Now, let's approach it another way — if we
take the 11
operating margin, deduct 1 for net interest & 3 for a 30 % tax rate, we end up with a 7 net
profit.
Those premiums are then used to ensure the company has sufficient capital to both pay claims from year to year, (although ultimately the insurance company must
take in slightly more than it pays out, to also cover cover the overhead and
operating expenses of the insurance company, plus some
margin for the company to earn a
profit).