Combined Ratio Calculator
The combined ratio is the single most important summary metric for evaluating the underwriting profitability of a property and casualty insurer. It equals the loss ratio (incurred losses plus loss adjustment expenses as a percentage of earned premiums) added to the expense ratio (underwriting expenses as a percentage of written or earned premiums). A combined ratio below 100% means the insurer collects more in premiums than it pays in claims and expenses, generating an underwriting profit. This calculator also computes the operating ratio by subtracting investment income yield from the combined ratio, showing overall profitability.
Combined ratio formula
Combined ratio = Loss ratio + Expense ratio
Operating ratio = Combined ratio - Investment income yield
A combined ratio below 100% is an underwriting profit. An operating ratio below 100% is overall profitability. Investment income yield is net investment income divided by earned premiums.
Interpreting the combined ratio
- Combined ratio below 95%: excellent underwriting performance.
- Combined ratio 95 to 100%: acceptable, moderate underwriting profit.
- Combined ratio 100 to 110%: underwriting loss; insurer relies on investment income.
- Combined ratio above 110%: significant underwriting loss, common during catastrophe events.
- The NAIC and state regulators monitor combined ratios in rate filings to detect pricing inadequacy.
Combined ratio: frequently asked questions
What is the combined ratio in insurance?
The combined ratio is the sum of the loss ratio and the expense ratio, both expressed as percentages of earned premiums. A combined ratio below 100% indicates an underwriting profit; above 100% indicates an underwriting loss. Insurers with combined ratios above 100% rely on investment income to remain profitable.
What is the expense ratio?
The expense ratio is total underwriting and administrative expenses (agent commissions, salaries, overhead, marketing) divided by written or earned premiums. For personal auto insurance, expense ratios typically range from 25 to 35 percent.
What is a good combined ratio for an insurer?
A combined ratio below 95% is generally considered excellent underwriting performance. A ratio between 95 and 100% is acceptable. Above 100% means the insurer loses money on underwriting and must rely on investment returns. During catastrophe years, combined ratios for property insurers can exceed 120%.
What is the difference between the combined ratio and the operating ratio?
The operating ratio subtracts net investment income (as a percentage of premiums) from the combined ratio. An operating ratio below 100% indicates overall profitability including investment returns. The combined ratio measures underwriting performance alone.
Do all lines of insurance target the same combined ratio?
No. Long-tail lines (workers comp, liability) have longer claim development periods, allowing more investment income to offset higher combined ratios. Short-tail lines (auto, property) have less investment income per dollar of premium, so lower combined ratios are needed for profitability.
Official sources
- NAIC: NAIC Consumer Resources.
- Federal Insurance Office (US Treasury): FIO Homepage.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.