Refer to the following information for this question: Annual Data Thousands of D

ID: 2749615 • Letter: R

Question

Refer to the following information for this question:

Annual Data Thousands of Dollars

-Premiums earned $25,000

-Losses incurred $18,000

-Expenses/commissions $7,500

-Dividends paid to policyholders $ 750

-Investment income on premiums $ 1,600

Which of the following is true?

A) Everything else constant, the maximum expected loss ratio that would yield a profitable line after including investment income is $7,500

B)Everything else constant, the maximum expected loss ratio that would yield a profitable line after including investment income is $26,750

C)Everything else constant, the maximum expected loss ratio that would yield a profitable line after including investment income is $ 17,500

D) Everything else constant, the maximum expected loss ratio that would yield a profitable line after including investment income is $ 18,350

E) None of the above

Maximum Loss + $7,500 + $750 - $1,600 = $25,000

=> Maximum Loss = $18,350

Maximum loss ratio = $18,350 / $24,500

= 0.7489

D) Everything else constant, the maximum expected loss ratio that would yield a profitable line after including investment income is $ 18,350

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