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📊 '''Completion account''' refers to a set of financial statements prepared as of the [[Definition:Completion | closing]] date of an insurance-sector [[Definition:Mergers and acquisitions (M&A) | acquisition]], used to determine the final [[Definition:Purchase price adjustment | purchase price]] by measuring the target company's actual financial position at the moment ownership transfers. When the target is a licensed [[Definition:Insurance carrier | insurer]] or [[Definition:Reinsurance | reinsurer]], completion accounts typically capture [[Definition:Net asset value (NAV) | net asset value]], [[Definition:Statutory surplus | statutory surplus]], [[Definition:Loss reserves | claims reserves]], investment asset valuations, and working capital — all as of the effective date — so that the buyer pays a price reflective of what it actually receives rather than what was estimated at signing.

🔄 Preparation of completion accounts begins shortly after the transaction closes, with the seller (or the target's management) drafting the accounts under an agreed set of accounting policies specified in the [[Definition:Sale and purchase agreement (SPA) | SPA]]. These policies are among the most carefully negotiated provisions in any insurance deal because different measurement bases can produce materially different results. For instance, whether [[Definition:Loss reserves | reserves]] are stated on a [[Definition:US GAAP | US GAAP]], [[Definition:IFRS 17 | IFRS 17]], or local [[Definition:Statutory accounting | statutory]] basis, and whether [[Definition:Incurred but not reported (IBNR) | IBNR]] is calculated using the target's historical methodology or an independent [[Definition:Actuary | actuarial]] assessment, can swing the net asset figure significantly. Once drafted, the accounts are submitted to the buyer for review. The buyer may raise objections, and the [[Definition:Sale and purchase agreement (SPA) | SPA]] will prescribe a dispute resolution process — typically referral to an independent accounting or [[Definition:Actuary | actuarial]] firm — if the parties cannot agree.

💡 Completion accounts serve as the financial truth at the heart of most insurance acquisitions that use a [[Definition:Completion account mechanism | completion account mechanism]] rather than a [[Definition:Locked-box mechanism | locked-box]] structure. Their importance is amplified in insurance because the target's balance sheet is dominated by estimated liabilities — principally [[Definition:Loss reserves | claims reserves]] — that can shift materially between signing and closing as new information emerges. In long-tail lines such as [[Definition:Professional liability insurance | professional liability]], [[Definition:Workers' compensation insurance | workers' compensation]], or [[Definition:Medical malpractice insurance | medical malpractice]], reserve movements during even a short interim period can represent tens of millions of dollars. Ensuring that completion accounts are prepared on a consistent, clearly defined basis — and that the dispute mechanism is robust — protects both sides from being unfairly advantaged or disadvantaged by the inherent volatility of insurance financials.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Completion account mechanism]]
* [[Definition:Locked-box mechanism]]
* [[Definition:Purchase price adjustment]]
* [[Definition:Net asset value (NAV)]]
* [[Definition:Loss reserves]]
* [[Definition:Statutory accounting]]
{{Div col end}}

Definition:Completion account - Revision history

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