Return on surplus is calculated by dividing the insurer’s

Understanding Return on Policyholder Surplus The ratio is calculated by dividing an insurance company's after-tax income and capital gains by its policyholder surplus, with the policyholder surplus standing in for the insurance company's assets.

How is surplus insurance calculated?

Premium to surplus ratio is net premiums written divided by policyholder surplus. Policyholder surplus is the difference between an insurance company's assets and its liabilities. The premium to surplus ratio is used to measure the capacity of an insurance company to underwrite new policies.

What is an insurer's surplus?

Surplus — the amount by which an insurer's assets exceed its liabilities. It is the equivalent of "owners' equity" in standard accounting terms. The ratio of an insurer's premiums written to its surplus is one of the key measures of its solvency.

What is a surplus ratio?

A surplus ratio expresses the percentage of total assets a company saves against the possibility of an unexpected loss.

What is an insurance combined ratio?

Put simply, a combined ratio is a measure of an insurance company's profitability expressed in terms of the ratio of total costs divided by total revenue—which for insurance companies translates to incurred losses plus expenses divided by earned premiums: Combined Ratio = (Incurred Losses + Expenses)/Earned Premiums.