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under petitioner’s existing name. Under this reinsurance model
used by petitioner’s expert, petitioner’s 23,526 group contracts
effectively were valued together as a mass and not as distinct
assets separate from each other and from petitioner’s other
intangible assets.
In his valuation, petitioner’s expert utilized incomplete
information and either ignored, improperly applied, or made
incorrect assumptions about unique characteristics associated
with petitioner’s group contracts.
In his analysis of the life of petitioner’s health insurance
group contracts, petitioner’s expert incorrectly assumed a 20-
year useful life for all of petitioner’s separate health
insurance group contracts, and he incorrectly assumed that lapse
rates for the group contracts would be consistent with certain
outdated information.
We explain further the key aspects of petitioner’s expert’s
valuation of the group contracts with which we disagree.12
Reinsurance Model
The reinsurance model used by petitioner’s expert values
petitioner’s 376 group contracts that were terminated in 1994 and
12 In the instant case, because petitioner went to some
significant effort to cure the item by item valuation
deficiencies that the District Court detailed in its opinion in
Trigon Ins. Co. v. United States, 215 F. Supp. 2d 687 (E.D. Va.
2002), supplemented at 234 F. Supp. 2d 581 (E.D. Va. 2002), our
criticisms of petitioner’s valuation of the group contracts are
more general than those of the District Court in Trigon Ins. Co.,
but they are equally fatal to petitioner’s claimed loss
deductions.
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