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Skrodenis concluded that the actuarial methodologies and
assumptions used to develop Tillinghast’s point estimate were
“reasonable”. In addition, Skrodenis reviewed petitioner’s
unpaid loss estimate for 1994. Skrodenis noted that petitioner’s
carried loss reserves at yearend 1994 were 9.8 percent above the
Tillinghast point estimate. Skrodenis concluded that this 9.8
percent “redundancy” was acceptable from an actuarial
perspective.
After consulting with Skrodenis, Coopers’s auditors
determined that Tillinghast’s point estimate was likely the
midpoint of a range whose width was plus 10 percent or minus 5
percent of the best point estimate. These auditors concluded
that petitioner’s unpaid losses on its 1994 annual statement
exceeded the range suggested under Coopers’s in-house guidelines.
As in 1993, the 1994 guidelines specified a mechanical formula
which the auditors used to test the reasonableness of
petitioner’s recorded reserves. Ultimately, after further
assessment, the Coopers auditors determined that no unpaid loss
adjustment was required for financial statement purposes. As
stated in an undated Coopers working paper, the somewhat
“conservative” nature of petitioner’s carried reserve was
supported by several factors, including the following:
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