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For insurance, the loss ratio is the ratio of total losses incurred (paid and reserved) in claims plus adjustment expenses divided by the total premiums earned. [1] For example, if an insurance company pays $60 in claims for every $100 in collected premiums, then its loss ratio is 60% with a profit ratio/gross margin of 40% or $40.
In this video as part of The Motley Fool's "Ask a Fool" series, Motley Fool Stock Advisor analyst Brendan Mathews takes a question from a Fool reader, who asks: "Can you explain the combined ratio ...
A combined ratio of less than 100% indicates an underwriting profit, while anything over 100 indicates an underwriting loss. A company with a combined ratio over 100% may nevertheless remain profitable due to investment earnings. Insurance companies earn investment profits on "float". Float, or available reserve, is the amount of money on hand ...
Chubb Limited. Website. www.combinedinsurance.com. Combined Insurance is a global provider of supplemental insurance, including accident insurance, life insurance and critical care coverage. Combined Insurance operates in North America, Latin America, Europe and the Pacific. The company is headquartered in Chicago, Illinois .
Contribution margin (CM), or dollar contribution per unit, is the selling price per unit minus the variable cost per unit. "Contribution" represents the portion of sales revenue that is not consumed by variable costs and so contributes to the coverage of fixed costs. This concept is one of the key building blocks of break-even analysis.
Loss reserving is the calculation of the required reserves for a tranche of insurance business, [1] including outstanding claims reserves . Typically, the claims reserves represent the money which should be held by the insurer so as to be able to meet all future claims arising from policies currently in force and policies written in the past.
Capital requirement. A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital adequacy ratio of equity as a percentage of risk-weighted assets.
It is primarily used in the property and casualty and health insurance fields. Generally considered a blend of the chain-ladder and expected claims loss reserving methods, [2] [8] [10] the Bornhuetter–Ferguson method uses both reported or paid losses as well as an a priori expected loss ratio to arrive at an ultimate loss estimate.