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Combined Ratio

Combined ratio definition; countrywide and Indiana state results.;

The combined ratio is an indication of an insurance company's health. The word "combined" is used because it includes three ratios:
  • loss ratio
  • expense ratio, and
  • dividend ratio.
 
The combined ratio is the percentage of each premium dollar an insurance company has to spend on claims and expenses. When a combined ratio is more than 100 percent, the insurer has an underwriting loss. So, a combined ratio above 100 indicates that a carrier is paying out more in claims and expenses than it is taking in premiums.

Carriers often consider the combined ratio to be a more appropriate indicator of company performance than earnings because earnings also include profits on the company's investments (thus, investment combined with underwriting results yields operating results). A company with higher than 100 combined ratio can still be profitable because of investment income.

The combined ratio is the sum of the combined loss ratio, expense ratio and dividend ratio for a given time period. The formula is [(Loss + Loss Adjustment Expense)/Earned Premium] + [Underwriting Expenses/Written Premium] + [Dividends to Policyholders/Earned Premium].
 
Combined Ratio
Calendar Year   Accident Year
Year Country* Indiana**   Country# NCCI States*** Indiana***
1990 117     122 122  
1991 123     112 112  
1992 121     100 100  
1993 109     95 95  
1994 102 91   97 97 85
1995 97 87   101 101 82
1996 100 82   106 106 107
1997 101 94   119 119 103
1998 107 101   133 133 110
1999 115 101   143 143 114
2000 118 99   138 138 108
2001 122 98   125 125 94
2002 111 93   106 106 92
2003 110 92   97 97 88
2004 107 90   88 98 90
2005 103 92   87 96 91
2006 93 96   86 93 91
2007 101 93   99 95 93
2008 101 100   106 104 103
2009 110 88   110 108 101
2010 115 120   118 117 118
2011 115 97   113 114 109
2012 108 98   107 105 98
2013 101 96   99 100 95
 
Sources:
* Calendar Yr Results - all states, NET basis (direct + assumed - ceded), private carriers; 1990-2012 Annual Statement Data, NCCI AIS 2014 State of Line, p. 13
** IEE and Statutory Page 14 - DIRECT Basis
# Accident Yr Results - all states, private carriers Annual Statement Data Schedule P, developed to ultimate; NCCI AIS 2014 State of Line, p. 24
*** Calendar-Accident Year Underwriting Results - 38 NCCI states only, financial data submitted to NCCI NET basis (direct + assumed - ceded); NCCI website as of 12/03/14
 
 
Countrywide Calendar Year
  • Net Basis, and by definition, not developed
  • Calendar Year comes from AM Best - True Countrywide (not just NCCI states) - Private Carrier Data
 
Countrywide Accident Year
  • Net Basis, and by definition, developed to ultimate
  • From the latest Calendar Accident Year Underwriting Results publication on ncci.com
  • Data is from the Financial Calls
 
Indiana Calendar Year
  • Direct basis (Note: this is different from the countrywide data, which is on a net basis)
  • From Carrier Annual Statements
 
Indiana Accident Year
  • Net Basis
  • From the latest Calendar Accident Year Underwriting Results publication on ncci.com
  • Data is from the Financial Calls 

Because we only collect five years of calendar year premium, we can really only accurately state the accident year combined ratios for the latest five years. We could get older evaluations from prior years' underwriting results reports, but they would not reflect our most current estimate of the accident year losses. Therefore, only the latest five years are reliable. Older years are shown for general comparison purposes only.

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The material in this document has been prepared and shared for informational purposes only and should not be relied upon as legal advice on any particular situation.