Note 3 Recently Issued Accounting Pronouncements
Adoption of New Accounting Standards
In May 2014, the
FASB issued guidance that superseded most existing revenue recognition requirements in GAAP. Insurance contracts generally are excluded from the scope of the guidance. For those contracts which are impacted, the transaction price is attributed to
the underlying performance obligations in the contract and revenue is recognized as the entity satisfies the performance obligations and transfers control of a good or service to the customer. The Companys revenues include premium, other
policy revenue, net investment income, realized investment gains, and other income. Other income includes fee income which is recognized when obligations under the terms specified within a contract with a customer are either (1) satisfied at a
point in time or (2) the progress of completion is measured over a period of time as the obligation is performed using the input method. The Company adopted the standard on its required effective date of January 1, 2018 using the modified
retrospective approach. The majority of our revenue sources are insurance related and not in the scope of the guidance. The adoption of the standard did not have a material impact on the Companys consolidated financial position, results of
operations, equity or cash flows as of the adoption date or for the nine months ended September 30, 2018.
In January 2016, the FASB issued guidance
that changed certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The new guidance requires that equity investments, other than those accounted for under the equity method or those that result in
consolidation of the investee, be measured at fair value and the changes in fair value are recognized through earnings. When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit
risk will be recognized separately in other comprehensive income. The guidance also simplifies the impairment assessment of equity investments and eliminates the disclosure requirements for methods and significant assumptions used to estimate fair
value of financial instruments that are measured at amortized cost on the statement of financial position. The Company adopted the standard on its required effective date of January 1, 2018 using a modified retrospective approach. Upon
adoption, cumulative unrealized gains and losses on equity securities of $667.7 million, partially offset by $30.4 million participating policyholders interest, net of tax, related to unrealized gains and losses on equity securities,
were reclassified from accumulated other comprehensive income to retained earnings. In April 2018, an additional $10.2 million deferred policy acquisition cost adjustment, net of tax, related to net unrealized gains and losses on equity
securities, was reclassified from accumulated other comprehensive income to retained earnings. Earnings increased $105.7 million and $115.1 million, net of tax, for the three and nine months ended September 30, 2018, respectively from
the change in net unrealized gains and losses on equity securities.
In October of 2016, the FASB issued guidance requiring an entity to recognize the
income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Whereas, prior guidance prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset
was sold to an outside party. The Company adopted the standard on its required effective date of January 1, 2018 using a modified retrospective approach. Upon adoption, an other liability was released and retained earnings increased by
$59.9 million. The adoption of the standard did not have a material impact on the Companys consolidated financial position, results of operations, equity or cash flows for the nine months ended September 30, 2018.
In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit costs. The guidance requires the service cost
component to be reported in the same line item as other compensation costs. All other components of net periodic pension cost are required to be presented in the income statement separately from the service cost component and outside of income from
operations. The Company adopted the standard on its required effective date of January 1, 2018 using a retrospective approach. Upon adoption, other components of net periodic pension costs of $1.5 million and $8.4 million, net of tax,
for the three and nine months ended September 30, 2017, respectively, were reclassified from other operating expenses. The guidance changed presentation only and did not have an impact on the Companys consolidated financial position,
results of operations, equity or cash flows. Since the Companys defined benefit pension plans have been frozen, the components of net periodic benefit costs have not materially changed from
year-end
2017.
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