Difference between COR and Op Ratio
What is the logical and/or formulaic difference between these two?
RBC has COR including Dividend Ratio, but IRIS 5 is the Op Ratio that includes Investment Income in the formula.
From work, I'm more familiar with the concept of investment income over dividend ratio. How do these relate?
Comments
The difference is, IRIS 5 includes investment income ratio, whereas COR does not.
They are both meant to depict profitability. The COR threshold in the RBC context is 120%: they let it past 100, because investment will compensate. IRIS 5 threshold is 100%: with both underwriting and investment included, the company must be turning a profit.
Thank you for the explanation. To complete my understanding, can you explain what a dividend ratio is in the context of policyholders? This isn't dividends to stockholders right? How are policyholders getting dividends?
Some insurance companies, usually mutuals, offer an arrangement of returning part of their profit back to policyholders. It is like a premium rebate.