A property–casualty insurer brings in $6.29million in premiums on its homeowners
ID: 2762075 • Letter: A
Question
A property–casualty insurer brings in $6.29million in premiums on its homeowners MP line of insurance. The line’s losses amount to $4,396,710, expenses are $1,629,110, and dividends are $182,410. The insurer earns $245,310 in the investment of its premiums. Calculate the line’s loss ratio, expense ratio, dividend ratio, combined ratio (after dividends), investment ratio, operating ratio, and overall profitability. (Do not round intermediate calculations. Round your answers to 1 decimal place. (e.g., 32.1))
A property–casualty insurer brings in $6.29million in premiums on its homeowners MP line of insurance. The line’s losses amount to $4,396,710, expenses are $1,629,110, and dividends are $182,410. The insurer earns $245,310 in the investment of its premiums. Calculate the line’s loss ratio, expense ratio, dividend ratio, combined ratio (after dividends), investment ratio, operating ratio, and overall profitability. (Do not round intermediate calculations. Round your answers to 1 decimal place. (e.g., 32.1))
Explanation / Answer
Ans:- Loss Ratio Can be calculated the amount of claims an insurance company has to pay to the amount of earned premiums the company collects for the year.
= Total loss /Premium Amount
=$4396710 / $629000
=6.9 %
Expense Ratio = Total Expences/ Premium Amount
=$ 1629110 / $ 629000
=2.59 %
Dividend Ratio = Total Dividend / Total Premium
=$182410 / $ 629000
=0.2 %
Combined Ratio =( Incurred Losses+Operating expenses) / Total Premium
= ( 4396710+1629110) / 629000
=9.5 %
investment Ratio = Investment/ Premium
= $245310 / 629000
= 0.3 %
operating Ratio = Operating cost / Total premium
= 1811520 /629000
=2.8 %
Overall Profitability = Total overall costs / total premium
=6208230/629000
= 9.8 %