The operating ratio is the combined ratio less than the ratio of investment income, to earned premiums.
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A. B.A
The statement is false. The operating ratio is a measure used in the insurance industry to determine the profitability of an insurance company's underwriting operations. It is calculated by dividing the sum of an insurer's expenses, including losses, commissions, and general administrative expenses, by its earned premiums.
The formula for the operating ratio is:
Operating Ratio = (Underwriting Expenses + Losses + Loss Adjustment Expenses + Dividends) / Earned Premiums
The combined ratio, on the other hand, is a similar metric that includes the insurer's underwriting expenses, losses, and loss adjustment expenses, as well as its policy acquisition costs. It is calculated as:
Combined Ratio = (Underwriting Expenses + Losses + Loss Adjustment Expenses + Policy Acquisition Costs) / Earned Premiums
Investment income is not included in either the operating ratio or the combined ratio. It is a separate source of revenue for the insurer and is typically not related to its underwriting operations. Therefore, the statement that the operating ratio is the combined ratio less than the ratio of investment income to earned premiums is incorrect.