Hi, The investment income item in the P&L is split into "Investment income on insurance funds" and "Balance of investment income". I don't understand the difference between these 2 items. What is the rationale for splitting the investment income in 2? Thanks, Christina
'Investment income on insurance funds' is the investment return earned on the technical reserves, (ie case estimates, IBNR, UPR and so forth). The other investment income is earned on any remaining assets. You'll see some exams calling this 'investment return on shareholders' funds', or on 'free assets'. As for the rationale, it gives a clearer picture of the profitability of the insurance business to split it out like this. For longer-tail business in particular, investment returns can form a significant portion of the profits.
