Capital Blue Cross and Subsidiaries - Page 42

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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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