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expert witness Matthew P. Merlino and set out in his report dated
October 27, 1994, should be made." Mr. Merlino's adjustment for
the year ended 1986 is based on an erroneous assumption and is
not otherwise supported in the record. Accordingly, we conclude
that the adjustment proposed by Mr. Merlino for year ended 1986
is not warranted.
With respect to the 1987 and 1988 policy years, Mr. Merlino
proposed adjusting Parthenon's reserves to conform to the
reserves recommended in Mr. Biscoglia's reserve analysis reports
for those years, but after first reducing the workers'
compensation reserves by $12.5 million for 1987 and $11.2 million
for 1988. For policy years 1987 and 1988, Mr. Biscoglia had
recommended unpaid losses reserves for workers' compensation
liabilities of $67,289,000 and $72,217,000, respectively. On the
annual statements for those years, Parthenon had reported unpaid
losses reserves for workers' compensation liabilities of
$50,551,000 and $57,417,000, respectively.
The workers' compensation policy for 1987 and 1988 was
retrospective. Parthenon accordingly received a premium
installment in the year of coverage (policy year) that was
designed to cover only a portion of the ultimate losses
anticipated on that line of business for that year. During the
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