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Net Premiums Earned

Financial glossary · plain-language definition · Specialized Investing

The portion of premium an insurer has actually earned during the period as coverage elapsed -- premiums written are recognized as earned gradually over the policy term (a 12-month policy earns one-twelfth of its premium each month). Net premiums earned is the revenue figure that pairs with the period's losses to produce the loss ratio and combined ratio. The gap between premiums written and premiums earned is a timing signal: when written runs ahead of earned, the insurer is growing and building an unearned-premium reserve that will convert to future revenue.

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