Invested Assets
The formula for AdjInvYld = 2*(NetInvInc +OCI)/(Invested Assets [start] + Invested Assets [End] -NetInvInc-OCI)
Invested Assets = Short Term Investments + Bonds & Debentures + Mortgage Loans + Common Stock + Preferred Stock + Investment Properties + Other loans and Invested Assets
If the first formula for investment yield is correct this would mean cash is not to be included in the denominator. However the note on the wiki says that cash should be included in the denominator.
If Cash is excluded from Invested Assets but exam q's Spring 2019 Q21 and Spring 2017 Q13 include it in the denominator for investment yield, does this mean the real formula for AdjInvYld should be equal to 2*(NetInvInc +OCI)/(Cash [start] + Invested Assets [start] + Cash [End]+Invested Assets [End] -NetInvInc-OCI)?
Comments
Im not sure I follow - cash is included in short term investments. Short-term investments are ultra liquid investments such as short term government bonds, term deposits and cash
clarification on mortgages and loans, do we consider them as assets because we have lent out the mortgage/loan? we do this for MCT too where for margin interest rate loans & mortgages are asset. How are we supposed to know when we hold or give out a loan
Mortgages are usually considered an asset (i.e. the insurer is supplying a mortgage to a third party) There would be no reason for an insurer to take a large mortgage (usually, unless purchasing a building) But in an exam, it would be clearly stated that it is an asset