Question

The U.S. Property/Casualty industry has the following data for 2017 (in $ billions). Net premiums Written = 552.6; Premiums Earned = 540.6; Losses and Loss Adjustment Expenses Incurred = 410.2; Net Investment Income = 49; Underwriting Expenses = 151.1. The expense ratio is:

a) 27.9%
b) 28.0%
c) 28.5%
d) 28.9%

Answer 1

The expense ratio is calculated by dividing underwriting expenses by premiums earned and multiplying by 100. For the U.S. Property/Casualty industry in 2017, this calculation yields an expense ratio of 27.95%, which, when rounded to the nearest tenth, is 28.0%.

Step-by-step explanation:

The question pertains to calculating the expense ratio for the U.S. Property/Casualty insurance industry based on the 2017 financial data provided. To calculate the expense ratio, we divide the underwriting expenses by the premiums earned, then multiply by 100 to get a percentage. Here's the formula and calculation:

Expense Ratio = (Underwriting Expenses / Premiums Earned) × 100

Using the given numbers:

Expense Ratio = (151.1 billion / 540.6 billion) × 100 = 27.95%

However, when we look at the provided options, we must round to the nearest tenth to match the format, which gives us an expense ratio of 28.0%.