DEFINITION of 'Policyholder Dividend Ratio'
The ratio of dividends to policyholders to net premiums earned. The policyholder dividend ratio is a measurement of the profitability of an insurance company or the overall insurance industry, and is examined alongside the operating ratio.
BREAKING DOWN 'Policyholder Dividend Ratio'
The policyholder dividend ratio measures the money flowing out of an insurance company in the form of dividends. Dividends are generated from the premiums generated from the insurer’s underwriting activities, and in the case of the dividend ratio only premiums earned are taken into account. This is because premiums that an insurer obtains through underwriting activities are treated as a liability until part of the contract’s duration has elapsed. As the contract approaches its end date, more and more of the premium is considered earned.
The policyholder dividend ratio is used to calculate the combined ratio, which measures the underwriting profitability of the insurer. The combined ratio is the sum of the loss ratio (loss and lossadjustment ratio divided by net premiums earned), expense ratio (underwriting expenses divided by net premiums written), and policyholder dividend ratio. The ratio is typically expressed as a percentage. If the combined ratio is under 100%, the insurer is said to be profitable from its underwriting activities. This is because the ratio represents the costs associated with generating an insurer’s business. A ratio of over 100% indicates an operating loss.
The policyholder dividend ratio, like the combined ratio, does not take into account investment income. This is an important item to note, since a portion of dividends will be invested in equities, bonds, and other securities. The investment income ratio i.e. investment income divided by net premiums earned, takes investment income into account, and is used in the calculation of the overall operating ratio. When analyzing an insurer’s overall operating ratio it is important to understand which components affect the resulting value.

Investment Income Ratio
Investment income ratio is the ratio of an insurance company’s ... 
Ratio Analysis
A ratio analysis is a quantitative analysis of information contained ... 
Annual Dividend (Insurance)
In the insurance industry, an annual dividend is a yearly payment ... 
Reserves To Policyholders' Surplus ...
Reserves To Policyholders' Surplus Ratio is the ratio of an insurer’s ... 
Return On Policyholder Surplus
Return On Policyholder Surplus is the ratio of an insurance company’s ... 
Loss Ratio
Loss ratio is the ratio of losses to gains such as the ratio ...

Insurance
DividendPaying Whole Life Insurance: What to Know
Many whole life insurance policies pay dividends. Here are what policyholders need to consider. 
Investing
Analyze Investments Quickly With Ratios
Make informed decisions about your investments with these easy equations. 
Investing
Ratio Analysis
Ratio analysis is the use of quantitative analysis of financial information in a company’s financial statements. The analysis is done by comparing line items in a company’s financial ... 
Investing
Financial Ratios to Spot Companies Headed for Bankruptcy
Obtain information about specific financial ratios investors should monitor to get early warnings about companies potentially headed for bankruptcy. 
Investing
The 4 basic elements of stock value
Investors use these four measures to determine a stock's worth. Find out how to use them. 
Investing
SXC Health Solutions Corp. (USA) Among the Nasdaq's Biggest Movers
The market is having a bad day so far: the Nasdaq is trading down 0.3%; the S&P 500 has declined 0.4%; and the Dow has slipped 0.5%. The Nasdaq Composite Index is a capitalizationweighted index, ... 
Investing
Liquidity Measurement Ratios
Learn about the current ratio, quick ratio, cash ratio and cash conversion cycle. 
Investing
5 musthave metrics for value investors
In this article, we outline the five ratios that can help value investors find the most undervalued stocks in the market.

How do I calculate the combined ratio?
Learn about the combined ratio and how it is calculated under a financial basis and a trade basis using the loss ratio and ... Read Answer >> 
How do I calculate the dividend payout ratio from an income statement?
Understand the dividend payout ratio, how it differs from the dividend yield and how it can be calculated from a company's ... Read Answer >> 
What is the difference between efficiency ratios and profitability ratios?
Learn about efficiency and profitability ratios, what these ratios measure and the main difference between efficiency and ... Read Answer >>