(a) The annual audited financial report shall
reflect the financial condition of the insurer as of the end of the most recent
calendar year and the results of its operations, cash flows and changes in
capital and surplus for the year then ended in conformity with statutory
accounting practices prescribed, or otherwise permitted, by the Department.
Statutory accounting practices are those practices and procedures prescribed by
the Accounting Practices and Procedures Manuals published by the National
Association of Insurance Commissioners, or as otherwise prescribed or provided
by specific statutes, regulations, orders or rulings of the Commonwealth or the
Department.
(b) The annual
audited
financial report must, at a minimum, include the following:
(1) Financial statements that present in a
comparable manner, as of the end of the current and the preceding calendar
year, the financial condition of the insurer, including the following:
(i) Statement of admitted assets,
liabilities, capital and surplus.
(ii) Statement of operations.
(iii) Statement of cash flows.
(iv) Statement of changes in capital and
surplus.
(2) Notes to
financial statements. These notes shall be those required by the appropriate
National Association of Insurance Commissioners Annual Statement Instructions
and Accounting Practices and Procedures Manual. The notes must include a
reconciliation of differences, if any, between the audited statutory financial
statements and the annual statements filed with the Department, with a written
description of the nature of these differences, particularly with respect to
surplus or stockholder equity and the results of operations. The Commissioner
may require the insurer to file an amendment to its annual statement with the
Department, the NAIC and other states in which the insurer is licensed, to
reflect differences between the audited statutory financial statement and the
annual statement filed with the Department within 60 days of the filing date of
the audited financial report. The Commissioner may require amendments to
financial statements to be filed with the Department and the NAIC in a form of
electronic transmission acceptable to the Commissioner.
(3) The report of an independent certified
public accountant prepared in compliance with this chapter, including
notification of adverse financial condition, communication of internal control
related matters noted in the audit in accordance with AU section 325 of the
Professional Standards of the American Institute of Certified Public
Accountants (SAS 112) Communicating Internal Control Related Matters Identified
in an Audit, or its replacement, and letter of qualifications of the
independent certified public accountant.
(c) The financial statements included in the
audited financial report shall be prepared in a form and using language and
groupings substantially the same as the relevant sections of the annual
statement of the insurer filed with the Department, and the financial
statements shall be comparative, presenting the amounts as of December 31 of
the current year and the amounts as of the immediately preceding December 31.
In the first year in which an insurer is required to file an audited financial
report, the comparative data may be omitted if sufficient detail is made
available to the Department upon request. An account which represents less than
5% of the insurer's admitted assets may be aggregated for reporting purposes,
except that all invested asset accounts shall be separately reported.
(d) If an error is discovered after a report
is filed, the independent certified public accountant shall withdraw the report
and issue a corrected report to the insurer and to the Department within 30
days of the date the independent certified public accountant becomes aware of
the discovery of the error. To the extent that the error requires an amendment
to the insurer's annual financial statement filed with the Department, the
insurer shall file, within 60 days of the date the corrected report is issued,
an amendment to its annual statement with the Department, the National
Association of Insurance Commissioners and other states in which the insurer is
licensed, to reflect differences between the corrected audited statutory
financial statement and the annual statement filed with the Department and
including reconciling notes as required by the appropriate National Association
of Insurance Commissioners Annual Statement Instructions and Accounting
Practices and Procedures Manual. The Commissioner may require
amendments to financial statements to be filed with the Department and the
National Association of Insurance Commissioners in a form of electronic
transmission acceptable to the Commissioner.
(e) Subsections (a)-(d) do not apply to
continuing care providers. The annual
audited financial report for a continuing
care provider shall comply with the following:
(1) The annual
audited financial report for a
nonprofit continuing care provider shall reflect its financial condition as of
the end of its most recent fiscal year and the results of its activities, cash
flows and changes in net assets for the fiscal year then ended in conformity
with generally accepted accounting principles. The annual
audited financial
report shall, at a minimum, include the following:
(i) Financial statements that present in a
comparable manner, as of the end of the current and the preceding fiscal year,
or the period of time that the continuing care provider has been in existence,
whichever is shorter, the financial condition of the continuing care provider,
including balance sheet, statements of activities, cash flows, changes in net
assets and notes to financial statements.
(ii) Report of an independent certified
public accountant prepared in compliance with this chapter, including
notification of adverse financial condition, report on significant deficiencies
in internal controls and letter of qualifications of the independent certified
public accountant.
(2)
The annual
audited financial report for a for-profit continuing care provider
shall reflect its financial condition as of the end of its most recent fiscal
year and the results of its operations, cash flows and changes in shareholder's
equity for the year then ended in conformity with generally accepted accounting
principles. The annual
audited financial report shall, at a minimum, include
the following:
(i) Financial statements that
present in a comparable manner, as of the end of the current and the preceding
fiscal year, or the period of time that the continuing care provider has been
in existence, whichever is shorter, the financial condition of the continuing
care provider, including balance sheet, statements of net income, cash flows,
shareholder's equity and comprehensive income, and notes to financial
statements.
(ii) Report of an
independent certified public accountant prepared in compliance with this
chapter, including notification of adverse financial condition, report on
significant deficiencies in internal controls and letter of qualifications of
the independent certified public accountant.
(3) If an error is discovered after an annual
audited financial report is filed, the independent certified public accountant
shall withdraw the report and issue a corrected report within 30 days of the
date the independent certified public accountant becomes aware of the discovery
of the error.