What Is Combined Ratio?

By Matthew Frankel, CFP – Updated Feb 24, 2025 at 11:55 AM

Key Points

A combined ratio under 100% indicates an insurance firm's underwriting profitability.
A good combined ratio is usually below 100%, with the industry average around 97.5%.
Combined ratio plus investment income shows total profitability of an insurance company.

Insurance is a business that isn't well understood by many investors, and one of the big reasons is that there are unique profitability metrics that are used to evaluate insurance companies. One of the most important metrics to know when investing in insurance companies is known as the combined ratio, so here's what investors need to know about what it is and how to use it in analysis.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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Matt Frankel has positions in Markel Group. The Motley Fool has positions in and recommends Markel Group. The Motley Fool has a disclosure policy.