Combined Ratio (Insurance)
Computes an insurer's combined ratio: the sum of the loss ratio and the expense ratio. It's the central measure of an insurance operation's technical profitability — below one hundred percent, the insurer had an underwriting profit, making money on operations alone, before investments. Above one hundred percent, it had a technical loss and relied on investment income to finish in the black. Enter the loss ratio and the expense ratio.
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Combined Ratio (Insurance)
Computes an insurer's combined ratio: the sum of the loss ratio and the expense ratio. It's the central measure of an insurance operation's technical profitability — below one hundred percent, the insurer had an underwriting profit, making money on operations alone, before investments. Above one hundred percent, it had a technical loss and relied on investment income to finish in the black. Enter the loss ratio and the expense ratio.
Does the insurer make money insuring?
An insurer has two ways to profit: from the insurance operation itself and from investing the money it holds between the premium and the claim. The combined ratio isolates the first, the harder one. It adds up everything that goes out the operation's door, claims plus expenses, and compares it with earned premiums.
The hundred percent line is the watershed. Below it, the insurer had an underwriting profit: it made money just from insuring, before investing a single cent. Above it, it had a technical loss and needed investment income to make up for it. That's why the combined ratio is the first thing analysts look at in an insurer's statement.
Enter the loss ratio (how much of premiums became claim payments) and the expense ratio (the cost of operating). The tool adds the two and indicates whether there was a technical profit or loss. A combined ratio consistently below one hundred is the hallmark of a well-run insurer.
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The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.