CCIR Instructions
I have 2 questions regarding the text CCIR Intrusctions.
In the Guidelines for page 20.22 it is written that :
So in word, that means that Investment return = Interest revenue on financial assets not measured at FVTPL + Net investment income excluding segregated funds + Net investment income - segregated funds + Provision for Credit Losses.
However, in the Guidelines for page 40.74, it is written that :
So in word, that means that Investment return = Net Investment Income - Provision for Credit Losses, where Net Investment Income = Gross Investment Income - Investment Expenses (other than Investment Taxes) - Investment Taxes. Since in page 40.74, there is no information about financial assets not measured at FVTPL (page 40.72), how can the Investment return calculated per fomula on page 20.22 be equal to the Investment return calculated per formula on page 40.74 ? I feel that OSFI Guidelines are contradictory? What do you think about that?
In the wiki, it it stated that Net Investment Income = Total Realized Gains (Losses) on Sale + Total Fair Value Gains (Losses) + Dividends + Gross Investment Income - Investment Expenses (other than Investment Taxes) - Investment Taxes, but I think that the Net Investment Income should be : Net Investment Income = Gross Investment Income - Investment Expenses (other than Investment Taxes) - Investment Taxes, because Gross Investment Income = Total Realized Gains (Losses) on Sale + Total Fair Value Gains (Losses) + Dividends (that’s what I have been told at my work). What do you think? I am confused because Gross Investment Income is not written in front as the other sub total are, but it makes sens that it is a sub total.
Comments
Errr are you asking me?
Yup, this was emailed to to us. I sometimes just send the question to the forum staff if I don't have time to respond. Sorry!
Takeaway, should we include gross investment income or not?
I think that's an interesting observation. I'm not an accountant and have never filled up these sections of the P&C annual return, but I think it does seem like the amounts in page 40.72 would be on line 240 of page 40.74. I doubt that there would be a contradiction as these returns are used by every company and are constantly audited.
I think gross investment income here is mainly referring to the non-capital gains portion of investment returns, so mainly interest. In your version of the formula, you would be missing your returns from interest payments. Unless I am misunderstanding something, in terms of semantics, you can move the terms around however you like and it doesn't really change anything. I don't see anything wrong with the BA formula here
Line Item 099 Total Realized Gains (Losses) on Sale
Line Item 199 Total Fair Value Gains (Losses)
My understanding is that Realized Gains is profit you made from the increased value of your selling you investment. Than what is 199? What is Fair Value Gains in simple terms?
Fair Value gains are the unrealized or mark to market gains