-7-
January 10, 1992, and owned by petitioner and Crossroads'
minority shareholders.
4. Crossroads' Annual Statements
Crossroads reported on its 1991 and 1992 annual statements
that it had surpluses of $6,372,038 for 1991 and $8,720,809 for
1992.
a. KPMG Peat Marwick's Actuarial Reports
Crossroads began using KPMG Peat Marwick as an actuary to
prepare Crossroads' loss reserves around 1988. KPMG Peat Marwick
also audited Crossroads' financial statements. A different
office of KPMG Peat Marwick audited Gulf's financial statements.
In analyzing Crossroads' reserves, KPMG Peat Marwick
reviewed the following underlying claims data for each of the
self-insurer funds: (i) Accident year cumulative amount of paid
and incurred losses, at historical development points; (ii)
accident year cumulative number of closed and reported claims, at
historical development points; (iii) earned normal premium by
accident year; (iv) recoveries from subrogation, second injury
funds, and specific excess insurance, by accident year; and (v)
all reinsurance policies with loss exposure.
After reviewing the historical data, KPMG Peat Marwick: (i)
Applied standard actuarial loss development techniques, including
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