What Does Underwriting Income Mean?
Underwriting income is the profit an insurance company makes from the policies it offers after factoring in the total amount brought in from premiums minus expenses and the cost of resolving claims. This figure provides an accurate measure of the effectiveness of the company's underwriting.
Insuranceopedia Explains Underwriting Income
For example, if an insurance company receives $100 million in premiums and spends $60 million in claims and related expenses, then $20 million would be its underwriting income.
Inevitably, throughout a year, underwriting income fluctuates from one quarter to the next. Insurance companies may experience significant underwriting losses during certain times of the year due to natural and other disasters, but ideally, they have set aside enough loss reserves to remain solvent. Any insurer must retain and bring in new business to recover from heavy losses and maintain a positive underwriting income.