Explanation:
The insurance company's operating ratio is a gross profitability measure. It is calculated by adding the loss ratio, expense ratio, and dividends and deducting the investment income earned if the investment earned a positive return. If the investment had a negative return, it should be added to the equation.
Operating Ratio = 65% + 15% + 3% − 5% = 78%
Q.5042 Given the information below, the operating ratio for a property-casualty insurance company is closest to?
| Loss Ratio | 65% |
|---|---|
| Expense Ratio | 15% |
| Combined Ratio | 80% |
| Dividends | 3% |
| Investment Income | 5% |
A
78%
B
88%
C
72%
D
85%
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