United Parcel Service of America - Page 114




                                       - 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               





Page:  Previous  89  90  91  92  93  94  95  96  97  98  99  100  101  102  103  104  105  106  107  108  Next

Last modified: May 25, 2011