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While we believe that the reserve indications and
methods used to determine the reserve indications are
reasonable, the development of these indications
requires the projection of future contingent events;
thus, it is not possible to guarantee that these
reserves will prove to be adequate or not excessive.
Petitioner’s Representation Letters to Tillinghast
Before Tillinghast prepared its final reserve reports each
year, it required petitioner to provide a representation letter.
In connection with Tillinghast’s review of petitioner’s loss
reserves at yearend 1993, petitioner’s February 1994
representation letter to Tillinghast confirmed, among other
things, that petitioner had not knowingly withheld from
Tillinghast any “relevant information which would materially
affect the loss and loss adjustment expense reserves”, that
information furnished to Tillinghast for the calculation of the
loss and loss adjustment expense reserves was “complete and
accurate”, and that Tillinghast had been advised of “all known
changes in internal methods or procedures which would materially
affect the determination of needed loss and loss adjustment
expense reserves”. Petitioner’s February 1995 representation
letter, in connection with Tillinghast’s review of petitioner’s
loss reserves at yearend 1994, was substantially identical.
Third-Party Reviews of Petitioner’s Loss Reserves
Coopers & Lybrand
The accounting firm of Coopers & Lybrand (Coopers) reviewed
petitioner’s 1993 and 1994 annual statements. Coopers also
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