The combined ratio — loss ratio plus expense ratio — is the headline measure of underwriting profitability. Below 100% the carrier makes an underwriting profit; above 100% it relies on investment income.
The example
$640k claims, $300k expense, $1M premium.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | (640k+300k)/1M | — |
| 3 | Combined | → 94% |
The formula
The formula:
How it works
How it works:
- Loss ratio = claims ÷ premium; expense ratio = expenses ÷ premium.
- Add them for the combined ratio.
- Under 100% = underwriting profit; over 100% = underwriting loss.
- Underwriting margin = 100% − combined ratio.
Illustrative math only — not insurance, financial, or legal advice. Policy language, state regulation, and carrier rules govern actual claims, premiums, and coverage. Always read the policy and consult a licensed professional.
Try it: interactive demo
Claims, expenses, premiums earned.
Variations
Loss ratio
Claims share:
Expense ratio
Expense share:
Underwriting margin
Profit margin:
Pitfalls & errors
100% is the line. Below = profit, above = loss on underwriting alone.
Earned premium. Match expenses and claims to earned premium.
Investment income. A >100% combined ratio can still be offset by investments.
Practice workbook
Frequently asked questions
How do I calculate combined ratio in Excel?
What does a combined ratio below 100% mean?
How is it related to loss ratio?
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