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Did Insurance Company K have more than $300 million in total

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by BTGmoderatorLU » Sun Jul 15, 2018 9:28 am

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C

D

E

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Difficulty—

Did Insurance Company K have more than $300 million in total net profits last year?

(1) Last year Company K paid out $0.95 in claims for every dollar of premiums collected.
(2) Last year Company K earned a total of $150 million in profits from the investment of accumulated surplus premiums from previous years.

The OA is E.

Please, can anyone assist me with this DS question? Thanks in advance!
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Source: — Data Sufficiency |

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by Jay@ManhattanReview » Sun Jul 15, 2018 9:59 pm
BTGmoderatorLU wrote:Did Insurance Company K have more than $300 million in total net profits last year?

(1) Last year Company K paid out $0.95 in claims for every dollar of premiums collected.
(2) Last year Company K earned a total of $150 million in profits from the investment of accumulated surplus premiums from previous years.

The OA is E.

Please, can anyone assist me with this DS question? Thanks in advance!
What's the source of the question? It does not seem to be a GMAT type. To get the Net Profits, one must know the Revenue and the Expenses. Considering both the statements, we cannot assume whether the Net Profit is to be calculated from $150; there may be other expenses such as remuneration and overheads, etc. Moreover, the phrase, "profits from the investment of accumulated surplus premiums from previous years," is not devoid of any misinterpretation.

Hope this helps!

-Jay
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Re: Did Insurance Company K have more than $300 million in total

by Brent@GMATPrepNow » Wed Jan 15, 2020 2:55 pm
BTGmoderatorLU wrote: ↑
Sun Jul 15, 2018 9:28 am
 Did Insurance Company K have more than $300 million in total net profits last year?

(1) Last year Company K paid out $0.95 in claims for every dollar of premiums collected.
(2) Last year Company K earned a total of $150 million in profits from the investment of accumulated surplus premiums from previous years.
Target question: Did Insurance Company \(K\) have more than $300 million in total net profits last year?
Jump straight to...
.
.
.
Statements 1 and 2 combined
Statement 2 tells us about profits from ONE PART of Company K's business.
Statement 1 tells us a tiny bit about Company K's expenses.

There are several scenarios that satisfy BOTH statements. Here are two:
Case a: Company K earned a total of $150 million in profits from ONE PART of its business, and another $100 Billion in profits from the OTHER PARTS of its business. In this case, the answer to the target question is YES, Company K DID have more than $300 million in total net profits last year.
Case b: Company K earned a total of $150 million in profits from ONE PART of its business, and LOST $100 Billion in the OTHER PARTS of its business. In this case, the answer to the target question is NO, Company K did NOT have more than $300 million in total net profits last year.

Since we cannot answer the target question with certainty, the combined statements are NOT SUFFICIENT

Answer: E

Cheers,
Brent
Brent Hanneson - Creator of GMATPrepNow.com
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