An insurance company’s projected loss ratio is 78.4 percent, and its loss adjust
ID: 2793758 • Letter: A
Question
An insurance company’s projected loss ratio is 78.4 percent, and its loss adjustment expense ratio is 13.8 percent. It estimates that commission payments and dividends to policyholders will add another 14 percent. What is the minimum yield on investments required in order to maintain a positive operating ratio? (Round your answer to 2 decimal places. (e.g., 32.16))
An insurance company’s projected loss ratio is 78.4 percent, and its loss adjustment expense ratio is 13.8 percent. It estimates that commission payments and dividends to policyholders will add another 14 percent. What is the minimum yield on investments required in order to maintain a positive operating ratio? (Round your answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
calculation of minimum yield on investment the combined ratio company’s projected loss ratio + loss adjustment expense ratio + commission payments and dividends to policyholders 78.40 + 13.80 +14 106.20% minimum yield on investment the combined ratio - 100 % 106.20 % - 100 % 6.20%