New "net investment income from insurance operation"
Hi,
With this new version of the paper, there is a new element to the calculation; the Share of Net Income from Pooled Funds.
I won't write the whole formula, because it would just take time and not add value, but my question is
Which one is the new version :
The lesser of [X, Y] + Share of net Income ...
or
The lesser of [X, Y + Share of net Income...]
I assume it is the first one, since it makes way more sense to me, but I just want to be sure.
Thanks again
Comments
This is a good question. It is not fully clear from the way they write it. However, I believe that it's actually the second one
min(X, Y + Share of net income...)
for the following reason:Share of net income ...
=(page 20.30, line 47)
X
, they reference(line 46)
which is the investment yield.(line 46)
now incorporatesShare of net income ...
in its calculation. Therefore, when we calculateX
as the product of(A+B+C+D-E-F)
and(line 46)
, we will be accounting for theShare of net income ...
in some manner.min(X, Y + Share of net income...)
(had we donemin(X, Y) + Share of net income...
, then we may be double counting theShare of net income...
portion).Referencing http://www.osfi-bsif.gc.ca/Eng/fi-if/rtn-rlv/fr-rf/ic-sa/pc-sam/Pages/pcVI.aspx here so you can do Ctrl+F to move quickly to the lines mentioned above.
This makes sense to me, thanks a lot.
Considering that the MSA text is not updated, I doubt this will end up on the exam, but I wanted to be sure.
MSA text for adjusted Investment yield does not have the Share of pool funds component.