Answer: 120%

## Explanation The **combined ratio** is a key metric in insurance that measures the overall efficiency of an insurer's operations. It is calculated as: **Combined Ratio = Loss Ratio + Expense Ratio** Where: - **Loss Ratio** = Loss Expense and Loss Adjustment Expense / Net Premiums Earned - **Expense Ratio** = Underwriting Expense / Net Premiums Written **Step-by-step calculation:** 1. **Calculate Loss Ratio:** Loss Ratio = 12,000 / 15,000 = 0.80 or **80%** 2. **Calculate Expense Ratio:** Expense Ratio = 4,000 / 10,000 = 0.40 or **40%** 3. **Calculate Combined Ratio:** Combined Ratio = 80% + 40% = **120%** **Interpretation:** - A combined ratio of **120%** indicates that the insurer is paying out $1.20 in claims and expenses for every $1.00 of premium collected - This means the insurer is operating at a **loss** on its underwriting activities - The insurer would need investment income or other sources of revenue to be profitable Therefore, the correct answer is **C. 120%**.

Author: LeetQuiz Editorial Team