-35-
there is no indication how that separate allowance was made, how
it purported to avoid redundancy with the case reserve developed
by the claim department, or to what extent petitioner took into
account its reinsurance proceeds recoverable for claims over
$100,000.
2. Variance from Actuarial Estimates
In Utah Med. Ins. Association v. Commissioner, T.C. Memo.
1998-458, the taxpayer’s actuary used consistent actuarial
methods and standard actuarial loss development techniques to
estimate the taxpayer’s ultimate loss within a bounded range
instead of recommending a point estimate. The taxpayer then
selected reserves at the high end of the actuary’s indicated
range. On the basis of the evidence in the record, including
the testimony of the actuary, we concluded that the actuary’s
indicated range of reserves was reasonable, that each point in
the actuary’s range was reasonable, and that the taxpayer’s
reserves were fair and reasonable.
By contrast, here the evidence does not indicate that
petitioner used consistent actuarial methods and standard
actuarial loss development techniques in establishing its loss
reserves.24 Petitioner’s actuaries did not assist in
24 The Witcraft opinion for 1993 states that petitioner’s
carried reserves were “computed in accordance with Standards of
Practice issued by the Actuarial Standards Board (including the
Casualty Actuarial Society’s Statement of Principles regarding
Property and Casualty Loss and Loss Adjustment Expense
(continued...)
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