From statement (1), a^2 > b^2, we can gather that abs(a) > abs(b). However, this is not enough information to tell us if both are positive, both are negative, or one is positive and one is negative. In the case where both a and b share the same sign, abs(a) + abs (b) will equal abs(a + b). Take a minute to convince yourself of this. If they have opposite signs, though, then abs(a) + abs (b) will be bigger than abs (a + b). Again, take a minute to convince yourself of this. Basically, some canceling out happens in the a + b part if the signs are different, and you are left with a number that is smaller than the absolute value of either one.
Since we don't know the signs of a and b, statement 1 is not sufficient.
Moving on to statement (2), abs(a) x b > 0 tells us that b <0> abs(b) and b < 0. This STILL doesn't tell us the sign of a. We could have the situation where a < b< 0, or the situation where b < 0 <a> abs(b).
Assigning real numbers, what I am staying is we could have a = -4 and b = -3, or we could have b = -3 and a = 4. In the first case, abs(a) + abs (b) will equal abs(a + b). In the second case, abs(a) + abs (b) will be greater than abs(a + b).
Thus, the statements combined do not provide sufficient information and the answer is E.
Tatiana Becker | GMAT Instructor | Veritas Prep