SECTION 25. INSURANCE

COMPANIES (§§ 832, 833)

.01 Safe harbor method of accounting for premium acquisition expenses .

(1) Description of change . Rev. Proc. 2002–46, 2002–2 C.B. 105, sets forth a safe harbor method of accounting for

premium acquisition expenses of certain non-life insurance companies. Under this method, an insurance company is permitted to treat as premium acquisition expenses incurred for the taxable year an amount equal to the sum of (a) the amount of premium acquisition expenses paid during the taxable year; (b) the difference between the unpaid premium acquisition expenses shown on the company’s annual statement for the taxable year and the unpaid premium acquisition expenses shown on the company annual statement for the preceding taxable year; and (c) the difference between the amount of the insurance company’s pro forma premium acquisition expenses at the end of the taxable year and the company’s pro forma premium acquisition expenses at the end of the preceding taxable year. The amount taken into account as a net increase in the pro forma premium acquisition expenses, however, cannot exceed the insurance company’s unearned premium reserve offset amount for that year. A special rule applies to premium acquisition expenses with respect to certain contracts with installment premiums. See Rev. Proc. 2002–46.

(2) Scope . This automatic change in accounting method applies to any insurance company that is subject to tax under § 831(a) and determines its premiums earned for insurance contracts during the taxable year under § 832(b)(4) in accordance with the provisions of § 1.832–4. The automatic change does not apply to an existing Blue Cross or Blue Shield organization or any other organization to which § 833 applies.

(3) Scope limitations inapplicable . The scope limitations in section 4.02 of this revenue procedure do not apply to this change.

(4) Designated automatic accounting method change number . The designated automatic accounting method change number for a change under section 25.01 of this APPENDIX is “67.” See section 6.02(4) of this revenue procedure. (5) Contact information . For further information regarding a change under this section, contact Kay Hossofsky at 202–622–3970 (not a toll-free call). .02 Certain changes in method of accounting for organizations to which § 833 applies.

(1) Description of change . This change applies to an existing Blue Cross or Blue

2011–4 I.R.B. 418 January 24, 2011