2017 S12 net investment income

luohuashengluohuasheng
in NAIC.IRIS

I have a question about the net investment income calculation. the answer in examiner report just use net investment gain. what about the investment expense listed in underwriting and investment exhibit (95)?. I am confused about the terms used in investment income and keep miscalculating it. Are the following equation correct? where does capital gain tax on realized fit into?

investment income = net investment gain = investment revenue - investment expense = net investment earned + net realized capital gain = net investment gain attributable to insurance transaction + net investment gain attributable to capital and surplus

Comments

  • luohuashengluohuasheng

    I thought investment income earned is already net of expense, but in 2014 F 12,
    net investment income = - investment expenses incurred +gross investment income earned + realized capital gain
    is the gross investment income earned means gross of investment expense? if change to net investment income earned, should we ignore the expense?

  • grahamgraham

    Those formulas look correct. Your main question seems to be how to know when you have to subtract investment expenses.

    • In the 2017 problem, you're given net investment gain. That means investment expenses have already been subtracted so you can use the value of net investment gain as given.
    • In the 2014 problem, you're given gross investment income. That means investment expenses have not been subtracted so you first have to subtract them from gross investment income.

    Also, the 2014 problem tells you to ignore taxes. You can generally ignore taxes in these types of problems unless they specifically say otherwise.

    To see how capital gains tax is handled on the income statement, open the link below and use control-f to search for "tax". You will then be see all references to capital gains tax.

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