WC Results/Profitability

Whereas combined ratios exclude the effect of investment income, return on net worth includes return on investment. Return on net worth therefore, is an important measure when looking at the success of a line of insurance since large sums of money are set aside for the payment of future losses (reserves). This is especially relevant for the workers compensation line.

The return on net worth calculation helps to evaluate the profits earned in relation to the net worth that is committed to that market. The return is equal to profit after taxes divided by allocated capital and surplus adjusted to place it on a GAAP basis.