- 13 -
value. For 1994, the projection indicated that petitioner would
partially satisfy its premium and interest payment10 obligation
by borrowing $113,929,000 and withdrawing $1,649,000 from the net
cash value of the policy. For 1995, the projection indicated
that a loan of $110,318,000 and a policy withdrawal of
$14,731,000 would be used to pay a large portion of the premiums
of $113,852,000 and interest payment of $24,486,000. Except for
the next 4 years, 1996 through 1999, the projection indicated
petitioner would finance a large portion of its premium and
interest payments with policy loans. For years 1996 through
1999, petitioner would generally finance its premium and interest
payments through policy withdrawals. The policies' premiums were
to be completely paid by 2007; therefore, no premium payments
were projected for the years 2008 through 2052. However, for
years 2008 through 2052, policy loans continued to be projected
in amounts that were approximately between 90 percent and 95
percent of the amount of the annual loan interest payments.
The projection indicated that petitioner would sustain a
negative "pretax earnings effect" on the COLI plan for every year
the plan remained in effect. Thus, the projection for the years
10The projection indicated that petitioner would actually
pay the estimated $11,902,000 of interest due on the 1993 loan of
$107,684,000 in 1994. Interest accumulated on policy loans was
payable in arrears.
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