Minnesota Lawyers Mutual Insurance Company and Subsidiaries - Page 40




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            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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Last modified: May 25, 2011