Rusty is the president of The Huge Insurance Company. His Vice-President in charge of Finance comes to him one day and says "Rusty, our combined ratio for the year is 95%." Rusty replies, "Wooo hooo, profit sharing bonuses for everyone!" Why isn't Rusty upset about this combined ratio?
A) The company probably made enough money on its investments to make up for the underwriting losses.
B) The company has actually made a profit on its insurance business.
C) Rusty is not very bright and doesn't understand what the combined ratio really means.
D) The combined ratio is not an important indicator of underwriting results.

Question

Quizplus · Accepted Answer

A combined ratio below 100% indicates that the insurance company is making an underwriting profit, meaning that premiums collected exceed the expenses and claims paid. Rusty is happy because a 95% combined ratio means the company is profitable in its insurance operations.

Rusty Is the President of the Huge Insurance Company