The NAIC's 2013 proposed budget released Oct. 24 reflects (before adding investment income, fiscal impact statements and the structured securities project) total revenues of $78.5 million and total expenses of $78.1 million.
The NAIC 2013 proposed budget before fiscals and the modeling of structured securities includes total revenues of $80.8 million.
These numbers represent a 3.86% increase and a 0.33% increase, respectively, from the 2012 budget, for $440,560 in projected revenues over expenses.
However, viewed in relation to the 2012 projected totals, the 2013 proposal represents an operating revenue decrease of 1.75% and operating expense decrease of 3.82%.
The NAIC did better than expected in 2012. Based on actual operating results through June 30, the year-2012 projections indicate a net operating margin of negative $1.3 million compared to a budgeted net operating margin of negative $2.2 million.
When including investment income, plus the recovery of $6.9 million from the NAIC's affiliate NIPR for prior period investments in the State Producer Licensing Re-engineering Project offset against budgeted transaction fees, the NAIC projects a total net revenue margin of $10.3 million for 2012.
Total net revenue margin including the 2011/2012 structured security project is projected to be nearly $11.9 million before the 2012 impact of 2013 fiscals.
The NAIC highlighted new business initiatives at a cost of increased revenue and expense of $1,548,032 and $3,159,038, respectively, producing a net contribution impact of negative $1,611,006, in 2013.
"While these proposals result in an overall net operating expense in 2013, they represent important capital investments in the NAIC's products and services, some of which will generate net operating revenues in future years," the NAIC stated.
Operating revenues are $4.3 million higher than budget and database fees are higher than budget due to 3.52 percent increase in industry premium growth, the NAIC stated.
According to the budget revenue composition mix, database fees are still the largest revenue generator for the NAIC among the various services, with a projected 33.5% of the budget or almost $26.8 million out of $80 million. However, although more money, this is down from 2012 where the percentage of the composite budget was 34.2%.
Service categories like SERFF and administrative/license fees are both projected to increase in percentage and dollar amount, perhaps due to anticipated health insurance exchange work. Publications—the second largest category—is up slightly but a bit down as a percentage of the total revenue budgeted. It is $19.5 million in revenue and 24.4 percent of the budget in 2013, down from almost 30% in 2012 but up from the $18.9 million in revenue.
Database fees and publications fees are the NAIC's two largest revenue sources and together represent more than half of the group's projected $80 million in revenues, one group noted.
By contrast, the NAIC projects to collect just $2.3 million in fees from state insurance departments, which benefit greatly from the education, actuarial, market conduct and securities valuation services the NAIC provides to the states, stated R Street Senior Fellow and Public Affairs Director R.J. Lehmann.
