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The percentage of revenue from underwriting profits versus investment income can vary significantly based on the type of insurance and market conditions. However, here are typical trends:
1. Property & Casualty Insurance
Underwriting Profits: ~10–20% of total revenue, depending on the company's risk management and claims experience.
Investment Income: ~70–80% of profits come from investment returns. Many property & casualty insurers aim to break even or achieve modest underwriting profits, relying heavily on their investment income.
2. Life Insurance
Underwriting Profits: ~10–30%, as life insurers rely on premium revenue and reserve management.
Investment Income: ~70–90%. Since life insurance policies often involve long-term premiums and payouts, companies invest reserves over extended periods, making investment returns crucial.
3. Health Insurance
Underwriting Profits: ~5–15%, as these insurers focus on balancing premiums and medical claims.
Investment Income: ~5–15%, as health insurers typically deal with shorter-term claims, leaving less time to generate significant investment returns.
Industry Averages
In general, investment income tends to contribute a larger share of total profits, especially in industries like life insurance or during periods of strong market performance.
Underwriting profits can be cyclical, shrinking in years of high claims (e.g., during natural disasters for property insurers) or growing in stable years.