Minnesota Lawyers Mutual Insurance Company and Subsidiaries - Page 26

            Ph.D. in mathematics from the University of California                                     
            (Riverside) and has more than 21 years of actuarial consulting                             
                  In forming his opinion, Hayne relied primarily on                                    
            information supplied by petitioner, the Witcraft opinion, and                              
            the Teufel opinions, as well as petitioner’s annual statements                             
            and annual statements of other insurers specializing in legal                              
            professional liability insurance.                                                          
                  Hayne did not attempt to estimate petitioner’s unpaid                                
            losses.  He testified that he had no actuarial opinion as to the                           
            amount of unpaid loss reserves petitioner should use for either                            
            annual statement or Federal income tax purposes.  Instead, his                             
            goal, as stated by petitioner on brief, was to “assess the                                 
            volatility present in petitioner’s data and the effect of that                             
            volatility on projections based on that very data.”                                        
                  Hayne testified that petitioner’s loss development was                               
            historically volatile and difficult to predict with certainty.                             
            He found that petitioner had substantially fewer expected paid                             
            claims than the number generally needed each year for full                                 
            statistical credibility.  He attempted to quantify the level of                            
            uncertainty and to test petitioner’s carried reserves using two                            
            statistical analyses, the incurred loss development method and                             
            the paid loss development method.  Under these two methods,                                
            Hayne determined that the range of outcomes for petitioner’s                               

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Last modified: May 25, 2011