A US insurance company reports that its “combined ratio” is determined by dividing losses and expenses incurred by net premiums earned. It reports the following combined ratios:

Explain what this ratio is measuring and compare the results reported for each of the years shown in the chart. What other information might an analyst want to review before making any conclusions on this information?

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Fiscal Year Combined ratio 5 90.1% 104.0% 3 98.5% 2 104.1% 1 101.1%