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We turn to these factors and analyze them one at a time.
We also analyze and discuss other factors that we find to be
relevant to our determination. In analyzing all of the factors,
we apply a deferential standard of review because the text of
section 845(b) confers broad discretion on the Commissioner
similar to that of section 482 and like provisions. We shall
sustain the Commissioner’s determination as within her discretion
unless the determination is arbitrary, capricious or without
sound basis in fact. Capitol Fed. Sav. & Loan Association v.
Commissioner, 96 T.C. 204, 213 (1991); Procter & Gamble Co. v.
Commissioner, 95 T.C. 323, 332 (1990), affd. 961 F.2d 1255 (6th
Cir. 1992).
i. Duration or Age of Business Reinsured
The duration or age of the business reinsured bears directly
on the transfer of significant economic risk between the parties.
The reinsurance of new business may carry a greater risk of
lapse, and thus of potential loss to the reinsurer, than the
reinsurance of old business. H. Conf. Rept. 98-861, supra at
1063, 1984-3 C.B. (Vol. 2) at 317.
The two blocks of SPDA policies underlying the 1988
Agreement and the block of SPDA policies underlying the 1989
Agreement were several years old. Respondent argues that the
history of these policies allowed petitioner to predict the
policies’ potential profits, which, in turn, allowed petitioner
to minimize its risk through the negotiation of a ceding
commissions that would be recouped out of those profits. We
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