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Loss Ratio
For insurance companies, the ratio of claims paid plus loss adjustment expenses to premiums earned during a period — the fundamental measure of underwriting profitability.
What it shows
A loss ratio above 100% means the insurer is paying out more in claims than it collects in premiums — structurally unprofitable underwriting. Combined with the expense ratio, it determines whether the insurance operation is profitable before investment income.
Formula
Loss Ratio = (Claims Paid + Loss Adjustment Expenses) ÷ Earned Premium × 100. Combined Ratio = Loss Ratio + Expense Ratio. A combined ratio below 100% indicates underwriting profitability.