-21-
that KPMG Peat Marwick erred in not recommending that Crossroads
discount its reserves for 1991 and 1992 for the time value of
money as it had recommended that Crossroads do for 1989 and 1990.
We disagree that KPMG Peat Marwick should have considered
the time value of money in estimating Crossroads' reserves.
First, respondent points out that, as of December 31, 1995, and
without considering the time value of money, KPMG Peat Marwick's
estimate of Crossroads' reserves for 1991 and 1992 had been shown
to be almost 100 percent accurate compared to Crossroads' known
claim losses for those years. Second, Wise did not reduce
Crossroads' reserves based on time value of money principles, nor
did we reduce the reserves in Estate of Feldmar v. Commissioner,
supra, to account for the time value of money. Third,
respondent's contention that section 846 requires reinsurance
companies to discount their unpaid losses (or reserves) to take
into account the time value of money misses the mark. We are not
computing Crossroads' reserve for unpaid losses for income tax
purposes; we are valuing the stock of Crossroads.
Respondent used KPMG Peat Marwick's reserve estimates and
valuation method as a benchmark to discredit Gallagher's report,
and made no convincing argument that we should not adopt KPMG
Peat Marwick's conclusion. We conclude that KPMG Peat Marwick's
conclusions were reasonable.
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011