Combined Ratio

The Combined Ratio is all costs incurred by an insurer (admin and claims) as a percentage of premium, i.e. the combination of the Loss Ratio and Expense Ratio.

If the Combined Ratio is under 100%, the insurer has made an underwriting profit, i.e. it has collected more in premiums than it has paid out in claims and the costs of running the insurance business.

If the Combined Ratio is over 100%, the insurer has made an underwriting loss, i.e. it has collected less in premiums than it has paid out in claims and the costs of running the insurance business.

However, making an underwriting profit (or loss) does not mean that the insurer has made a profit (or loss) overall. This is because the insurer may have other income streams - in particular the income earned by investing the premiums for the period between policies starting and the payment of claims, which could be months or even years.