reserves, mean net unearned premium reserves, net acquisition expenses, mean agents' balances, mean ceded reinsurance premiums payable and mean surplus.

Part III Allocation to Lines of Direct Business Written

  • Part III allocates elements of profit or loss on a direct basis to lines of business and simulates the results without the effect of reinsurance.
  • Direct expense items are related to the direct written premium reported on the Exhibit of Premiums and Losses, Statutory Page 14, and companies in a pooling agreement relate direct expense items to their own direct written premiums.

Sources

  • 2026 Property/Casualty Annual Statement Instructions (NAIC), Insurance Expense Exhibit — the document: the Insurance Expense Exhibit section's introduction, general instructions, interrogatories and Parts I to III (printed pp. 753-759 of the file the NAIC serves at this address, 936 pages, sha256 89c17012b36d516837c11538214c91302d13a9b25b2e22e41cd7961bc7fa2a08); that file is the 2026 edition (marked © 1984-2026), not the 2025 edition the syllabus prescribes, which could not be reached, so wording and page numbers in the 2025 edition may differ from what is listed here
  • CAS Exam 6U Content Outline, Fall 2026 — the citation (2025 Annual Statement Instructions, Insurance Expense Exhibit, pp. 730-736) and the objective it serves