Ins Return on Net EP

bicbicbicbic
in MSA.Ratios

The formula is ( U/W.Inc - CapGains + InvInc(from U/W.Inc ) / NEP

Could you please explain on investment income attributing from U/W income? How do i separate the investment income sources?

Thank you!

Comments

  • Staff-T1Staff-T1
    edited July 2022

    I wouldn't worry about separating them for the exam -> it will usually be given. I would say investment income attributable to U/W income is simply the return on your invested UW profits

  • bicbicbicbic

    Thanks

  • VadimSemVadimSem

    Hi, I came across this same question and found this sample from the Fall 2012 exam question 21b) where it was asked to calculate insurance return on NEP. The basis of the answer was using the following formula:

    Which version of the formula should be used? Any insight is appreciated!

  • cornedovcornedov

    I believe they are the same, the latter simply assumes all investment income is attributable to U/W which is really the only assumption we can make unless the question explicitly states a split.

  • Staff-T1Staff-T1

    thats right

  • VadimSemVadimSem

    Thanks!

    Also might be a little nit picky (I apologize!) but I think this version of the formula used in the Fall 2017 Q25 examiners report is more accurate and makes more sense. Let me know any thoughts.

    Basically you don't just subtract capital gains on its own, the point is that you add investment income excluding capital gains, but only the portion that is attributed to UW income.

  • Staff-T1Staff-T1

    I think it makes sense. I wouldn't say it is more accurate as it is just restating the same thing -> Whichever way is easier for you to memorise :)

  • VadimSemVadimSem

    Thanks!

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