Combined Ratio

Percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the Combined Ratio means financial results are improving; an increase means they are deteriorating.

A sum of two ratios, one calculated by dividing incurred losses plus loss adjustment expenses by earned premiums, and the other calculated by dividing all other expenses by written premiums. When applied to a company’s overall results, the Combined Ratio is also known as the composite, statutory, or trade ratio. In both insurance and reinsurance, a Combined Ratio below 100% indicates an underwriting profit.