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Investment Income on Tech and Non Tech reserves.

L

Leala

Member
Subject G - April 1997 - Paper 2 - Q1

Firstly, could you really be asked a question like part two of this question? It just seems impossible to me.

Also, just to confirm this :

Is the investment income, when earned on the average of the companies assets over the year, in total the investment income multiplied by the asset figures in the balance sheet?

then to split it between the income on technical and non-technical reserves:

Technical reserve income = Investment income on the average of the reserves figures during the year (so for eg, the figures at the start and end of the year for the sum of the OSCR, UPR, AURR etc)

For the non- technical reserves, its' the investment income on the average of the shareholders funds (or free reserves )for the year?

So the sum of these should equal to the investment income on the Asset figures (usually the first figure on the balance sheet) for the year?

Thanks a lot on this
 
Although Subject G was UK-specific, all the principles are exactly as they are now in Subject ST3, so yes, it's still a fair question. You're not alone in finding accounts questions tricky though, and to be fair this question was amongst the worst!

You're right about investment income (although there are other ways of calculating it):
Total inv income = inv return times average of total assets at start and end of year.
Inv income on tech reserves = inv return times average of tech reserves (UPR etc) at start and end of year.
Inv income on free reserves = the rest (= inv return on average SHF at start and end of year).

Bear in mind that in some past questions, you won't have all this data and so might have to calculate it some other way (for example just by using the start-year values).
 
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