Four numbers do most of the work on a general insurer, and a fifth on a life insurer, and all of them are owned in depth elsewhere. Here you need only how they're built and what a currency translation does to them.
How is the combined ratio calculated?
Vindhya General Insurance Ltd (synthetic) is an Indian motor and health insurer. It wrote ₹8,400.00 crore of gross premium and ceded ₹1,900.00 crore to reinsurers, for a retention of 77.3810%. After a ₹350.00 crore increase in the unearned premium reserve, it earned ₹6,150.00 crore. Claims incurred were ₹4,489.50 crore, commission ₹780.00 crore and operating expenses ₹1,050.00 crore.
The loss ratio is claims over net earned premium: 4,489.50 ÷ 6,150.00 = 73.0000%. The expense ratio is where conventions diverge. On net earned premium, which is the US GAAP presentation, it's 1,830.00 ÷ 6,150.00 = 29.7561%. On net written premium, which is the Indian and the trade-basis convention, it's 1,830.00 ÷ 6,500.00 = 28.1538%.
So the combined ratio is either 102.7561% or 101.1538%, a gap of 1.6023 percentage points produced entirely by which denominator the expense ratio uses. Both are published. Compare an Indian insurer with an American one without first putting both on the same basis, and you're measuring the convention.
The underwriting result is 6,150.00 − 4,489.50 − 1,830.00 = −₹169.50 crore, a loss, as any combined ratio above 100% implies.
Advertisement
Where can the combined ratio mislead?
Float is the money held between premium and claim: outstanding claims reserves of ₹9,800.00 crore plus unearned premium of ₹3,150.00 crore less reinsurance recoverable of ₹1,850.00 crore, giving ₹11,100.00 crore. Investment income of ₹780.00 crore on that float is a yield of 7.0270%, and profit before tax is −169.50 + 780.00 = ₹610.50 crore. The cost of float is the underwriting loss over the float: 169.50 ÷ 11,100.00 = 1.5270%. Put plainly, Vindhya is borrowing ₹11,100 crore at 1.53% and investing it at 7.03%, and that spread is the business.
Reserve development is the reality check, and it's the one number that can invalidate everything above. Vindhya's opening claims reserve of ₹9,200.00 crore has been re-estimated at ₹9,540.00 crore, so ₹340.00 crore of this year's claims charge relates to prior accident years. That's 3.6957% of the opening reserve and 55.6921% of profit before tax. Strip it out and the current-accident-year loss ratio is 67.4715% and the combined ratio is 97.2276%. The loss turns into an underwriting profit. Which of those numbers describes the business depends on whether the adverse development repeats, and the only way to form a view is the run-off triangle, which discloses several years of development at once.
What does currency translation do to insurance ratios?
Now back to currency. Vindhya owns a UK subsidiary writing motor business, and the pound strengthened against the rupee from an average of ₹104.00 to ₹112.00, with closing rates of ₹106.00 and ₹115.00.
The subsidiary wrote £200 million of net premium in FY25 and £220 million in FY26, which is 10.0000% local growth. Translated, that's ₹2,080.00 crore and ₹2,464.00 crore, which is 18.4615%. Currency supplied 8.4615 percentage points of the growth an Indian shareholder reads. At group level, net written premium grew from ₹8,180.00 crore to ₹8,964.00 crore, or 9.5844%, against a constant-currency 7.4328%, so currency added 2.1516 percentage points.
The subsidiary's own combined ratio is 96.0000%, and it's 96.0000% in either currency, because both its numerator and its denominator are income-statement lines translated at the same average rate. Every single-statement insurance ratio survives translation untouched: loss ratio, expense ratio, combined ratio, retention.
The yield on float doesn't survive, for the reason seen in the ratio grid for the two translation methods. Investment income of £58 million goes at the average rate of ₹112.00 for ₹649.60 crore. The float of £900 million goes at the closing rate of ₹115.00 for ₹10,350.00 crore. The local yield of 6.4444% becomes 6.2763%, a distortion of −0.168116 percentage points. It's the scaling identity again: 112.00 ÷ 115.00 = 0.973913, and 6.4444% × 0.973913 = 6.2763%.
So the rule for reading a multinational insurer is the same rule as for reading a multinational anything. Ratios inside one statement are safe. Ratios that cross the two statements carry a currency term, and the term is the average rate over the closing rate.