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conclusion “appears to be consistent” with Tillinghast’s 1993
yearend reserves study.
Petitioner’s Operating Experience
Petitioner has recorded a surplus every year since it was
incorporated in 1986. From its inception through the years in
issue, petitioner’s ultimate losses have proved each year to be
significantly lower than it originally estimated for annual
statement purposes in earlier years.8 For the years in issue,
petitioner’s redundancies (excesses as determined by hindsight)
in its loss reserves were also significantly higher
than the average redundancies in loss reserves for the medical
malpractice industry as a whole.
With respect to each of the years in issue, A.M. Best Co.
(Best)9 rated petitioner’s consolidated financial condition and
8 For example, on its 1994 annual statement, petitioner
revised downward its original estimates of unpaid losses for
prior coverage years as follows:
Coverage As Originally As Estimated on 1994 Percentage
Year Reported Annual Statement Decrease
1987 $3,379,000 $1,658,000 51
1988 10,580,000 4,183,000 60
1989 17,276,000 8,507,000 51
1990 25,746,000 13,266,000 48
1991 29,166,000 16,445,000 44
1992 27,948,000 19,820,000 29
1993 30,003,000 28,819,000 4
9 A.M. Best Co., a rating agency specializing in the
insurance industry, rates the financial condition of P&C
companies each year.
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