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approximately $700,000. By early 1994, the cumulative deficit
had reached $4 million, and petitioner had proposed a 48-percent
rate increase to take effect the following year. Pennsylvania
Farmer’s Union did not accept the rate increase proposed by
petitioner, and its group contracts with petitioner were
terminated in 1994.
In spite, however, of the millions of dollars in deficits
that petitioner had incurred relating to the three Pennsylvania
Farmers’ Union group contracts (particularly the $568,000
cumulative deficit that had built up in 1988 and prior years),
petitioner’s expert assigned the three Pennsylvania Farmer’s
Union contracts a total positive value of $479,000, or nearly 20
percent of the total value attributed to all of petitioner’s
experience-rated group contracts that were terminated in 1994.
Lifing Analysis
In establishing the future income stream for the group
contracts, petitioner’s expert undertook a lifing analysis of
petitioner’s group contracts in which he, in present value terms,
set forth the after tax income he expected petitioner’s 23,526
group contracts to generate over the course of 20 years (1987-
2006).
In his lifing analysis of petitioner’s group contracts, in
his attempt to account for the reality that not all of
petitioner’s group contracts would remain in existence for 20
years, petitioner’s expert utilized historical lapse rates
relating to a sample of petitioner’s group contracts that
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