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Most if not all life and health insurers required to do so appear to have met a U.S. Securities and Exchange Commission deadline to file financial statements that had been certified by the companies top executive and financial officers.

The SEC requires these sworn statements from certain publicly traded companies with revenues over $1.2 billion during the last fiscal year.

Of 32 life and health insurers the SEC required to meet the Aug. 14 deadline for filing certified statements, 25 at press time had either filed statements certified by both their chief executive and chief financial officers or said they were about to do so.

Of the remainder, it could not be immediately confirmed that they had complied. It was possible for firms that had not met the deadline to ask for an extension.

In addition, a number of insurers not required to file certified statements had done so, apparently to reassure investors who have been spooked by recent corporate bookkeeping scandals.

In another development aimed at reassuring wary investors, a number of life carriers and other financial service companies recently stated that they will soon begin to account for stock options granted to their executives as an expense rather than a capitalized item on their financial statements.

This is a move long endorsed by the Financial Accounting Standards Board, a group that establishes accounting principles for the nations businesses.

On Aug. 13, a trade association representing 18 top U.S. financial firms stated that most of its members would begin to treat stock options as a cost beginning in January 2003, the date set by FASB.

The group, the Financial Services Forum in Washington, says it looks forward to “working with the accounting community and regulators to develop a uniform and accurate way to determine the value of stock options.”

Among those endorsing the statement were the CEOs of Citigroup Inc., New York, parent of Travelers Life and Annuity and Primerica Financial Services; American Express Inc., Minneapolis, parent of IDS Life Insurance Company; MetLife Inc., New York; Prudential Financial, Newark, N.J.; American International Group Inc., New York; and Allstate Insurance Company, Northbook, Ill.

Other companies say they have yet to decide whether or not to expense stock options, although some they have disclosed the information in financial statement footnotes.

Deborah New, a spokeswoman for Anthem Inc., Indianapolis, says her company has no plans to expense stock options formally but does intend to reveal the information voluntarily.

As with a number of companies, executives of Anthem expressed reservations about reporting options as a cost rather than a capital outlay because of the potential for inconsistencies among companies, New notes.

“Moving to a standard for expensing stock options for all companies would be dependent on how consistent the calculation is done,” she explains. “We would like a consistent methodology, so we know we are comparing apples to apples.”

Larry C. Glasscock, president and CEO of Anthem, and Michael L. Smith, executive vice president and CFO, filed their certified statement on Aug. 6, well ahead of most other financial firms.

As did a number of CEOs and CFOs, Glasscock and Smith took precautions to ensure the statements they certified were true and accurate to the best of their knowledge, says New.

“Some of the folks who report to the CEO and CFO did sign statements” certifying to the accuracy of their own figures submitted to the top executives, New says. “Meetings were held between the CEO and CFO and our audit committee and operating committee.”

Aetna, which filed Aug. 2 and was also among the earliest companies to do so, did not find it especially hard to meet the deadline, says spokesman Roy Clason. “We were prepared.”

Anne Watson, a spokeswoman for American Financial Group Inc., Cincinnati, said the companys executives are “studying” the stock options question. “Trying to estimate expenses is very subjective,” she notes, “so we will see where it goes.”

Meanwhile, the company disclosed in its most recent 10K form, certified by its top executives Aug. 13, that expensing stock options would have reduced income by $2.7 million in 2001, or about 5 cents per share.

Art Ryan, chairman and CEO of Prudential, also asked heads of divisions to certify their financial data before signing the certification to the SEC, says company spokesman Robert deFilippo.

“He says he did that not to spread accountability, which he understands is his responsibility, but because he wanted to make the point that he relies on everyone to do the right thing,” deFilippo says.

Top executives of StanCorp Financial Group Inc., Portland, Ore., asked for “some additional certifying” by those who report to them, says company public relations specialist Tiana Tozer. “But largely we had everything we needed in place to be comfortable with our certified financial statements.”

As for expensing options, “we are discussing this but have not made any decision for accounting or disclosing stock options at this time,” Tozer adds.

A spokesman for the Phoenix Companies, Hartford, says the company still is reporting stock options as capital transaction, “but we are disclosing them in our 10Q as if they were expenses.”

The company has yet to decide on whether to conform to FASBs recommendation in the future. “Were just monitoring developments for now,” the spokesman says.

A spokeswoman for the Hartford Financial Services Group notes the companys certified statement was filed on Aug. 12. As for expensing options, the company was “evaluating that but has not yet decided,” she says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, August 19, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.