- 99 -
have been over four times as large as the highest return earned
by any of the Value Line companies in any year, and its average
ROE of 173.6 percent would have been almost 10 times the average
ROE of 18.0 percent earned by the Value Line companies."
Respondent also offered the expert report of Mr. Frederick
Kilbourne, an actuary, for his opinion regarding an arm's-length
premium for the coverage associated with petitioner's excess
value activity. In computing the premium rate, Mr. Kilbourne
analyzed the following premium elements:
1. Losses (payments to claimants)
2. Claim expenses
3. Other expenses (commissions, taxes, etc)
4. Investment income
5. Risk charge (provision for profit and catastrophes)
Mr. Kilbourne determined on an actuarial basis the following
rates per premium element (in cents per $100 of coverage):
1. Losses 7.5�
2. Claims expenses 0.0
3. Other expenses 0.4
4. Risk charge 0.4
5. Investment income -.2
Total 8.1�
Additionally, Mr. Kilbourne concluded that if claim expenses were
to be covered within the premium rate, as is customary in the
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