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An insurer's incurred losses run 68% of premium and its underwriting expenses run 29%. Its combined ratio and what that ratio shows are:
a.97%, an underwriting loss that investment income must cover
b.97%, an underwriting gain before any investment income
c.68%, since expenses sit outside the combined ratio entirely
d.39%, the gap between the loss ratio and the expense ratio
Giải thích
The combined ratio adds the loss ratio to the expense ratio, so 68% plus 29% gives 97%. A figure under 100% means the insurer collected more premium than it paid out in losses and expenses, which is an underwriting profit before investment income is counted; a figure above 100% would be the underwriting loss. Subtracting the two ratios has no meaning, and expenses are very much part of the calculation.
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