- 41 - that are in issue in this case as if the 376 contracts were sold in a reinsurance transaction that occurred on January 1, 1987, as part of a larger sale for $131.7 million of all 23,526 of petitioner’s group contracts in effect on that date. In treating the 376 group contracts as if they were sold together in one transaction, along with the balance of petitioner’s 23,526 group contracts, petitioner’s expert erroneously minimizes the risk inherent in each separate group contract, maximizes the value of petitioner’s group contracts, and, for loss deduction purposes, overstates their value. Petitioner’s expert’s $131.7 million reflects the cumulative total value of petitioner’s 23,526 group contracts as a whole, and the expert appears to include therein the value of petitioner’s other intangible assets (e.g., goodwill, trade name, and provider network). Petitioner’s expert acknowledged that under his method he valued petitioner’s group contracts in a way that reflected more than just the value of each separate group contract. In his report and testimony, petitioner’s expert states as follows: as in the case of most intangible assets, the value of group health insurance contracts can be realized in a market transaction where the contracts are transferred together with other assets. In this case, the hypothetical market transaction to realize that value could be a transfer that includes all of * * * [petitioner’s] assets, including such assets as the provider network. As I indicated earlier, a hypothetical market transaction that realizes the full economic value of the contracts could be structured as a sale by reinsurance.Page: Previous 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Next
Last modified: May 25, 2011