[C009]

capital gain

That part of a company's income which is realized when its invested assets are sold at a price above book value (or below book value, for a capital loss). Unrealized capital gains or losses do not affect a company's income; however, increases or decreases in the market values of equity securities produce a corresponding effect on policyholder surplus, although market value changes in other invested assets do not affect policyholder surplus.

(See investment income.)