-40-
part, revg. in part on another issue, and remanding 70 T.C. 944
(1978); Hanover Ins. Co. v. Commissioner, 69 T.C at 272.
4. Hayne’s Testimony
The testimony of petitioner’s expert, Hayne, falls short in
assisting the Court in determining whether petitioner’s
estimates of unpaid losses were fair and reasonable, or what
estimates might be fair and reasonable. He did not opine on the
ultimate value of petitioner’s unpaid losses. His testimony
suggests that because of the low volume and volatility of
petitioner’s claims data, almost any estimate within a very wide
range might have statistical credibility. His report implies,
for example, that for petitioner’s 1995 year, any estimate in a
range from $4.8 million to $39.2 million might be considered
reasonable.
Hayne’s testimony is difficult to square with petitioner’s
qualified actuary reports. These reports reflect the
application of a variety of standard actuarial techniques to
arrive at best estimates or selected point estimates.28
Moreover, Hayne’s premise as to the volatility of petitioner’s
data is difficult to square with Bixler’s September 1996
statement to petitioner’s shareholders that “we have had the
opportunity to observe the loss activity in each band of risk
and have found many of the lower layers to be relatively stable
28 The Witcraft report was prepared by another actuary in
the same actuarial firm with which Hayne is affiliated. Hayne
testified that he had no reason to believe that Witcraft did not
do her analysis properly.
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