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:
“Already nature is serving all those uses which science slowly derives on a much higher and grander scale to him that will be served by her. When the sunshine falls on the path of the poet, he enjoys all those pure benefits and pleasures which the arts slowly and partially realize from age to age. The winds which fan his cheek waft him the sum of that profit and happiness which their lagging inventions supply.”
—Henry David Thoreau (1817–1862)