Combined Ratio Calculator
From incurred losses, expenses and earned premiums, compute the combined ratio — the core underwriting profitability gauge for insurers.
Input Data
Results
At a glance:Combined ratio = (incurred losses + underwriting expenses) / earned premiums. It splits into loss ratio (losses/premiums) and expense ratio (expenses/premiums). Below 100% = profitable underwriting; above 100% = underwriting loss (only investment income can rescue it). Example: premiums 1m, losses 600k, expenses 280k → (600k+280k)/1m = 88% — profitable. WARNING: Excludes investment income and capital gains; a >100% ratio is not necessarily a net loss; based on accounting figures that can shift with reserves. Education, not advice.
Formula
Loss ratio = incurred losses / earned premiums × 100%.
Expense ratio = expenses / earned premiums × 100%.
Combined ratio = loss ratio + expense ratio.
$$$LR=\\dfrac{Losses}{EarnedPremium}\\times100\\%$$$$$$ER=\\dfrac{Expenses}{EarnedPremium}\\times100\\%$$$$$$CR = LR + ER$$$$$$\\dfrac{600{,}000}{1{,}000{,}000}+\\dfrac{250{,}000}{1{,}000{,}000}=60\\%+25\\%=85\\%$$$How to Use
- Enter earned premiums, incurred losses and underwriting expenses.
- View the combined, loss and expense ratios.
FAQ
What does a combined ratio below 100% mean?
It means the insurer's core underwriting (collecting premiums vs paying claims and running the business) is profitable — it makes money before any investment income. Below 100% is the goal; the lower, the better the underwriting.
Why can a ratio above 100% still be fine?
Because the combined ratio ignores investment income. Insurers invest the 'float' (premiums held before claims are paid); strong investment returns can offset an underwriting loss, so the firm can still net profit with a combined ratio above 100%. But relying on that is riskier than underwriting profit.
What do the loss and expense ratios tell me?
Loss ratio = claims / premiums — how much of premium goes to claims (pricing adequacy and risk quality). Expense ratio = underwriting expenses / premiums — acquisition and admin efficiency. A high loss ratio points to poor pricing/claims; a high expense ratio to bloated costs. Combined = the two.
Why use earned, not written, premiums?
Written premium is the total sold; earned premium is the portion that applies to the period (premium is earned as coverage is provided). Using earned premium matches the losses and expenses of the same period, giving a meaningful ratio. Written premium alone overstates the current period's result.
What is the Hong Kong angle?
The Insurance Authority (IA) supervises Hong Kong insurers' solvency and conduct; the combined ratio is a standard indicator analysts use to assess underwriting health alongside solvency and investment results. This is a simplified educational measure; for actual insurer analysis consult the IA's disclosures and filings. Education, not advice.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.