Combined Ratio After Policyholder Dividends
What Does Combined Ratio After Policyholder Dividends Mean?
The combined ratio after policyholder dividends is a metric used to gauge an insurer’s profitability and financial health in relation to the volume of business it generates. Expressed as a percentage, this ratio reflects the company’s performance over a specific period. It is calculated by dividing the sum of the insurer’s losses and expenses by its earned premiums.
Insuranceopedia Explains Combined Ratio After Policyholder Dividends
If the combined ratio after policyholder dividends is below 100%, it indicates that the company is generating an underwriting profit. Conversely, a ratio above 100% suggests that the company is paying out more in claims and expenses than it collects in premiums. However, a company with a ratio exceeding 100% can still achieve an overall profit, as the combined ratio does not account for investment income. For this reason, the combined ratio is often considered a valuable measure of a company’s operational performance.
