Combined Ratio Calculator
Calculate insurance company profitability using combined ratio analysis
Calculate Combined Ratio
Total premiums earned by the insurance company
Amount paid out as claims to policyholders
Expenses to investigate and settle claims
Expenses to acquire new policies and underwrite risks
Loss Expense
Claim Loss + Loss Adjustments
Total Expenses
Loss Expense + Underwriting Expense
Combined Ratio Analysis
Formula: Combined Ratio = (Loss Expense + Underwriting Expense) ÷ Premiums × 100
Calculation: (0 + 0) ÷ 0 × 100 = 0.00%
Ratio Interpretation
Example Calculation
ABC Insurance Company
Total Premiums: $12,000,000
Claim Loss: $4,500,000
Loss Adjustments: $2,300,000
Underwriting Expense: $1,200,000
Step-by-Step Calculation
1. Loss Expense = $4,500,000 + $2,300,000 = $6,800,000
2. Total Expenses = $6,800,000 + $1,200,000 = $8,000,000
3. Combined Ratio = ($8,000,000 ÷ $12,000,000) × 100
Combined Ratio = 66.67%
Result: Profitable operation
Industry Benchmarks
Excellent
Below 90%
Highly profitable operations
Good
90% - 99%
Profitable but margin for improvement
Break-even
Around 100%
No underwriting profit or loss
Poor
Above 100%
Underwriting losses
Key Components
Loss Ratio
Claims and adjustments vs premiums
Expense Ratio
Underwriting costs vs premiums
Combined Analysis
Total operational efficiency metric
Profitability
Below 100% indicates profit
Understanding Combined Ratio in Insurance
What is Combined Ratio?
The combined ratio is a key financial metric that measures the overall operational efficiency of an insurance company. It represents the percentage of premium dollars that go toward covering claims and operating expenses, making it the best indicator of underwriting profitability.
Why is it Important?
- •Measures overall operational efficiency
- •Indicates underwriting profitability
- •Helps compare insurance companies
- •Guides pricing and risk management decisions
Formula Components
Combined Ratio = (Loss Expense + Underwriting Expense) ÷ Premiums × 100
- Loss Expense: Claim Loss + Loss Adjustments
- Claim Loss: Money paid out as claims
- Loss Adjustments: Costs to investigate and settle claims
- Underwriting Expense: Costs to acquire new policies
- Premiums: Total premiums earned
Interpretation Guide
- < 100%: Profitable (premiums exceed expenses)
- = 100%: Break-even (premiums equal expenses)
- > 100%: Loss-making (expenses exceed premiums)
Combined Ratio vs Loss Ratio
Combined Ratio
- • Includes all operational expenses
- • Measures total underwriting efficiency
- • Best overall profitability metric
- • Considers entire value chain
Loss Ratio
- • Only includes claims and adjustments
- • Measures claims management efficiency
- • Focuses on risk assessment quality
- • Excludes acquisition costs