Hellooo On page 16 onwards where we were asked to analyse and compare company A and B, the expense ratio for company B is calculated on (I believe) the net written premium whereas its claim ratio is calculated on earned premium. Correct me if I am wrong, but I think these two cannot be added together as combined ratio because of the different denominator
Quite right Jensen. The two denominators are different, so the combined ratio will be distorted by things like odd earnings patterns, and whether the book is growing or contracting. Hence, it's a bit of a rough and ready measure, but it is used in practice. In the exam, remember that just as many marks (and probably more) are available for discussing the ratios as are available for calculating the numbers themselves, so your cynicism is spot on! Kind regards, Katherine.
