Explain the main ratios and other considerations used when analysing an insurer

Property and casualty insurers are judged on underwriting and investment. The loss and loss adjustment expense ratio equals losses and adjustment expenses over net premiums earned. The underwriting expense ratio equals underwriting expenses over net premiums written; their sum is the combined ratio, and below 100% means underwriting profit. Reserve development shows whether past loss estimates were adequate. Life and health insurers are judged on product diversification, earnings from benefits and expenses relative to premiums and deposits, investment returns and portfolio quality, liquidity and risk-based capital. Both hold large investment portfolios, so asset quality and interest rate sensitivity matter. The trap is using net premiums earned as the denominator for the expense ratio, which mixes up the two bases.