Did Insurance Company K have More than $300 Million in Total Net Profits Last Year? GMAT Data Sufficiency

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

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

Statement (1) ALONE is sufficient, but statement (2) alone is not sufficient.
Statement (2) ALONE is sufficient, but statement (1) alone is not sufficient.
BOTH statements (1) and (2) TOGETHER are sufficient, but NEITHER statement ALONE is sufficient.
EACH statement ALONE is sufficient.
Statements (1) and (2) TOGETHER are not sufficient.

“Did Insurance Company K have More than $300 Million in Total Net Profits Last Year? GMAT Data Sufficiency”- is a topic of the GMAT Quantitative reasoning section of GMAT. This question has been taken from the book "GMAT Quantitative Review". GMAT Quant section consists of a total of 31 questions. GMAT Data Sufficiency questions consist of a problem statement followed by two factual statements. GMAT data sufficiency comprises 15 questions which are two-fifths of the total 31 GMAT quant questions.

Solution and Explanation:

Approach Solution 1:

Explanation:

In the above question, we need to decide if the Insurance Company K had more than $300 million in total net profits last year.
So let R and E, be the company’s total revenue and total expenses last year respectively.
Now if R – E > $300 million. Then we have two cases,

Case 1: This indicates that for $x in premiums collected. So, the company paid $0.95x in claims. But then it provides no information about other sources of revenue. It also does not provide other types of expenses. So this statement is NOT sufficient.

Case 2: This indicates the company’s profits. It shows that the profit from the investment of accumulated surplus premiums was $150 million last year. But gives no information about other sources of revenue. It also does not provide other types of expenses. So this statement is NOT sufficient.

So both statements (1) and (2) together give information on profit. The profit that results from collecting premiums and paying claims. It also shows the profit from investments from accumulated surplus premiums. But there is no indication whether there were other sources of revenue or other types of expenses. Hence option E is the correct answer.

Approach Solution 2:

Explanation:

In the above question, we need to decide if the Insurance Company K had more than $300 million in total net profits last year.

Statement One Alone:

There is no information about the total number of dollars of premiums Company K collected last year. It is not possible to determine whether Insurance Company K had more than $300 million in total net profits last year. Statement one alone is not sufficient.

Statement Two Alone:

It shows that the profit from the investment of accumulated surplus premiums was $150 million last year. But gives no information about other sources of revenue. Statement two alone is not sufficient.

Statements One and Two Together:

While both the statements state the profits and revenues. But the total number of dollars of premiums Company K collected last year is not provided. So, even both the statements together are still not sufficient.

Hence option E is the correct answer.

Correct Answer: E

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Did Insurance Company K have More than $300 Million in Total Net Profits Last Year? GMAT Data Sufficiency

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