A property-casualty insurer brings in $6.21 million in premiums on its homeowner

Question

A property-casualty insurer brings in $6.21 million in premiums on its homeowners MP line of insurance. The line's losses amount to $4,291,110, expenses are $1,558,710, and dividends are $130,410. The insurer earns $192,510 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

Solution:

Loss ratio = Loss / Premimums 1 Loss Ratio = 4,291,110 / $ 6,210,000 69.10% Loss 4,291,110 Premimum 6,210,000 2 Expense ratio = Expense / Premimum Expense ratio = $ 1,558,710 / $ 6,210,000 25.10% Expense 1,558,710 Premimum 6,210,000 3 Dividend ratio = Expense / Premimum Dividend ratio = $ 130,410 / $ 6,210,000 2.10% Dividend 130,410 Premimum 6,210,000 4 Combined ratio = Loss + Expense / Premimum Loss       4,291,110 Expense       1,558,710 Premimum       6,210,000 Combined Ratio = ( 4,291,110 + 1,558,710) / 6,210,000 94.20%

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