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Net Investment Income Ratio Formula:
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The Net Investment Income Ratio (NIIR) is a financial metric used primarily in the insurance industry to measure the yield generated from invested assets. It represents the percentage return on average invested assets from net investment income.
The calculator uses the Net Investment Income Ratio formula:
Where:
Explanation: This ratio measures the efficiency of investment management by showing the percentage return generated from the average invested asset base.
Details: NIIR is crucial for insurance companies to assess their investment performance, make strategic investment decisions, and ensure adequate returns to support policyholder obligations and company profitability.
Tips: Enter net investment income and average invested assets in the same currency units. Both values must be positive, with average invested assets greater than zero.
Q1: What constitutes Net Investment Income?
A: Net Investment Income includes interest, dividends, rental income, and other investment earnings minus investment expenses and taxes.
Q2: How is Average Invested Assets calculated?
A: Typically calculated as the average of beginning and ending invested assets for the period, or as a time-weighted average for more precision.
Q3: What is a good NIIR for insurance companies?
A: This varies by market conditions and investment strategy, but generally ranges from 3% to 6% for well-managed insurance portfolios.
Q4: How does NIIR differ from ROI?
A: NIIR focuses specifically on income yield from investments, while ROI includes both income and capital gains/losses on the entire investment portfolio.
Q5: Why is NIIR important for policyholders?
A: A healthy NIIR indicates the insurer's ability to generate sufficient investment income to meet future policyholder claims and benefit payments.