Combined ratio

In general (non-life) insurance, the combined ratio is claims and operating expenses as a percentage of premium income.

If it is less than 100% the company is making an operating profit on investment underwriting. A company may still make a profit despite a combined ratio of over a 100% as insurance companies normally have substantial investment income.

It is may include or exclude amounts reimbursed by reinsurers. It is important to be clear which of these variants is being used in any instance.

The combined ratio combines two types of costs: claims and operational expenses. It can be decomposed into two ratios, the claims ratio and the expense ratio to give a more detailed breakdown.