Combined ratio

The sum of a general insurer's loss ratio and expense ratio. Below 100% the underwriting itself makes money; above 100% it loses money and the insurer depends on investment income.

An insurer with a 68% loss ratio and a 30% expense ratio reports 98% and is underwriting profitably.

The measure is the quality gate for the sector, and the most common way it is misread is by looking at total profit. A company with a combined ratio of 108% and a healthy bottom line is earning everything from its investment book while paying for the privilege of writing insurance.

Underwriting discipline and investment returns are separate businesses. Score them separately.

Below a hundred, the insurance itself pays.

The ratio also decomposes usefully. A rising loss ratio is an underwriting or claims-inflation problem. A rising expense ratio is a distribution-cost problem, which scale can fix. The two have different fixes and different timescales, and the aggregate hides which one is happening.