Underwriting Income


DEFINITION of 'Underwriting Income '

Profit generated by an insurer's underwriting activity over a period of time. Underwriting income is the difference between premiums collected on insurance policies by the insurer, and expenses incurred and claims paid out. Huge claims and disproportionate expenses may result in an underwriting loss, rather than income, for the insurer. The level of underwriting income is an accurate measure of the efficiency of an insurer's underwriting activities.

BREAKING DOWN 'Underwriting Income '

For example, if an insurer collects $50 million in insurance premiums over a year, and spends $40 million in insurance claims and associated expenses, its underwriting income is $10 million.

An insurer's underwriting income may fluctuate from quarter to quarter, with natural and other disasters such as earthquakes, hurricanes and fires leading to huge underwriting losses. Hurricane Katrina, the largest natural catastrophe in US history, caused an underwriting loss of $2.8 billion for the US property/casualty insurance industry in the first nine months of 2005, compared with underwriting income of $3.4 billion in the corresponding period of 2004.

  1. Insurance Underwriter

    A financial professional that evaluates the risks of insuring ...
  2. Reinsurance

    The practice of insurers transferring portions of risk portfolios ...
  3. Premium

    1. The total cost of an option. 2. The difference between the ...
  4. Underwriting

    1. The process by which investment bankers raise investment capital ...
  5. Casualty Insurance

    A broad category of coverage against loss of property, damage ...
  6. Investment Banker

    Someone working at an institution raising capital for companies, ...
Related Articles
  1. Home & Auto

    The History Of Insurance

    The first written policy appeared in Hammurabi's Code. Find out how it evolved from there.
  2. Home & Auto

    Insure Your Future With A Career As An Actuary

    If you've got excellent math skills, they can add up to a lucrative career as an actuary.
  3. Brokers

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  4. Insurance

    Is Insurance Underwriting Right For You?

    If you have excellent analytical skills and an eye for detail, this may be your calling.
  5. Retirement

    What To Do If Your Insurance Won't Pay

    Before paying for coverage, find out what you need to do to ensure you get paid.
  6. Insurance

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  7. Insurance

    Using LinkedIn to Find Life Insurance Leads

    Learn how LinkedIn can help you generate leads as a life insurance agent, and understand the steps to turn your profile into a lead-generating machine.
  8. Personal Finance

    Choosing An In-Home Safe: Features To Look For

    What to look for in a box to protect your irreplaceable belongings.
  9. Home & Auto

    Top-Tier Home Security Systems: Which Are Best?

    Here's help sorting out the different types of home security systems, which features will work best for you and the costs.
  10. Retirement

    Why Are Annuities Important for Retirement?

    Understand how annuities work, and identify the benefits they provide for retirement, the most salient being a guaranteed income stream for life.
  1. What is the difference between underwriting and investment income for an insurance ...

    Underwriting and investing are two different methods an insurance company uses to generate income. The underwriting income ... Read Full Answer >>
  2. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  3. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>
  4. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  5. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  6. Can your life insurance company sue you?

    A life insurance company generally cannot sue you, but it can sue your estate. The company may do this in order to recover ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!