Combined Ratio Calculator

Calculate combined, loss, and expense ratios for insurance underwriting analysis.

Assess the financial health and profitability of insurance companies by calculating the combined ratio, loss ratio, and expense ratio. Enter incurred losses, expenses, and earned premiums to get instant results.

Examples

Click on any example to load it into the calculator.

Auto Insurance Company

auto_insurance

A mid-sized auto insurer's annual underwriting performance.

Incurred Losses: $1,200,000.00

Expenses: $350,000.00

Earned Premiums: $2,000,000.00

Health Insurance Provider

health_insurance

A health insurer with high claims and moderate expenses.

Incurred Losses: $1,800,000.00

Expenses: $400,000.00

Earned Premiums: $2,100,000.00

Profitable Underwriting

profitable_case

A company with low losses and efficient expense management.

Incurred Losses: $600,000.00

Expenses: $200,000.00

Earned Premiums: $1,000,000.00

Unprofitable Scenario

not_profitable_case

A scenario where combined ratio exceeds 100% (loss-making).

Incurred Losses: $900,000.00

Expenses: $250,000.00

Earned Premiums: $1,000,000.00

Other Titles
Understanding Combined Ratio Calculator: A Comprehensive Guide
Master insurance profitability analysis with combined, loss, and expense ratios. Learn how to interpret, calculate, and apply these metrics for better financial decisions.

What is the Combined Ratio?

  • Core Concepts and Definitions
  • Why Combined Ratio Matters
  • Components of Combined Ratio
The Combined Ratio is a key financial metric used in the insurance industry to assess underwriting profitability. It combines the loss ratio and expense ratio to provide a comprehensive view of an insurer's operational efficiency and risk management. A ratio below 100% indicates profitability, while a ratio above 100% signals underwriting losses.
Why is Combined Ratio Important?
Combined Ratio is crucial for insurance companies, investors, and analysts as it directly reflects the company's ability to generate profits from its core business. It helps identify trends, benchmark performance, and guide strategic decisions.
Components: Loss Ratio & Expense Ratio
Loss Ratio measures the proportion of premiums used to pay claims, while Expense Ratio reflects the share spent on operating costs. Together, they form the Combined Ratio, offering a holistic view of underwriting performance.

Key Metrics Explained:

  • Combined Ratio: (Incurred Losses + Expenses) / Earned Premiums × 100
  • Loss Ratio: Incurred Losses / Earned Premiums × 100
  • Expense Ratio: Expenses / Earned Premiums × 100

Step-by-Step Guide to Using the Calculator

  • Input Data Collection
  • Calculation Methodology
  • Result Interpretation
To use the Combined Ratio Calculator, gather accurate data for incurred losses, expenses, and earned premiums. Enter these values into the calculator and select the appropriate currency if needed. The tool will instantly compute the combined, loss, and expense ratios.
1. Collect Accurate Data
Ensure all monetary values are for the same period and currency. Use audited financial statements or reliable internal reports for best results.
2. Enter Data and Calculate
Input incurred losses, expenses, and earned premiums. Click 'Calculate' to see the results. The calculator will display all ratios and indicate profitability status.
3. Interpret the Results
A combined ratio below 100% means the insurer is profitable from underwriting. Above 100% indicates losses. Compare with industry benchmarks for deeper insights.

Calculation Examples:

  • Incurred Losses: $1,200,000, Expenses: $350,000, Earned Premiums: $2,000,000 → Combined Ratio: 77.5%
  • Incurred Losses: $1,800,000, Expenses: $400,000, Earned Premiums: $2,100,000 → Combined Ratio: 104.8%

Real-World Applications of Combined Ratio

  • Insurance Company Analysis
  • Investor Decision-Making
  • Regulatory Compliance
Combined Ratio is widely used by insurance executives, analysts, and regulators to evaluate underwriting performance, set pricing strategies, and ensure financial stability. It is a key metric in annual reports and industry benchmarking studies.
Company Performance Assessment
Executives use combined ratio trends to identify operational strengths and weaknesses, optimize expense management, and improve claims handling.
Investor and Analyst Insights
Investors rely on combined ratio to compare insurers, assess risk, and make informed investment decisions. A consistently low combined ratio is a sign of strong management and profitability.
Regulatory and Compliance Uses
Regulators monitor combined ratios to ensure insurers remain solvent and can meet policyholder obligations. High ratios may trigger regulatory scrutiny or intervention.

Industry Benchmarks:

  • Auto Insurance: 95-100% typical combined ratio
  • Health Insurance: 98-105% typical combined ratio

Common Misconceptions and Correct Methods

  • Myths About Combined Ratio
  • Calculation Pitfalls
  • Best Practices
A common misconception is that a combined ratio above 100% always means a company is failing. In reality, investment income can offset underwriting losses. Another pitfall is inconsistent data periods or currencies, which can distort results.
Myth: Combined Ratio Alone Tells the Whole Story
While important, combined ratio should be analyzed alongside other metrics like investment returns, reserve adequacy, and growth rates for a complete picture.
Calculation Best Practices
Always use consistent, audited data. Double-check for one-off expenses or extraordinary claims that may skew results. Document assumptions and calculation methods for transparency.

Best Practice Tips:

  • Use annual data for consistency
  • Exclude investment income from combined ratio calculation

Mathematical Derivation and Examples

  • Formula Breakdown
  • Worked Examples
  • Advanced Analysis
The combined ratio formula is straightforward: (Incurred Losses + Expenses) / Earned Premiums × 100. Loss ratio and expense ratio are calculated similarly. Advanced users may analyze trends over time or compare ratios across business lines for deeper insights.
Formula Details
Combined Ratio = (Incurred Losses + Expenses) / Earned Premiums × 100. Loss Ratio = Incurred Losses / Earned Premiums × 100. Expense Ratio = Expenses / Earned Premiums × 100.
Worked Example
If an insurer has $1,200,000 in incurred losses, $350,000 in expenses, and $2,000,000 in earned premiums: Combined Ratio = (1,200,000 + 350,000) / 2,000,000 × 100 = 77.5%.
Advanced Analysis
Track combined ratio trends over multiple years to identify improvements or emerging risks. Segment ratios by product line for granular analysis.

Advanced Calculation Examples:

  • Compare combined ratios across years for trend analysis
  • Segment ratios by product line for detailed insights