Glossary

Combined ratio

An insurer's loss ratio plus its expense ratio, where a result under 100% means premiums covered claims and costs and over 100% means an underwriting loss.

Also called: underwriting ratio, combined loss and expense ratio, cat-adjusted combined ratio, ex-cat combined ratio

The combined ratio is the standard scorecard for underwriting results. It equals the loss ratio plus the expense ratio. Under 100% means the insurer collected more premium than it spent on claims and operating costs. Over 100% means it lost money on underwriting before counting investment income.

Say a company has a loss ratio of 62% and an expense ratio of 30%. The combined ratio is 92%, so it keeps 8 cents of each premium dollar. If a bad storm year pushes losses to 78%, the combined ratio is 108% and the company loses 8 cents per dollar before investment returns. Insurers often report the figure with and without catastrophe losses, so check which one you are reading.

Investment income can offset an underwriting loss, but homeowners claims are paid within months rather than years, so there is less invested cash than in long-tail lines. Several years above 100% in a state is a common reason insurers raise rates, tighten underwriting, buy more reinsurance or stop writing new business there. One bad year is not a trend, and a low ratio does not prove rates are fair or that service is good. Use it alongside a financial strength rating. The the combined ratio: reading home insurer results guide shows how to read it for home insurers, and reading a home insurer's earnings report shows where to find it.

Last reviewed October 10, 2026

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Related terms

Loss ratio The share of earned premium an insurer pays out or sets aside for claims, shown as a percentage and used to judge profitability and set rates. Expense ratio The share of premium an insurer spends on commissions, salaries, marketing, taxes and other costs of selling and running its business, excluding claim payments. Underwriting profit What an insurer keeps from premiums after paying claims, claim-handling costs and operating expenses, before any investment income is counted. Direct premiums written The total premium on the policies an insurer issues itself in a period, counted when written and before any share is passed to reinsurers. Policyholder surplus An insurer's assets minus its liabilities under statutory accounting, the capital cushion that absorbs losses beyond its reserves and premiums. Reinsurance Insurance that an insurance company buys from other companies, which reimburse part of its claim payments, especially after a large disaster.

Related guides

The combined ratio: reading home insurer results What a combined ratio of 95 or 108 means for a home insurer, how net, direct and underlying versions differ, and why no single ratio proves a company is sound. Florida's home insurance market: what happened and what changed How Florida's home insurance market broke between 2019 and 2023, what the reforms did, and where prices, Citizens and new insurers stand as of October 2026. Home insurance industry trends to watch Seven trends shaping homeowners insurance in October 2026: recovering profits, softer reinsurance, shrinking state plans, cat bonds, storm losses and data. Home insurance market outlook Where home insurance pricing stands in October 2026: insurers back in profit, reinsurance costs falling, rate increases slowing, and the risks that remain. How home insurers make money, and lose it Home insurers earn from underwriting and from investing premiums. How loss ratios, expenses and catastrophe years combined in 2023 to 2025 industry results. Reading a home insurer's earnings report How to read a public home insurer's quarterly release or 10-K: homeowners combined ratio, catastrophe losses, reserve development and premium growth.