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Crossroads' common stock was zero on January 1, 1992, and
$3,312,000 ($331 per share) on January 1, 1993.
4. Respondent's Appraiser: Raymond Wise
Wise calculated the value of Crossroads' stock using two
methods: the book value method and the price/earnings method.
He used Crossroads' assets and liabilities from its December 31,
1991, balance sheet as a starting point to estimate the book
value. He did not review any of the reinsurance policies or the
underlying claims experience for the self-insurer funds.
Wise concluded that Crossroads' reserves for unpaid claims
should be reduced by 30 percent based on his review of
Crossroads' balance sheet and what he said was an industry
standard requiring a 50-percent ratio between claims paid and
reserves. Thus, he multiplied Crossroads' unpaid claims by 70
percent and recorded the product on his adjusted balance sheet.
He added the adjusted unpaid claims to Crossroads' other
liabilities to get its total liabilities "corrected". He
subtracted total liabilities corrected from Crossroads' total
assets, and projected that the book value of Crossroads' stock
was $1,241 per share as of January 1, 1992, and $1,580 per share
as of January 1, 1993. Wise estimated the price/earnings value
of Crossroads' stock using Rev. Rul. 59-60, 1959-1 C.B. 237
(which suggests using corporate financial statements for the 5-
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