Mission Vision - · PDF fileThe National Insurance Producer Registry ... • Financial/Time savings • Reduction in paper ... Mission Vision

2 2013 Annual Report National Insurance Producer Registry

About the NAIC

NIPRCompany Profile

The National Insurance Producer Registry (NIPR) was incorporated in 1996 as a non-profit affiliate of the National Association of Insurance Commissioners (NAIC). NIPR is governed by a Board of Directors including members of the NAIC and individuals representing a cross section of the insurance industry. NIPR was instrumental in the development and implementation of the Producer Database (PDB) and the Gateway for electronic appointments/terminations and licensing.

NIPR provides support for the NAIC’s State Producer Licensing Database (SPLD) and NIPR’s PDB. Both are electronic databases consisting of information relating to insurance producers (agents and brokers), with the PDB available to the insurance industry to use in the licensing and compliance process. The NAIC’s SPLD is regulator only and accessible through the NAIC’s I-SITE. NIPR’s PDB complies with the Fair Credit Reporting Act and is available to the industry. These databases provide information from participating state regulatory licensing systems into common repositories of producer information. Regulators have access to the Regulatory Information Retrieval System (RIRS) through the NAIC’s SPLD and industry, through PDB, has access to RIRS to provide a more comprehensive producer profile. The key benefits of these producer databases are: • Financial/Timesavings • Reductioninpaper • Centralizedsourceofdata • Easyonlineaccess • Verificationoflicenseandstatusin53jurisdictions

The Gateway is a communication network that links state insurance regulators with the entities they regulate to facilitate the electronic exchange of producer information. Data standards have been developed for the exchange of license application, license renewal, appointment/termination submissions and address changes within a resident state. All data flowing over the Gateway will conform to these data standards. The key benefits of the Gateway are: • Paperfreetransactions • Nationalstandardsforelectronictransmission • Fasterturnaroundtime • Electronicpaymentforfees

The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting andregulatorysupportorganizationcreatedandgovernedbythechiefinsuranceregulatorsfrom the 50 states, the District of Columbia and five U.S. territories.Through the NAIC,state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.

3National Insurance Producer Registry

NIPR provides one-stop shopping for all aspects of electronic producer licensing.

Mission

Vision

NIPR is a unique public-private partnership that supports the work of the states and the NAIC in making the producer-licensing process more cost-effective, streamlined and uniform for the benefit of regulators, the insurance industry and the consumers they protect and serve.


Buildinganorganizationismuchlikebuildingahouse:whenbuiltonastrongfoundationitiseasier to expand and reinforce. The National Insurance Producer Registry (NIPR) has been building a foundation for electronic producer licensing that will stand the test of time. NIPR’s morethan15yearsofexistencehavegivenustheperspectiveandvisionneededtoaugmentand enhance that foundation.

In 2013, NIPR completed one of its most significant accomplishments to date. With thecooperation and collaboration of regulators and the NAIC, NIPR completed electronic non-resident licensing and renewals in all jurisdictions; the cornerstone of our vision of “one-stopshopping.” Thenon-resident licensingapplicationwasestablished in2000andnowencompasses all 50 states, the District of Columbia, Puerto Rico andVirgin Islands.Therealizationofthislong-termgoalmeansthatproducerscanutilizeNIPR,costeffectivelyandefficiently,toapplyfornon-residentlicensesandrenewalsinalljurisdictions.

NIPR continues to support the achievement of producer licensing uniformity through the developmentandimplementationofprojectsforregulatorsandindustry.Havingmetthegoalofestablishing NIPR as the primary electronic resource for completion of non-resident licensing and renewals, focus has now shifted to the completion of resident licensing and renewals andprovidingonlinesolutionsforinsuranceadjusters.NIPRworkedcloselywiththeNAIC,regulatorsandindustrytoexpandproductsandservicestosupporttheadjusterlicensingandrenewalprocessbyimplementationoftheDesignatedHomeStatefunctionality,whichallowsanadjusterwhosehomestatedoesnotissueadjusterlicensestodesignateadifferenthomestateinordertoapplyforandrenewadjusterlicenses.ThisworkwascompletedinsupportoftheNAICIndependentAdjusterGuidelines.

Last year, we also renovated our website, NIPR.com, making it easier to use and find information,aswellasmorevisuallypleasing. Wecontinuallystrive tomakeNIPR.comabetter education and marketing vehicle to show our users the services we provide on behalf of the states.

Just like the foundation of a building, sometimes the most important changes are the ones that cannot be seen:

Seeking to improve the structure of NIPR to foster continued improvement of our products and services, last year we contracted with a consulting firm to perform a business operations analysis. Based on the results of the analysis, NIPR will be looking at a number of changes and improvements including designing a cost-based pricing tool that we can use to help set pricing in the future.

We also built a detailed receipt page to respond to individual producer requests fordocumentation for licensing transactions processed through NIPR. It not only provides areceipt itemizingwhat licensingactivitywasrequestedandpaid for,butmakes thatreceipt available for several months after the transaction has completed.

The collection and transfer of state fees was improved through enhancements to e-commerce reports, and the customer experience was improved through use of online forms that assist support staff in responding to customer issues.

Officers’ Message


Roger SevignyCommissioner, New Hampshire Insurance Department

John FieldingCouncil of Insurance Agents & Brokers

Sharon ClarkCommissioner,Kentucky Department of Insurance

President Secretary/TreasurerVice President

NIPRdidnotstopwiththesemajoraccomplishmentsin2013.Wealsoprovidedsupporttotheregulators’producer-licensingneedsrelatedtotheAffordableCareAct.Theorganizationstands ready to assist with future needs of the states and industry.

WiththeretirementofNIPRExecutiveDirectorMaryellenWaggonerinSeptemberof2013,NIPR began a new chapter in its enduring mission to making the producer-licensing process more cost-effective, streamlined and uniform.

In2014,wewillenhanceNIPR’spopularAddressChangeRequestapplicationwiththeabilityfor producers to update email and telephone contact information, along with deploying an improved security software infrastructure.

In the months and years ahead, NIPR will continue to buttress and build the foundation of licensing technology and its suite of products for the benefit of regulators, the insurance industry and the consumers they serve.


TheProducerDatabase(PDB)isacentralizedrepositoryofproducerlicensinginformationupdatedonatimelybasisandmade available to the insurance industry. The primary purpose of PDB is to facilitate the ability to track pertinent information regarding licensed producers, a key to restoring consumer trust in the insurance industry with increased transparency and more uniformity.

PDBhasfiveprimaryproducts:DetailReport,CompanySpecializedReport,CompanyAppointmentReport,CompanyAppointment Reconciliation Report and Alerts.

DETAIL REPORTThe Detail Report allows the user to view all supplied information for a single producer, agency or company. This report willreturninformationfromalljurisdictionsthatareprovidingdata.Thisinformationincludes:

•Generaldemographicinformationsuchasnameandaddress•Licenseinformation,suchasjurisdictionslicensed,licensenumber,licensestatusandlinesofauthority.Designated

HomeStatesforAdjusterlicensesisanewadditiontothereport•Appointmentinformationsuchascompanyappointments,effectivedate,terminationdateandterminationreason•Regulatory actions (if taken) completed, adjudicated and reported actions submitted by the state insurance

departments

COMPANY SPECIALIZED REPORT (CSR)This customized report is useful when a full Detail Report is not needed. The user can select specific licensinginformationfromthefollowingPDBdatafieldstocreatetheirownspecializedreport:LicenseNumber(automaticallyreturned when requesting license data options), License Status, Resident/Non-Resident, License Issue/Expiration Date, Lines of Authority Status (LOA name is automatically returned when asking for data options) and Regulatory Information Retrieval System (RIRS) information.

COMPANY APPOINTMENT REPORT (CAR)The Company Appointment Report allows a company to view a listing of all active appointments and/or terminations. This report is company specific and state specific. Companies can only view data for their own affiliated companies.

COMPANY APPOINTMENT RECONCILIATION REPORT (CARR) This report is designed to facilitate the appointment renewal process for regulators and the insurance industry. Similar totheCompanyAppointmentReport,theCARRhastheaddedfunctionalityofcompleting“NotforCause”terminationsdirectly from the report. This allows the user to reconcile the company’s producer listing against the Producer Database. The terminations are generated electronically through the Gateway and sent to the appropriate state insurance department for processing.

ALERTSThe PDB Alerts product is designed to provide notification to subscribers indicating a change has been made to the data stored in the Producer Database. Customers will have multiple options on accessing the data, selection of information desired and tracking individual producers. Customers receive a notification when a producer has a change in the following:

•Appointments:Receives,renewsorterminatesanappointmentfromaninsurancecompany•Demographics:Changestoaresidence,business,mailingorotheraddressinoneorallofthelicensedjurisdictions•Licensing:Amends,cancels,changesoraddsalineorlicense•RegulatoryActions(RIRS):Anadjudicatedregulatoryactiontakenhasbeentakenagainstthembyajurisdiction

Products & ServicesProducer Database


Resident

IndividualProducers

2,142,044

AgencyProducers

188,813

OH 76,259IL

86,047

NC 91,194

SC 37,205

GA 72,217

AL 33,266

MS 21,846

AR 22,683

OK 28,808

TX 207,601

AK 3,203

LA 38,476

FL 247,511

TN 47,017

KY 28,413

IN 46,584

MI 65,317

WI 39,487

MN 42,732

IA 27,670NE

17,369

KS 26,259

SD 8,670

ND 6,567

MT 8,531

WY 3,262

CO 40,177

NM 9,311

AZ 50,319

UT 23,189

ID 10,321

NV 18,014

CA 227,911

OR 22,456

WA 37,608

WV 10,596 VA

62,964

VT 3,570

NH 7,865

MA 33,428

RI 6,829

CT 30,922

NJ 60,822

DE 7,382

MD 39,756

DC 1,476

HI 8,085

PR

10,750

VI

384

PA 88,888

NY 116,787

ME 9,278

MO 50,688

Non-Resident

IndividualProducers

5,240,099

AgencyProducers

330,992

Total Producers

Resident

2,330,857

Non-Resident

5,571,091

Least

Total by State

Most

Producer Licensing (in 2013)

Producer Licensing (in 2013)


nipr.comIn2013...

Average visits per day ...............12,321Average visits per visitor ............2.01Average page views per day .....24,809Average page views per visit .....2.01

TheGatewayfacilitatestheexchangeofproducerlicensinginformationbetweenjurisdictioninsuranceregulatorsand the entities they regulate. The Gateway was designed to improve the effectiveness and efficiency of the state licensing process, with the goal of simplifying the communications and quickly distributing information regarding licensing applications, such as appointments and terminations, Address Change Requests and the Attachments Warehouse.TheGatewayprovidesacostefficientmethodofdatatransferthatwillprovideanopportunityforincreased revenue and reduction in costs. This process takes the guesswork out of producer licensing for the insurance industry as it provides the ability to track transactions. It is significant in aiding the ‘speed to market’ products.

APPOINTMENTS/TERMINATIONSThe Gateway requires certain data standards for the transfer of appointment and termination information between state insurance regulators and the industry. There are now three options to submit appointments/terminations through the Gateway.

1) NIPR’s Interactive Appointments/Terminations (IAT) A front-end application which allows insurance carriers to appoint and terminate using the National Producer

Number (NPN), eliminating the use of the SSN. These transactions are validated with the PDB prior to submission, greatly reducing the number of declines.

2) Customer Programming In order to process appointments/terminations directly through the Gateway (i.e. NOT using IAT),

programming on the company’s behalf is required. This option allows clients to establish specified programming requirements and to build their own product.

3) NIPR’s Authorized Business Partners (ABPs) CompaniescanchoosetoutilizeoneofNIPR’sABPs,whichoffervalue-addedservices.

The Gateway has the capability to accept payment for state appointment fees through Electronic Funds Transfer (EFT). This feature enhances the benefits of moving data electronically: accuracy, timeliness, efficiency and cost reduction.

Gateway

Products & Services

20082,353,942visits

2009*4,412,923visits

20102,630,171visits

20113,189,167visits

20123,642,887visits

20134,497,034visits

*duetosoftwarerewrite


APPOINTMENT RENEWALSForparticipatingjurisdictions,industrycangototheNIPRwebsiteandprocesstheircompanyappointmentrenewalinvoice(s). Renewal transactions will be sent to the State to automatically update their system, which in turn uploads thedatatothePDB.Thisproducteliminatestheneedforjurisdictionstomailoutthepaperworkandlikewiseforthe company to return paperwork.

LICENSING APPLICATIONSNIPR’s applications give producers the ability to quickly and easily apply for or renew a license in a resident or non-resident state.

The initial Resident and Resident Renewal Licensing applications further the facilitation of accelerated producer licensing by giving a producer, which has met the state’s requirements, the ability to apply electronically for resident licensing. This application also allows producers to renew their resident license.

Initial Non-Resident Licensing applications are based upon the producer’s resident state lines of authority. Using astandardizedformat,theonlineapplicationverifiesproducerinformationwiththePDB,sothereisnoneedforaletter of certification. The application automatically calculates fees and allows the user to apply in multiple states using a single application.

NIPR implemented a new licensing type, Adjuster Designated Home State (ADHS). The stand-alone Non-ResidentAdjusterLicensing(NRAL)applicationallowsanadjustertodesignateahomestate.Thiswillbenefitindividuals whose home state/jurisdiction does not license adjusters. These adjusters will now be able todesignate thenon-residentadjuster licenseas their residentstate/jurisdiction. Theapplicantmay thenapplyforothernon-residentadjusterlicensesinparticipatingjurisdictions.Adjusterscanalsorenewtheirlicensesinparticipatingjurisdictions.

ADDRESS CHANGE REQUEST (ACR)Withmorethan2.3millionlicensedindividualsholdingmorethan6millionlicenses,producersandstateinsurancedepartments process hundreds of thousands of address change requests annually. The former process to change addresses differed from state to state and often involved time consuming paper forms and manual entry. WithACR,aproducercanleveragetechnologytocompleteaddresschangesformultiplestatesusingonlyoneon-lineform.ProducersandauthorizeduserscansubmitindividualproduceraddresschangesthroughtheNIPRwebsite, www.NIPR.com.


TheAttachmentsWarehouseisasecuredatabasethatreceives,storesandsharesapplicationandbackgroundinformation requested by regulators from the producers.

BACKGROUND QUESTIONS SUPPORTING DOCUMENTS (BQSD) TheoriginalfunctionoftheAttachmentsWarehouseiscalledtheBackgroundQuestionsSupportingDocuments.When additional information or documentation is requested by the regulators in response to an affirmativeanswertooneormoreofthebackgroundquestionsontheuniformapplication(s)-theAttachmentsWarehouseallows producers to submit this data to multiple states at one time, instead of individually by fax or by mail. State regulatorswillbenotifiedwhendocumentsaresubmittedtotheWarehousesotheycanaccesstheinformation.Thedocumentonlyneedstobesubmittedonce,andanyparticipatingjurisdictioncanobtainthedocument.

REPORTING OF ACTIONS (ROA)TheWarehouse also includes the Reporting of Actions function. The ROA function provides the means toallow producers to satisfy their regulatory requirements with respect to the notification and reporting of all administrative, criminal and civil (if applicable) actions. Pursuant to states’ laws, the duty to report the action andprovidedocumentationisrequiredwithinthirty(30)days,consistentwiththelanguagefoundintheNAICProducerLicensingModelActSection17.

twitter138tweets

177following

455followers(+81or22%)

facebook1768newlikes

189791totalImpressions

2248likes,comments,andreposts

Attachments Warehouse

Products & Services


Licensing and Appointments

AppointmentsRevenue

Volume

Terminations Non-Resident Licensing

Non-Resident Renewals Resident Licensing Resident Renewals

$6 mil

$5 mil

$4 mil

$3 mil

$2 mil

$1 mil

$02006 2007 2008 2009 2010 2011 2012 2013

2006 2007 2008 2009 2010 2011 2012 2013

11 mil

10 mil

9 mil

8 mil

7 mil

6 mil

5 mil

4 mil

3 mil

2 mil

1 mil

0

licensing and appointments


Audit Report

TotheMembersoftheBoardofDirectorsNational Insurance Producer RegistryKansasCity,Missouri

Report on the Financial StatementsWehaveauditedtheaccompanyingfinancialstatementsoftheNationalInsuranceProducerRegistry(theNIPR),whichcomprisethestatementsoffinancialpositionasofDecember31,2013and2012,andtherelatedstatementof activities and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial StatementsManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewith accounting principles generally accepted in the United States of America; this includes the design,implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOurresponsibility is toexpressanopinionon thesefinancialstatementsbasedonouraudits.Weconductedour audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentofthe risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial positionoftheNIPRasofDecember31,2013and2012,andthechangesinitsnetassetsanditscashflowsfor the years then ended, in conformity with accounting principles generally accepted in the United States of America.

KansasCity,MissouriFebruary21,2014

Independent Auditor’s Report


Statements of Financial PositionDecember31,2013and2012

Assets 2013 2012

Current Assets: Cash and cash equivalents $ 13,755,615 $ 13,142,855 Accounts receivable, less allowance for doubtful accounts;2013-$26,120and2012-$20,509 2,105,887 2,209,745 Interest receivable 20,860 32,031 Prepaid expenses 57,574 66,617 Investments (Note 2) 19,094,073 15,373,629

Total current assets 35,034,009 30,824,877

Propertyandequipment,net(Note3) 3,725 13,068

Total assets $ 35,037,734 $ 30,837,945

Liabilities and Net Assets

Current Liabilities: Accounts payable $ 2,040,123 $ 2,038,097 Accrued expenses 585,598 651,622 Deferred revenue - 9,133

Total current liabilities 2,625,721 2,698,852

Net Assets:

Unrestricted 32,412,013 28,139,093

Total liabilities and net assets $ 35,037,734 $ 30,837,945

See Notes to Financial Statements.


YearsEndedDecember31,2013and2012

2013 2012

Revenues: Access and transaction fees $ 24,330,231 $ 21,259,106 Other income 36,417 113,184

Total revenues 24,366,648 21,372,290

Expenses: Administrative services and license fees 10,559,482 9,546,704 Salaries 5,016,267 4,821,174 Employee benefits 1,456,933 1,300,233 Professional services 4,622,467 3,725,191 Travel 475,438 459,326 Rental and maintenance 99,167 104,904 Depreciation 9,343 16,415 Insurance 82,600 78,369 Office services 76,386 128,430 Bad debt expense 53,591 29,026 Other expenses 38,751 78,635

Total expenses 22,490,425 20,288,407

Changes in net assets before investment income and SPL Cost Recovery 1,876,223 1,083,883 Investment income (Note 2) 2,396,697 1,800,723 SPLCostRecovery(Note4) - (6,881,392)

Changes in net assets 4,272,920 (3,996,786)

Net assets, beginning of year 28,139,093 32,135,879

Net assets, end of year $ 32,412,013 $ 28,139,093


Audit ReportStatements of Activities


Statements of Cash FlowsYearsEndedDecember31,2013and2012

2013 2012

Cash Flows from Operating Activities: Changes in net assets $ 4,272,920 $ (3,996,786) Adjustmentstoreconcilechangesinnetassetstonet cash flows from operating activities: Depreciation 9,343 16,415 Netrealizedandunrealizedloss(gain)oninvestments (1,879,494) (1,076,668) Changes in operating assets and liabilities: Accounts receivable 103,858 535,688 Interest receivable 11,171 14,405 Prepaid expenses 9,043 (22,088) Deferred revenues (9,133) (73,367) Accounts payable 2,026 1,002,011 Accrued expenses (66,024) 4,673

Net cash provided by (used in) operating activities 2,453,710 (3,595,717)

Cash Flows from Investing Activities: Purchase of investments (5,967,738) (5,762,473) Proceeds from disposition of investments 4,126,788 13,767,246 Purchases of property and equipment - (4,664) Net cash provided by (used in) investing activities (1,840,950) 8,000,109

Net increase in cash and cash equivalents 612,760 4,404,392

Cash and Cash Equivalents: Beginning 13,142,855 8,738,463 Ending $ 13,755,615 $ 13,142,855


16 National Insurance Producer Registry

Note 1. Summary of Significant Accounting Policies

Nature of operations: The National Insurance Producer Registry (the NIPR) is a non-profit affiliate of the National Association of Insurance Commissioners (the NAIC). The NIPR combines the strengths of the public and private sectors to create products and services that benefit insurance regulators, industry and consumers.

Basis of accounting for revenues: The NIPR earns revenues predominantly through access fees and transaction fees. Access fees are earned when users access the NIPR’s Producer Database (PDB). The PDB is an electronic database consisting of information relating to insurance agents and brokers. The PDB links participating state regulatory licensing systems into one common repository of producer information. Transaction fees are earned when users process transactions through the NIPR Gateway. The NIPR Gateway facilitates the electronic exchange of producer information, including license applications, appointments and terminations. The NIPR earns revenue by charging a fee for providing the interface between industry and state regulators for licensing and other transactions.

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents: The NIPR considers all liquid investments with original maturities of one year or less to be cash equivalents.AtDecember31,2013and2012,cashequivalentsconsistedprimarilyofmoneymarketfunds.

Accounts receivable: Accounts receivable are stated at the amounts billed to customers. The NIPR provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Past-due accounts are periodically reviewed by management. Delinquent and/or uncollectible receivables are written off based on individual credit evaluation and specific circumstances of the customer.

Investments: NIPR carries its investments in marketable securities with readily determinable fair values, and all investments in debt securities, at their fair values determined by reference to public exchanges. NIPR reports the fair value of alternative investments using the practical expedient. Unrealized gains and losses are included in the change in net assets in theaccompanying financial statements.

Investments may be exposed to various risks, such as interest rate, market and credit risks. As a result, it is at least reasonably possible that changes in risks in the near term could affect investment balances, and those effects could be significant.

Fair value of financial instruments: The following methods and assumptions were used to estimate the fair value of each classoftheNIPR’sfinancialinstrumentsatDecember31,2013and2012:

Cash and cash equivalents: The carrying amount approximates fair value because of the short maturity of these instruments.

Investment securities, except alternative investments: The fair values of fixed income, and domestic and international equity investments are based on quoted market prices at the reporting date for those or similar investments. A portion of the fixed income investments are valued based on quoted prices for similar instruments in active markets.

Alternative investments: NIPR reports the fair value of market alternative investments using the practical expedient. Thepractical expedient allows for theuseof net asset value (NAV), either as reportedby the investee fundor asadjustedbyNIPRbasedonvariousfactors.

Audit ReportNotes to Financial Statements


Fair value measurements: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in its principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. NIPR accounts for its investments atfairvalue.Inaccordancewiththeguidance,NIPRhascategorizeditsinvestments,basedonthepriorityoftheinputstothevaluationtechniquewhichgivesthehighestprioritytounadjustedquotedpricesinactivemarketsforidenticalassets(Level1measurements)andthelowestprioritytounobservableinputs(Level3measurements).Thethreelevelsofthefairvaluehierarchy are described below:

Level 1-Quotedpricesforidenticalinstrumentstradedinactivemarkets.

Level 2 -Quotedpricesforsimilar instruments inactivemarkets;quotedpricesfor identicalorsimilar instruments ininactivemarkets;orderivedfrominputsthatareobservable.AlsoincludedinLevel2areinvestmentsmeasuredusingnetassetvalue(NAV)pershare,oritsequivalent,thatmayberedeemedatNAVatornearthereportingdate.

Level 3 -PrimarilyallLevel3investmentsarevaluedusingthepracticalexpedientandincludethoseinvestmentsthatcannotberedeemedatNAVatornearthereportingdate,orforwhichredemptionatNAVisuncertainduetolock-upperiods or other investment restrictions.

Investments and concentrations of credit risk: Financial instruments that potentially subject NIPR to significantconcentrations of credit risk consist principally of cash and investments. NIPR maintains deposits in financial institutions in excessoffederallyinsuredlimits.ManagementmonitorsthesoundnessofthesefinancialinstitutionsandbelievesNIPR’srisk is negligible.

Alternative investments are redeemable with the fund at net asset value under the original terms of the partnership and/or subscriptionagreements.However,itispossiblethattheseredemptionrightsmayberestrictedoreliminatedbythefundsin the future, in accordance with the fund agreements. Due to the nature of the investments held by the funds, changes in market conditions and the economic environment may significantly impact the net asset value of the funds and, consequently, the fair value of the NIPR’s interests in the funds. Although a secondary market exists for these investments, it is not active andindividualtransactionsaretypicallynotobservable.Whentransactionsdooccurinthislimitedsecondarymarket,theymay occur at discounts to the reported net asset value. It is, therefore, reasonably possible that, if NIPR were to sell these investments in the secondary market, a buyer may require a discount to the reported net asset value, and the discount could be significant.

Property and equipment: Property and equipment are stated at cost. Routine repairs and maintenance are expensed as incurred. Depreciation is computed by the straight-line method over the estimated useful life of the related assets. Furnitureandequipment 5Years Computersoftware 3Years Computerhardware 3Years

Taxes: The NIPR has been granted exemption from income taxes by the Internal Revenue Service under the provisions of Section501(c)(6)oftheInternalRevenueCodeandasimilarprovisionofstatelaw.However,theNIPRissubjecttofederalincome tax on any unrelated business taxable income.

Uncertaintaxpositions,ifany,arerecordedinaccordancewithFASBASC740,IncomeTaxes.FASBASC740requirestherecognition of a liability for tax positions taken that do not meet the more-likely-than-not standard that the position will be sustained upon examination by the taxing authorities. There is no liability for uncertain tax positions recorded at December 31,2013or2012.

Forms 990 filed by NIPR are subject to examination by the Internal Revenue Service (IRS) up to three years from theextendedduedateofeachreturn.Forms990filedbyNIPRarenolongersubjecttoexaminationfortheyears2009andprior.

Functional expenses:TheNot-for-ProfitEntities topicof theFASBASC requiresnot-for-profitorganizations todiscloseexpensesbyfunctionalclassification.TheNIPRpresentsexpensesonlybytheirnaturalclassificationontheDecember31,2013and2012statementsofactivities.Managementbelieves thatdisclosingexpensesby function is insignificant to thefinancial statements taken as a whole, and therefore does not apply the provision of the topic as it relates to the disclosure of expenses by functional classification.

18 National Insurance Producer Registry

Note 2. Investments and Investment Income

InvestmentscarriedatfairvalueatDecember31,2013and2012consistedofthefollowing: 2013 2012 Cost Fair Value Cost FairValue

Government bonds $ 688,566 $ 717,080 $ 699,620 $ 747,412Treasury inflation protected bonds 702,611 719,349 647,993 765,213Corporate bonds 2,115,757 2,087,664 1,785,836 1,783,390Fixed income mutual funds 3,038,969 3,224,505 2,918,410 3,223,507Foreign fixed income funds 1,064,896 1,012,842 949,381 947,602International bonds 102,936 103,985 102,936 106,601Common stock Industrials 360,625 698,352 315,197 468,287 Consumer discretionary 299,512 767,590 302,472 640,830 Financials 654,706 930,598 556,825 714,683 Information technology 890,991 1,357,632 703,578 910,178 Other industries 2,169,391 3,392,852 1,055,995 1,602,480Foreign common stock 193,218 366,277 228,172 314,520American depository receipts 106,042 195,992 280,096 409,543Foreign equity mutual funds 960,418 1,136,337 662,267 723,868Masterlimitedpartnership 757,189 1,079,123 766,832 818,979Alternative equity hedge funds 1,129,963 1,303,895 1,129,963 1,196,536

$ 15,235,790 $ 19,094,073 $13,105,573 $15,373,629

Total investment income is comprised of the following: 2013 2012Interest and dividend income $ 517,203 $ 724,055Netrealizedgains(losses) 289,267 957,281Netunrealizedgains(losses) 1,590,227 119,387

$ 2,396,697 $ 1,800,723

Thefollowingtablessummarizethefinancialinvestmentsmeasuredatfairvalueonarecurringbasis,segregated by the general classification of such instruments pursuant to the valuation hierarchy:

TotalDecember 31, 2013 Fair Value Level 1 Level 2 Level 3

Government bonds $ 717,080 $ - $ 717,080 $ -Treasury inflation protected bonds 719,349 - 719,349 -Corporate bonds 2,087,664 - 2,087,664 -Fixed income mutual funds 3,224,505 3,224,505 - -Foreign fixed income funds 1,012,842 1,012,842 - -International bonds 103,985 - 103,985 -Common stock Industrials 698,352 698,352 - - Consumer discretionary 767,590 767,590 - - Financials 930,598 930,598 - - Information technology 1,357,632 1,357,632 - - Other industries 3,392,852 3,392,852 - -Foreign common stock 366,277 366,277 - -American depository receipts 195,992 195,992 - -Foreign equity mutual funds 1,136,337 1,136,337 - -Masterlimitedpartnership 1,079,123 1,079,123 - -Alternative equity funds 1,303,895 - - 1,303,895

$ 19,094,073 $ 14,162,100 $ 3,628,078 $ 1,303,895

Notes to Financial Statements


Note 2. Investments and Investment Income (Continued)

TotalDecember31,2012 FairValue Level1 Level2 Level3 Governmentbonds $ 747,412 $ - $ 747,412 $ -Treasuryinflationprotectedbonds 765,213 - 765,213 -Corporatebonds 1,783,390 - 1,783,390 -Fixedincomemutualfunds 3,223,507 3,223,507 - -Foreignfixedincomefunds 947,602 947,602 - -Internationalbonds 106,601 - 106,601 -Common stock Industrials 468,287 468,287 - - Consumerdiscretionary 640,830 640,830 - - Financials 714,683 714,683 - - Informationtechnology 910,178 910,178 - - Otherindustries 1,602,480 1,602,480 - -Foreigncommonstock 314,520 314,520 - -Americandepositoryreceipts 409,543 409,543 - -Foreignequitymutualfunds 723,868 723,868 - -Masterlimitedpartnership 818,979 818,979 - -Alternativeequityfunds 1,196,536 - - 1,196,536

$15,373,629 $10,774,477 $ 3,402,616 $ 1,196,536

Assetsmeasuredatfairvalueonarecurringbasisusingsignificantunobservableinputs(Level3)are as follows:

Alternative Equity Funds

December31,2011 $ 2,658,445 Settlements (1,562,154) Netrealizedgains 8,409 Netunrealizedgains 91,836

December31,2012 1,196,536 Netunrealizedgains 107,359

December 31, 2013 $ 1,303,895



Note 2. Investments and Investment Income (Continued)

Alternative Equity Funds

2013 2012

Total gains (losses), net, included in earnings attributabletothechangeinunrealizedgains(losses),net,relatingtofinancial instruments still held $ 173,932 $ 66,573

The following tables set forth additional disclosure of the NIPR’s investments whose fair value is estimated usingnetassetvalue(NAV)pershare(oritsequivalent)asofDecember31,2013and2012:

Fair Value Unfunded Redemption Redemption Investment December 31, 2013 Commitment Frequency Notice Period

Alternative equity funds (A) $ 1,303,895 $ - Quarterly 95 days

FairValue Unfunded Redemption Redemption Investment December31,2012 Commitment Frequency NoticePeriod

Alternativeequityfunds(A) $ 1,196,536 $ - Quarterly 95days

(A) This fund aims to generate consistent absolute returns by investing in assets with a diversified group of investment managers through managed account structures (“Managed AccountStructures”) or in the private investment funds sponsored by investment managers (collectively, “HedgeFundManagers”or“HedgeFunds”).

Note 3. Property and Equipment

PropertyandequipmentatDecember31consistedof:

2013 2012

Furniture and equipment $ 20,167 $ 20,167Computer hardware 126,081 485,526Computer software 35,073 35,073 Total cost 181,321 540,766Lessaccumulateddepreciationandamortization 177,596 527,698

$ 3,725 $ 13,068



Note 4. Related Party TransactionsIn February, 2012, NAIC and NIPR finalized a new License and Services Agreement (the Agreement).TheinitialtermoftheagreementisfiveyearsandisretroactivelyeffectivetoJanuary1,2012.Theagreementwillautomatically renew each year thereafter unless either party provides written notice of termination to the other partynolaterthan180dayspriortotheendoftherenewalperiod.ThetermsinthenewAgreement,provideforalump-sumpaymentof$6,881,392toNAICasacostrecoverymechanismforNAIC’sremaininginvestmentinSPLasofDecember31,2011anddonotprovideforanyrepaymenttoNIPRofthiscostrecoveryamountiftheAgreement is cancelled prior to the end of the renewal period. The terms of the Agreement increased the fee for NIPRtousetheNAIC’sproducerdatafrom30%to38%.Inaddition,theadministrativefeechangedfromaflatfeeof$1,000,000totheactualcostofservices,facilities,andequipmentprovided.WiththefullreimbursementofNAIC’s previous investment in SPL the per transaction usage fee is no longer applicable. System usage fees for 2012forwardarerelatedtocurrentinfrastructurecosts.

The total amount charged during the year and amounts owed at year-end are as follows:

2013 2012

Administrative services provided by the NAIC $ 1,115,147 $ 1,289,158

License fee $ 9,225,778 $ 8,067,430

System Usage Fees $ 218,557 $ 190,117

SPL Cost Recovery $ - $ 6,881,392

Amounts payable to the NAIC $ 914,981 $ 954,568

Note 5. Defined Contribution PlanTheNIPRhasadefinedcontribution401(k)plan(thePlan),whichcoverssubstantiallyallemployeeswhohavecompleted one year or more of service. Each year the Board of Directors determines the contribution for the next year.In2013and2012,theNIPRmatchedupto3.5%ofcontributionsofthoseemployeeswhocontributedtothePlanandcontributed5%ofallemployees’annualcompensation.Contributionexpensewas$376,547and$341,097fortheyearsendedDecember31,2013and2012,respectively.

Note 6. Significant Estimates and ConcentrationsU.S. generally accepted accounting principles requires disclosure of certain significant estimates and current vulnerabilitiesdue tocertainconcentrations.Approximately31%and32%ofall revenue for theyearsendedDecember31,2013and2012,respectively,wasreceivedfromtwobusinesspartners. Note 7. Subsequent EventsManagement has performed an evaluation of events that have occurred subsequent to December 31, 2013throughFebruary21,2014.Therehavebeennoevents thatoccurredduringsuchperiod thatwould requiredisclosureinthesefinancialstatementsorwouldberequiredtoberecognizedinthefinancialstatementsasoforfortheyearendedDecember31,2013.

Notes to Financial Statements


THE HONORABLE SHARON CLARKCommissionerKentucky Department of InsuranceBoard Secretary/Treasurer*serveduntil12/06/13

DAVID EPPSTEINNational Association of Professional Insurance Agents (PIA)

JOHN FIELDINGCouncil of Insurance Agents & Brokers (CIAB)Board Vice President

DAVID LEIFERAmerican Council of Life Insurers (ACLI)

THE HONORABLE THOMAS LEONARDICommissionerConnecticut Insurance Department

THE HONORABLE MONICA LINDEENCommissioner of Insurance & SecuritiesMontanaOfficeofInsurance&Securities

SUZANNE LOOMISNational Alliance of Life Companies (NALC)

THE HONORABLE JULIE MIX McPEAKCommissionerTennessee Department of Commerce & Insurance

SENATOR BEN NELSONChief Executive OfficerNational Association of Insurance Commissioners (NAIC)Ex Officio Voting Member

THE HONORABLE SANDY PRAEGERCommissionerKansas Insurance Department

THE HONORABLE ROGER SEVIGNYCommissionerNewHampshireDepartmentofInsuranceBoard President

ÉLISE SPRIGGSProperty Casualty Insurers Corporation of America (PCI)

JESSICA WALTMANNationalAssociationofHealthUnderwriters(NAHU)

Board of Directors(as of December 31, 2013)


Senior Management Staff (L to R)

Patricia HertleinSeniorManager,Sales&Marketing

Susan MaldonadoAssistant Director – Operations

Laurie WolfSeniorManager,RegulatorRelations

Interim Executive Director

Dennis WilsonAssistant Director – Technology Applications

Senior Management