THERE HAS BEEN MUCH DISPUTE over the components to include in the earnings measure used in the security analysis of property-liability companies. Current practice in financial reporting is generally to include realized but exclude unrealized capital gains and losses on common stocks (i.e., equity securities) from the income statement.' Insurance industry officials and security analysts have expressed strong opposition to the reporting of annual unrealized capital gains and losses in the income statement. One argument presented to justify this opposition was that investors currently ignore the gains and losses on equity securities, and to include them in income would result in an income number not directly useful for investment analysis. For instance, the Chairman of the Adjusted Earnings Committee of the Association of Insurance and Financial Analysts stated at an Accounting Principles Board Public Hearing [4]: