What does a combined ratio under 100 indicate for an insurance company?

A combined ratio under 100 indicates that an insurance company is operating at an underwriting profit. The combined ratio is a measure of an insurer's profitability and is calculated by adding the loss ratio (claims paid out compared to premiums earned) to the expense ratio (operational expenses compared to premiums earned). When this ratio is below 100, it shows that the insurer is generating more in premiums than it is paying out in claims and expenses, leading to profitability in underwriting activities.

In contrast, a combined ratio of 100 or higher would suggest that the company is either breaking even or experiencing underwriting losses, as it would have to pay out as much or more than it brings in from premiums. A balance sheet surplus is not directly measured by the combined ratio itself but rather reflects the overall financial health of the company, including all of its assets and liabilities. Underwriting expenses represent the costs associated with acquiring and managing insurance policies, but again, they are only part of the combined ratio calculation and not indicative on their own of underwriting profit or loss.