The combined ratio is a measure used for insurance companies that shows how well their operations are performing.
The combined ratio is calculated by adding the losses an insurer incurs with its expenses, then dividing that number by the total earned premiums. A combined ratio of less than 100% shows an insurer is making a profit on its operations and, hence, the lower the combined ratio the better.
It doesn't necessarily show the full results of an insurer because other factors like investment income aren't included.
Recent Mentions on Fool.com
- 3 Biotech Growth Stocks You Can Buy Right Now
- Will Microsoft Stock Head Higher Or Lower In 2015?
- The Simple Way I Search for the Next Hit Stock
- 3 Biotech Stocks That Could Soar Even Higher
- The Most Important Number You Need to Know Before Buying InvenSense Inc Stock
- Why These Big Pharma Stocks Could Plunge Next Year