1. A Primer on Non-Life Insurance Ratios Craig Thorburn Cthorburn@worldbank.org

2. A Primer on Non-Life Insurance Ratios Profit

3. Basic Definitions Gross Written Premium Less Reinsurance Expense –Reinsurance premiums –Less reinsurance commissions received Net Written Premium Plus Unearned Premium Brought Forward –Gross Unearned Premium –Less Unearned Premium on Reinsurance Ceded Less Unearned Premium Carried Forward Gives Net Earned Premium

4. Basic Definitions (continued) Claims Paid –Gross Claims Paid –Less reinsurance recoveries Plus Claims Provisions Carried Forward Less Claims Provisions Brought Forward Gives Incurred Claims

5. Basic Definitions (continued) Earned Premium Less Incurred Claims Less Underwriting Expenses Gives Underwriting Result Plus Investment Income Gives Profit before Tax

6. Claims Ratio First fundamental measure Calculate, usually, by class of business as well as total business

7. Expense Ratio Often, a large part of the expenses are associated with writing and renewing business, hence use Written Premium instead of Earned Premium.

8. Combined Ratio Result used to be compared to 100%

9. Investment Income This ratio was developed to build to the total profit measure

10. Operating Ratio Adjusting the combined ratio to get a measure of profitability against a 100% figure.

11. Profit Ratio & Underwriting Ratio Akin to a sales margin. Underwriting Ratio draws focus on Underwriting performance separate from investment performance

12. Quality of the Investment Result

13. A Primer on Non-Life Insurance Ratios Third Break