Surplus Note Purchase Agreement

Overview: Although surplus bonds are, to some extent, debt securities that, in a way, resemble corporate bonds, which have a coupon, i.e. an interest rate, and an maturity date, surplus bonds are classified in equity according to accounting principles. The reason for this is the subdition of surpluses and payment restrictions that must be approved by the Commissioner of State. MassMutual issued $700 million in 3.38% of the bonds due in April 2050 in a transaction that LCDNews reported was increased from $500 million to. At the end of 2019, the Company reported a total surplus of $2.24 billion, including eight separate sets of notes issued beginning in 1993. The last time it issued $838.5 million in October 2019, it issued 3.73% of surplus bonds maturing in 2070. In total, according to S-P Global Market Intelligence, there were three transactions of surplus notes worth $1 billion or more in 2019. In addition to the New York Life agreement, Brooke Life Insurance Co. issued a $2 billion issue in November 2019 and a $1.35 billion deal in September 2019 from Northwestern Mutual Life Insurance Co.

It was the most active year for transactions of this size since 2009. There were nine transactions worth at least $100 million $US, compared to eight of that size in 2018. Summary: Excess notes are insurance instruments that are used to provide a source of capital for insurance companies. These debt securities may be recognized as capital and not liability due to the sub-delegate of the bonds and must be approved by the agent of the State of residence before the initial issue and before interest and repayments can be made. Accounting instructions for excess bonds, for both issuers and holders, are provided in the SSAP. 41R. The Legal Accounting Standards (E) working group monitors the accounting and reporting principles of excess accounts to ensure adequate valuation and coverage in the legal financial statements. The excess issuance of bonds in 2020 is more than 50% of the total fiscal year 2019 According to legal accounting standards (SAP), the issued surplus bonds are treated as an issued surplus, equity/equity. This treatment is different from the accounting principles generally accepted in the United States (GAAP) when these instruments are considered liabilities and are recorded as liabilities.

(Under SAP, debt securities that are not considered surplus bonds are recorded as liabilities similar to those in the United States.