-42-
however, should have alerted petitioner that its prior reserve
estimates were more than adequate. There is no evidence that
petitioner took this prior experience into account in evaluating
or amending its reserving philosophy and practices, especially
as regards its adverse development reserve. Cf. Hanover Ins.
Co. v. Commissioner, 69 T.C. at 270-271 (taxpayer failed to
prove that it employed any method of testing its reserves on the
basis of prior experience, even though it revised its reserve
estimates from time to time on the basis of developments in
particular cases).
Petitioner argues that it had competing business concerns–-
such as ensuring solvency and competitiveness--not to overstate
its loss reserves. Apart from such generalities, however,
petitioner fails to articulate with particularity how such
concerns–-which would appear to relate principally to annual
statement reporting–-should govern the determination of fair and
reasonable estimates of unpaid losses for Federal income tax
purposes. In any event, the record does not indicate that
petitioner’s solvency was in jeopardy during the years in issue,
when its surplus consistently exceeded $14 million.
6. Conclusion
On the basis of the totality of evidence in the record, we
conclude and hold that petitioner has failed to establish that
its estimates of unpaid losses, as used in computing “losses
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011