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Q: Now, in making your assumption in assuming this
reinsurance transaction, did you assume that the
contracts, in fact, would be sold one at a time?
A: No. In fact, I would think that would be quite
unlikely, for the most part.
* * * I anticipate that somebody in the insurance
business who would be an interested buyer of this
business would wish to buy in bulk.
Petitioner’s expert asserts that under his reinsurance model
the value (calculated for and assigned to each of petitioner’s
376 group contracts that terminated in 1994) would be the same
whether the hypothetical sale constituted a sale of all 23,526 of
petitioner’s group contracts or constituted a sale of just the
376 group contracts that terminated in 1994. According to
petitioner’s expert, the 376 group contracts in issue would
themselves constitute a “credible” block (i.e., the expected
income flow from the group would not be affected significantly by
fluctuations in claims experience within the block).
As noted however, and as it must, petitioner does not claim
a single loss deduction in 1994 upon the termination of the 376
group contracts. Rather, petitioner claims 376 separate loss
deductions relating to the termination of each of the 376
separate group contracts. What is required to support
petitioner’s claimed loss deductions under section 165 are
valuations of the group contracts that reflect a value for each
contract as a separate and discrete contract.
In this regard, the District Court in Trigon Ins. Co. v.
United States, 215 F. Supp. 2d at 709, stated as follows:
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