Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums.
It has also been very elusive to most insurance companies. Many companies will eschew Underwriting profit in order to gain a greater market share.
For example, an auto insurer collects money every month from its customers in the form of a premium. Should a customer have a covered auto accident, the company pays out a claim. In the time between the receipt of each premium payment and the paying of the claim, the money received by the insurer can be invested. Returns from investments are the primary source of profits for an insurance company. If the amount of premiums taken in is greater than the claims paid out, even before taking into account investment returns, the excess additional profit is called "underwriting profit".
Famous quotes containing the word profit:
“All schools, all colleges, have two great functions; to confer, and to conceal, valuable knowledge. The theological knowledge which they conceal cannot justly be regarded as less valuable than that which they reveal. That is, when a man is buying a basket of strawberries it can profit him to know that the bottom half of it is rotten.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)