This study compares the ability of two sets of income numbers to predict a market risk measure: 1) statutory, and 2) a surrogate of income produced according to generally accepted accounting principles (GAAP). The major conclusion is that investors using GAAP income data are able to make better predictions of market risk levels than those using only data. However, neither income data set can outperform a prediction model which allows for the mean reversion behavior of the market risk measure. Recently, the subject of insurance accounting procedures has received attention in the insurance and accounting literature. The set of accounting procedures required by state law for insurers is referred to in the literature as the statutory system, or the cash/accrual system, and differs from procedures normally employed under generally accepted accounting principles (GAAP). The purpose of the system, according to the National Association of Insurance Commissioners (NAIC), is to preserve the confidence of the policyowners, and to help them assess an insurer's claim paying ability [21]. A primary purpose of GAAP is to provide information for investor decision making purposes. Insurer Accounting Techniques The accounting techniques that are used by nonlife insurers differ from GAAP techniques in various ways. First, insurers recognize as assets only those items which are readily convertible into cash. These assets are called admitted assets, and only admitted assets are included on the balance sheet of a nonlife insurer. Most remaining assets (with certain exceptions such as land, EDP equipment, and buildings), not readily convertible into cash, cannot be included in determining the solvency of an insurer and are omitted from the balance sheet. William Kross currently is Assistant Professor, Krannert Graduate School of Management, Purdue University. He was an Assistant Professor of Accounting, Illinois State University whlen this article was submitted and later accepted for publication. He is a Certified Public Accountant and holds the Ph.D. degree. The author thanks Professors William Kinney (Iowa), and Robert Eskew (Purdue), and the participants of the University of Iowa Accounting Research Seminar for their helpful comments.