- 20 -
The June 4 projections indicate that without tax savings
from policy loan interest and administration fee deductions, the
earnings effect over 60 years would have been a negative
$681,922,000. The tax savings over 60 years for interest and fee
deductions were projected to be $2,696,038,000. After these tax
benefits are taken into consideration, the projection indicated
that petitioner would realize an after-tax profit of
$2,014,115,000. These after-tax financial benefits were
dependent on the tax savings flowing from the interest and fee
deductions being generated by the broad-based COLI plan.
Petitioner prepared a list of "Company Expense Reduction
Opportunities" for fiscal year 1993 that listed 23 items of
savings that totaled $329,093,000. The largest item of expense
reduction on the list is "Proposed Corporate Life Insurance
(COLI)". The list shows that this item (COLI) was estimated to
be implemented on June 30, 1993, and that petitioner's estimated
savings from COLI was $300 million. Mr. McCook testified that he
thought this figure was derived from the "After-Tax Earnings
Effect" shown in column J of appendix A.21
AIG is a major underwriter of COLI policies. AIG had been
working with WJ/Coventry in preparing the COLI plan. Mr. Qureshi
21Three hundred million dollars is the approximate total of
the annual "After-Tax Earnings" projected for the policy years
1993 through 2007. The total projected After-Tax Earnings for
the years 1993 through 2052 is $2,246,431,000. See appendix A.
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