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Insurance is not a good business. Most insurers lose money on an underwriting basis (the difference between premiums paid by customers and money paid out to cover losses). Most rely heavily on income from investment portfolios to cover losses from underwriting and help them remain profitable and solvent.
An important figure to understand is the combined ratio. It gives investors an instant idea of a firm’s profitability on an underwriting basis. The figure is calculated by adding losses paid out and operating expenses, divided by earned premiums from