Insurers’ Biggest Writedowns May Be Yet to Come: Jonathan Weil

How many legs would a calf have if we called its tail a leg?

Four, of course. Calling a tail a leg wouldn’t make it a leg, as Abraham Lincoln famously said.

Nor does calling an expense an asset make it an asset. This brings us to the odd accounting rules for the insurance industry, including Lincoln National Corp., which uses Honest Abe as its corporate mascot.

Look at the asset side of Lincoln National’s balance sheet, and you’ll see a $10.5 billion item called “deferred acquisition costs,” without which the company’s shareholder equity of $9.1 billion would disappear. The figure also is larger than the company’s stock-market value, now at $7 billion...

Bloomberg: Insurers’ Biggest Writedowns May Be Yet to Come: Jonathan Weil