What does a combined ratio greater than 100% indicate?

A combined ratio greater than 100% indicates an underwriting loss. The combined ratio is calculated by adding the loss ratio and the expense ratio of an insurance company. When this ratio exceeds 100%, it implies that the insurer is paying out more in claims and administrative expenses than it is earning in premiums.

This situation suggests that the company's core insurance operations are not profitable, which can lead to financial difficulties if it persists over time. A ratio lower than 100% would suggest the company is making an underwriting profit, while a ratio exactly at 100% would indicate a breakeven point, where income from premiums matches the expenses for claims and operational costs. High ratios could signal inefficiencies in claims handling or underwriting practices, as well as the possibility of inadequate pricing of risks.