EOM4 - actual earnings

[taketwo]

This will seem like a dumb question to some of you, but I work in pensions, not insurance, so bear with me.

Are the annual profits we calculate in Task 4 the same thing as the earnings they talk about on page 1 of the exercise? Can I compare the actual earnings in 2001 ($0.4 million) with profit in year 1? My calculated profit in year 1 is roughly negative $1 million so I'm confused by their projected earnings of $0.5 million in 2001.

Any thoughts?

[colemstpeter]

A few points:
1) These points are to the best of my limited knowledge
2) Task 4 is based on 2005 sales levels as mentioned in task 3 so comparing the earnings to the projected earnings for 2001 wouldn't be appropriate. But yes, the profit calculated in task 4 is the same financial measure (just using different sales figures).
3) You have a great point, how could they project a year 1 profit with this product? It seems impossible given the expenses and reserves. Further, how could they report an actual profit for 2001 given all of the actual data provided. I put the actual values into the model and it produces a negative year 1 profit.

Has anyone else looked at this?

[jy006m]

I'm also confused by this. How did Asherton come up with that earnings projection in the initial inteview? I feel like it's important to understand what he is doing differently compared to what we're doing in our worksheets because we are supposed to redefine the problem in our memo. I'm trying to understand what Asherton did wrong and how he is looking at the problem incorrectly.