Modified Formula Table
Jump to navigation
Jump to search
item formula U/W income = EP – (current AY loss) – (change in prior years' AY loss) – LAE – (other U/W expense) 1 = EP – (current AY loss & LAE) – (change in prior years' AY loss & LAE) – (other U/W expense) 1a
net investment income earned
(from Odomirok text)= (Interest and Dividends received on investment assets held over the course of the year)
.investment income
(from Odomirok text)= (net investment income earned) + (net realized capital gain (loss)) - (This formula appears to be an error in the source text since statutory accounting should not include realized capital gains. This formula however appeared in the exam problem E (2018.Spring #10a) where the correct answer used this formula. Answers from the official source texts should be marked correct, even if the information is wrong.)
investment gain
(from income statement)= (net investment income earned) + (net realized capital gains(loss)) – (capital gains taxes) 2a
.net investment income = (investment revenue) – (investment expenses) – (non-federal TLF) 2 other income = SUM(agents' balances charged off, service fees, aggregate write-ins) TOTAL net income = (U/W income) + (net investment gain ) + (other income) – (dividends to policyholders) – (fed/foreign taxes incurred) 3
- 1 SAP uses incurred expenses (not paid expenses because incurred is more accurate than paid)
- → Use version 1 of the U/W Income formula for E (2018.Spring #10a) because the LAE is given as a single number.
- 1 SAP uses incurred expenses (not paid expenses because incurred is more accurate than paid)
- 1a This version of the formula treats Loss and LAE the same way but the information must be provided in that format.
- → Use version 1a of the U/W Income formula for of E (2016.Spring #18b) because loss & LAE are given in the same format.
- 1a This version of the formula treats Loss and LAE the same way but the information must be provided in that format.
- 2 Investment revenue excludes realized capital gains AND excludes unrealized capital gains
- 2a by definition: (net investment income earned) is already net of expenses and in this problem also net of taxes
- (there is a helpful forum discussion on the difference between "investment income earned" and "investment gain".)
- 3 If you look at the given information in the exam problem, all of the little items in the bottom box (below unrealized capital gains) are included in the income calculation except dividends to stockholders. Normally you would also have to subtract federal & foreign income taxes, but this is not provided in the given information.
