Lesson 7: Investment Income

Calculate Investment Income

Monthly investment income is calculated on opening balance and cash flows at the beginning of policy month. Usually, we do not consider accumulated surpluses in the insurance fund in projecting investment income in a cash flow model – it becomes more complex if accumulated surplus needs to be included in the model. In many actuarial studies, investment income is calculated separately on fund level (i.e. combining cash flows from all in force policies), instead of policy level.

Monthly investment income is calculated as: