United Parcel Service of America - Page 65




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               The agreement, with respect to OPL's reinsurance of Liberty            
          Mutual includes but is not limited to the following terms:                  
               1.  OPL reinsured Liberty Mutual's UPS California workers'             
          compensation exposure for losses not exceeding $250,000 from any            
          one accident.  Liberty Mutual retained the exposure for losses              
          exceeding $250,000 from any one accident.  Liberty Mutual also              
          retained the risk of multiple accidents with losses in excess of            
          $250,000.                                                                   
               2.  Liberty Mutual Fire agreed to pay over to OPL an amount            
          equal to the premiums received on the California workers                    
          compensation policy, less $50,000 for the retained layer of                 
          liability for losses above $250,000, a management fee equal to 1            
          percent of the premium, 1 percent of the premium for excise tax,            
          and a ceding commission equal to 12 percent of the losses                   
          incurred.  The ceding commission was capped at $1.2 million.                
               3.  Liberty Mutual retained the obligation to investigate              
          and adjust all claims for the UPS workers' compensation program             
          in California.                                                              
               4.  Liberty Mutual paid a 1 percent excise tax on                      
          reinsurance by a foreign insurer, pursuant to I.R.C. section                
          4371.                                                                       
               C.   Amount in Dispute                                                 
               On its 1984 Federal income tax return, petitioner deducted             
          the estimated premium of $14,241,915 it paid to Liberty Mutual              





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Last modified: May 25, 2011