The Office of the Superintendent of Financial Institutions has released a new earnings disclosure guideline for life insurance companies.

OSFI released a draft of the new guideline that establishes OSFI’s expectations for source of earnings disclosure in annual public financial statements for federally regulated life insurers. It is intended to be a supplement to the disclosure required by the CICA Handbook.

“Because of the complexities and inherent uncertainties in the insurance industry, this SOE disclosure should enhance the ability of a company’s stakeholders to better form a view as to the quality, potential volatility and sustainability of earnings,” OSFI says.

Source of earnings analysis is a methodology for identifying and quantifying the various sources of Canadian GAAP income of a life insurance company, OSFI says. “It provides an analysis of the difference between actual income and the income that would have been reported had all assumptions at the start of the reporting period been realized during the reporting period.”

The methodology for the calculation of an SOE analysis was developed in co-operation with the Canadian Institute of Actuaries. The income that is to be analyzed is the consolidated net income that appears in the company’s financial statements. For demutualized companies, this includes any transfers from the participating accounts to the shareholder account, but does not include an analysis of earnings of the participating accounts, OSFI says. For mutual insurance companies, it includes all income, it notes.

Companies have until Sept. 30 to comment on the guideline.