1. What is Combined Ratio?

The Combined Ratio is a measure of profitability used by insurance companies to indicate how well they are performing in their daily operations. It shows the relationship between incurred losses plus expenses and earned premiums.

2. How Does the Calculator Work?

The calculator uses the Combined Ratio formula:

Where:

• \( Losses \) — Insurance claims paid plus adjustments (USD)
• \( Expenses \) — Operating costs (USD)
• \( Premiums \) — Earned insurance premiums (USD)

Explanation: A ratio below 100% indicates an underwriting profit, while a ratio above 100% means the company is paying out more in claims than it's receiving in premiums.

3. Importance of Combined Ratio

Details: The combined ratio is a key metric for assessing an insurance company's underwriting profitability. It helps investors and analysts evaluate the financial health of insurance providers.

4. Using the Calculator

Tips: Enter all values in USD. Losses and expenses should be positive numbers, and premiums must be greater than zero for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What does a combined ratio of 95% mean?
A: A ratio of 95% means the company is making a 5% underwriting profit before investment income.

Q2: What is a good combined ratio?
A: Generally, a ratio below 100% is good, indicating profitability. The lower the ratio, the better the underwriting performance.

Q3: How does combined ratio differ from loss ratio?
A: Loss ratio only considers losses versus premiums, while combined ratio includes both losses and expenses.

Q4: Can combined ratio be negative?
A: No, since all components are positive values, the ratio will always be a positive percentage.

Q5: Why is combined ratio important to investors?
A: It shows the core profitability of insurance operations, separate from investment income, helping assess the company's underwriting discipline.