Underwriting Income
The income an insurance company generates from its core insurance operations before investment income. It equals premiums collected minus claims paid and underwriting expenses during a specific period.
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Example
“The insurance company reported positive underwriting income of $50 million last quarter, indicating their premiums exceeded their claims and expenses.”
Memory Tip
Think 'Under-writing Income' as the money left UNDER the writing (policy) after paying out claims - the core insurance business profit.
Why It Matters
Underwriting income shows whether an insurance company is profitable from its actual insurance business, separate from investment gains. This helps consumers evaluate the financial strength and sustainability of their insurance provider.
Common Misconception
Many people think insurance companies only make money from investments, but underwriting income shows they must also price policies correctly to cover claims. Negative underwriting income means the company is losing money on insurance operations alone, regardless of investment performance.
In Practice
ABC Insurance collected $100 million in premiums last year, paid $70 million in claims, and had $25 million in underwriting expenses. Their underwriting income was $5 million ($100M - $70M - $25M). This positive result means they priced their policies well enough to cover costs and generate profit from insurance operations alone.
Etymology
From "underwriting," originally meaning to write one's name under a document to accept liability, combined with "income" from Latin "income" meaning revenue received.
Common Misspellings
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Related Terms
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See Also
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