Question

What does the profit margin (return on capital) represent?

a.

The ratio of net present value of future net cash flows to the new business strain

b.

The ratio of investment income to premium income

c.

The ratio of total expenses to total income

d.

The ratio of current profits to total capital employed

Answer: (a).The ratio of net present value of future net cash flows to the new business strain Explanation:Profit margin (return on capital) represents the ratio of net present value of future net cash flows to the new business strain, which is the return on insurer’s investment in the product.

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Q. What does the profit margin (return on capital) represent?

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