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:
“... when you make it a moral necessity for the young to dabble in all the subjects that the books on the top shelf are written about, you kill two very large birds with one stone: you satisfy precious curiosities, and you make them believe that they know as much about life as people who really know something. If college boys are solemnly advised to listen to lectures on prostitution, they will listen; and who is to blame if some time, in a less moral moment, they profit by their information?”
—Katharine Fullerton Gerould (1879–1944)