Statement value shows the adjusted book value of an investment after required accounting reductions under insurance accounting rules.
When you’re looking at insurance company financial statements, numbers don’t always reflect simple market prices. One important term you’ll see is statement value. While it sounds technical, the idea behind it is pretty practical. Statement value is the value of an investment as reported on an insurer’s financial statement after certain accounting adjustments are applied.
In simple terms, it’s a more conservative version of an investment’s value, designed to show a realistic and cautious picture of an insurer’s financial strength.
Understanding Statement Value in Plain English
Insurance companies don’t report investment values the same way individual investors do. Instead of focusing on what an asset might sell for today, they follow Statutory Accounting Principles (SAP). These rules prioritize safety and the ability to pay claims.
Statement value starts with the SAP book value of an investment. Then, it subtracts things like valuation allowances and non-admitted asset adjustments. The result is a more careful number that reflects potential risks or limits on how usable that investment really is.
What Goes Into Statement Value?
To understand statement value, it helps to break it down into its key pieces.
SAP Book Value
This is the starting point. SAP book value reflects the investment’s value based on statutory accounting rules, not market speculation.
Valuation Allowance
A valuation allowance reduces the reported value if there’s concern the investment may not be fully collectible. For example, if a bond issuer is facing financial trouble, the insurer may set aside a valuation allowance to reflect that risk.
Non-Admitted Adjustments
Some assets are considered “non-admitted” under statutory rules. This means they don’t count toward an insurer’s ability to pay claims. The value of these assets is subtracted when calculating statement value.
After these adjustments, what remains is the statement value.
Types of Investments That Use Statement Value
Statement value isn’t limited to just one type of asset. It’s commonly applied to groups of investments such as:
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Bonds
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Mortgage loans
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Common stock
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Preferred stock
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Other long-term investments
Each type may have its own rules for valuation allowances and non-admitted adjustments.
A Simple Example
Let’s say an insurance company owns a bond with a SAP book value of $1 million. However, the bond issuer’s financial health has weakened. To account for this risk, the insurer applies a $100,000 valuation allowance.
In addition, $50,000 of the investment is considered non-admitted under statutory rules.
Statement value would be calculated like this:
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$1,000,000 SAP book value
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minus $100,000 valuation allowance
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minus $50,000 non-admitted adjustment
The statement value would be $850,000.
This lower number gives regulators a more cautious view of the insurer’s financial position.
Why Statement Value Matters
Statement value plays a key role in protecting policyholders. Insurance regulators use it to assess whether companies have enough reliable assets to meet future claim obligations.
By reducing asset values for risk and uncertainty, statement value:
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Prevents overstating financial strength
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Encourages conservative investment reporting
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Helps regulators monitor solvency
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Supports long-term stability in the insurance system
It’s not about being pessimistic—it’s about being realistic.
Statement Value vs. Market Value
It’s easy to confuse statement value with market value, but they serve different purposes. Market value reflects what an asset could sell for today, which can change quickly. Statement value focuses on long-term reliability and claim-paying ability.
An investment might have a high market value but a lower statement value if it carries risk or doesn’t meet statutory requirements.
Why Everyday Readers Should Care
You may never calculate statement value yourself, but it affects you more than you think. It influences how insurance companies report financial health, how regulators supervise them, and how confident you can feel about their ability to pay claims.
Understanding statement value gives you insight into why insurance accounting is more conservative than most other industries.
A Behind-the-Scenes Measure That Builds Trust
Statement value may not be a headline number, but it plays an important behind-the-scenes role. By adjusting investment values for risk and usability, it helps keep insurance companies honest, stable, and prepared.
In the end, statement value isn’t just about accounting—it’s about protecting policyholders and keeping promises when they matter most.
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