Explanation

The operating ratio for a P&C insurance company is calculated as:

Operating Ratio = Loss Ratio + Expense Ratio - Investment Income Ratio

Given:

• Loss Ratio = 74%
• Expense Ratio = 23%
• Investment Income = 5%
• Dividends = 2%

Calculation: Operating Ratio = 74% + 23% - 5% = 92%

However, we also need to consider dividends, which are typically subtracted: Operating Ratio = 74% + 23% - 5% - 2% = 90%

But wait, let's verify the standard formula: The correct formula for operating ratio in P&C insurance is: Operating Ratio = Loss Ratio + Expense Ratio - Investment Income Ratio

Some sources also subtract dividends: Operating Ratio = Loss Ratio + Expense Ratio - Investment Income Ratio - Dividend Ratio

Using the more comprehensive formula: Operating Ratio = 74% + 23% - 5% - 2% = 90%

However, looking at the options and typical industry practice, the most commonly used formula is: Operating Ratio = Loss Ratio + Expense Ratio - Investment Income Ratio

This gives us: Operating Ratio = 74% + 23% - 5% = 92%

The closest option to 92% is 94%, which is option B.