What Does Net Underwriting Income Mean?
Net underwriting income is the profit that an insurance company makes from its premiums after the various associated expenses have been paid. These expenses include claims paid out, policyholder dividends, and loss adjustment expenses. The insurance company only generates a net underwriting premium if the money it receives from premiums is higher than the amount it must pay out in expenses.
Insuranceopedia Explains Net Underwriting Income
Because the nature of insurance depends on chance and involves risk, net underwriting income for insurance companies can vary greatly from quarter to quarter and year to year. For example, a property insurance company could be forced to pay out a lot of claims if an earthquake occurs and destroys many buildings. This could dramatically reduce net underwriting income for the period and actual result in huge losses. Similarly, other disasters or a series of smaller losses may lead to substantial losses.