SEC. 4. TABLES OF DISCOUNT

FACTORS

.01 The following tables present separately for each line of business the discount factors under section 846 of the

1998–4 I.R.B 9 January 26, 1998

Code for accident year 1997. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 1997, 6.33 percent, and by assuming all loss pay

.03 Tables

ments occur in the middle of the calendar year.

.02 If the groupings of individual lines of business on the annual statement change, taxpayers must discount the un

paid losses on the resulting line of business in accordance with the discounting patterns that would have applied to those unpaid losses based on their classification on the 1995 annual statement.

Accident and Health (Other Than Disability Income or Credit Disability Insurance)

The discount factor for all years equals 96.9777 percent.

Auto Physical Damage

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 89.9430 89.9430 10.0570 9.7006 96.4556 AY+ 1 99.3814 9.4384 0.6186 0.5821 94.0911 AY+ 2 N/A 0.3093 0.3093 0.3000 96.9777

The discount factor for AY+3 and subsequent years equals 96.9777 percent.

Commercial Auto/Truck Liability/Medical

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 25.8075 25.8075 74.1925 64.8956 87.4691 AY+ 1 49.8793 24.0718 50.1207 44.1814 88.1501 AY+ 2 67.6592 17.7799 32.3408 28.6441 88.5696 AY+ 3 79.7711 12.1119 20.2289 17.9679 88.8231 AY+ 4 88.2132 8.4421 11.7868 10.4001 88.2353 AY+ 5 93.1778 4.9646 6.8222 5.9391 87.0558 AY+ 6 95.9623 2.7845 4.0377 3.4438 85.2909 AY+ 7 97.0091 1.0468 2.9909 2.5823 86.3405 AY+ 8 97.5719 0.5628 2.4281 2.1654 89.1841 AY+ 9 98.2191 0.6471 1.7809 1.6352 91.8184 AY+10 N/A 0.6471 1.1338 1.0715 94.4995 AY+11 N/A 0.6471 0.4867 0.4720 96.9777

The discount factor for AY+12 and subsequent years equals 96.9777 percent.

January 26, 1998 10 1998–4 I.R.B.

Composite Discount Factors

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 35.4611 35.4611 64.5389 55.1671 85.4789 AY+ 1 59.1449 23.6838 40.8551 34.2373 83.8018 AY+ 2 70.8220 11.6771 29.1780 24.3635 83.4996 AY+ 3 81.9019 11.0799 18.0981 14.4806 80.0114 AY+ 4 86.3688 4.4669 13.6312 10.7911 79.1644 AY+ 5 90.0497 3.6809 9.9503 7.6785 77.1686 AY+ 6 92.7488 2.6991 7.2512 5.3813 74.2131 AY+ 7 93.8259 1.0771 6.1741 4.6113 74.6881 AY+ 8 94.2415 0.4156 5.7585 4.4747 77.7054 AY+ 9 94.8568 0.6153 5.1432 4.1234 80.1725 AY+10 N/A 0.6153 4.5279 3.7499 82.8190 AY+11 N/A 0.6153 3.9125 3.3528 85.6937 AY+12 N/A 0.6153 3.2972 2.9305 88.8789 AY+13 N/A 0.6153 2.6819 2.4815 92.5291 AY+14 N/A 0.6153 2.0665 2.0041 96.9777

The discount factor for AY+15 and subsequent years equals 96.9777 percent.

Fidelity/Surety

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 24.1540 24.1540 75.8460 70.0818 92.4001 AY+ 1 59.0961 34.9421 40.9039 38.4870 94.0911 AY+ 2 N/A 20.4520 20.4520 19.8339 96.9777

The discount factor for AY+3 and subsequent years equals 96.9777 percent.

Financial Guaranty/Mortgage Guaranty

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 9.2513 9.2513 90.7487 83.8101 92.3540 AY+ 1 50.5659 41.3146 49.4341 46.5131 94.0911 AY+ 2 N/A 24.7171 24.7171 23.9700 96.9777

The discount factor for AY+3 and subsequent years equals 96.9777 percent.

1998–4 I.R.B 11 January 26, 1998

International (Composite)

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 35.4611 35.4611 64.5389 55.1671 85.4789 AY+ 1 59.1449 23.6838 40.8551 34.2373 83.8018 AY+ 2 70.8220 11.6771 29.1780 24.3635 83.4996 AY+ 3 81.9019 11.0799 18.0981 14.4806 80.0114 AY+ 4 86.3688 4.4669 13.6312 10.7911 79.1644 AY+ 5 90.0497 3.6809 9.9503 7.6785 77.1686 AY+ 6 92.7488 2.6991 7.2512 5.3813 74.2131 AY+ 7 93.8259 1.0771 6.1741 4.6113 74.6881 AY+ 8 94.2415 0.4156 5.7585 4.4747 77.7054 AY+ 9 94.8568 0.6153 5.1432 4.1234 80.1725 AY+10 N/A 0.6153 4.5279 3.7499 82.8190 AY+11 N/A 0.6153 3.9125 3.3528 85.6937 AY+12 N/A 0.6153 3.2972 2.9305 88.8789 AY+13 N/A 0.6153 2.6819 2.4815 92.5291 AY+14 N/A 0.6153 2.0665 2.0041 96.9777

The discount factor for AY+15 and subsequent years equals 96.9777 percent.

Medical Malpractice — Claims-Made

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 6.3899 6.3899 93.6101 76.7016 81.9372 AY+ 1 24.0011 17.6112 75.9989 63.3967 83.4179 AY+ 2 42.6970 18.6959 57.3030 48.1312 83.9942 AY+ 3 58.0610 15.3640 41.9390 35.3351 84.2535 AY+ 4 69.6653 11.6043 30.3347 25.6058 84.4110 AY+ 5 75.6033 5.9380 24.3967 21.1036 86.5019 AY+ 6 81.8786 6.2753 18.1214 15.9686 88.1202 AY+ 7 87.8539 5.9753 12.1461 10.8179 89.0649 AY+ 8 89.5207 1.6668 10.4793 9.7839 93.3644 AY+ 9 94.3025 4.7818 5.6975 5.4724 96.0499 AY+10 N/A 4.7818 0.9157 0.8880 96.9777

The discount factor for AY+11 and subsequent years equals 96.9777 percent.

January 26, 1998 12 1998–4 I.R.B.

Medical Malpractice — Occurrence

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 2.1239 2.1239 97.8761 71.3476 72.8958 AY+ 1 6.4831 4.3592 93.5169 71.3689 76.3165 AY+ 2 15.5987 9.1156 84.4013 66.4869 78.7747 AY+ 3 31.9062 16.3075 68.0938 53.8797 79.1257 AY+ 4 45.0931 13.1868 54.9069 43.6925 79.5755 AY+ 5 50.0751 4.9821 49.9249 41.3209 82.7662 AY+ 6 60.9728 10.8976 39.0272 32.6993 83.7858 AY+ 7 69.2138 8.2411 30.7862 26.2712 85.3345 AY+ 8 72.8658 3.6519 27.1342 24.1685 89.0700 AY+ 9 80.0005 7.1347 19.9995 18.3412 91.7085 AY+10 N/A 7.1347 12.8648 12.1452 94.4063 AY+11 N/A 7.1347 5.7300 5.5569 96.9777

The discount factor for AY+12 and subsequent years equals 96.9777 percent.

Miscellaneous Casualty

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 77.6669 77.6669 22.3331 21.1546 94.7229 AY+ 1 94.0673 16.4004 5.9327 5.5822 94.0911 AY+ 2 N/A 2.9664 2.9664 2.8767 96.9777

The discount factor for AY+3 and subsequent years equals 96.9777 percent.

Multiple Peril Lines (Homeowners/Farmowners Multiple Peril, Commercial Multiple Peril, and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery))

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 55.9587 55.9587 44.0413 39.0317 88.6251 AY+ 1 77.8939 21.9352 22.1061 18.8836 85.4224 AY+ 2 84.0083 6.1144 15.9917 13.7739 86.1318 AY+ 3 91.3188 7.3105 8.6812 7.1075 81.8723 AY+ 4 92.1670 0.8482 7.8330 6.6827 85.3156 AY+ 5 94.3838 2.2168 5.6162 4.8199 85.8215 AY+ 6 96.4959 2.1121 3.5041 2.9471 84.1041 AY+ 7 97.3670 0.8712 2.6330 2.2354 84.8988 AY+ 8 98.0034 0.6364 1.9966 1.7207 86.1793 AY+ 9 98.4059 0.4025 1.5941 1.4146 88.7355 AY+10 N/A 0.4025 1.1916 1.0891 91.3925 AY+11 N/A 0.4025 0.7892 0.7430 94.1488 AY+12 N/A 0.4025 0.3867 0.3750 96.9777

The discount factor for AY+13 and subsequent years equals 96.9777 percent.

1998–4 I.R.B 13 January 26, 1998

Other (Including Credit)

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 66.7418 66.7418 33.2582 31.3428 94.2407 AY+ 1 89.2755 22.5337 10.7245 10.0908 94.0911 AY+ 2 N/A 5.3622 5.3622 5.2002 96.9777

The discount factor for AY+3 and subsequent years equals 96.9777 percent.

Other Liability — Claims-Made

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 10.2440 10.2440 89.7560 73.7178 82.1313 AY+ 1 29.3763 19.1323 70.6237 58.6556 83.0537 AY+ 2 44.4111 15.0349 55.5889 46.8651 84.3066 AY+ 3 67.8197 23.4086 32.1803 25.6935 79.8425 AY+ 4 73.4753 5.6555 26.5247 21.4881 81.0117 AY+ 5 78.8604 5.3852 21.1396 17.2953 81.8150 AY+ 6 83.5027 4.6422 16.4973 13.6032 82.4571 AY+ 7 84.0676 0.5649 15.9324 13.8818 87.1292 AY+ 8 85.2129 1.1453 14.7871 13.5795 91.8334 AY+ 9 90.5992 5.3863 9.4008 8.8849 94.5123 AY+10 N/A 5.3863 4.0145 3.8932 96.9777

The discount factor for AY+11 and subsequent years equals 96.9777 percent.

Other Liability — Occurrence

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 13.5751 13.5751 86.4249 67.6678 78.2967 AY+ 1 26.3964 12.8213 73.6036 58.7304 79.7927 AY+ 2 40.2725 13.8761 59.7275 48.1394 80.5984 AY+ 3 55.4566 15.1841 44.5434 35.5293 79.7634 AY+ 4 65.3309 9.8742 34.6691 27.5964 79.5992 AY+ 5 74.0647 8.7339 25.9353 20.3372 78.4151 AY+ 6 80.9090 6.8442 19.0910 14.5670 76.3027 AY+ 7 84.3622 3.4532 15.6378 11.9282 76.2781 AY+ 8 84.6163 0.2542 15.3837 12.4212 80.7428 AY+ 9 86.7311 2.1147 13.2689 11.0268 83.1026 AY+10 N/A 2.1147 11.1542 9.5442 85.5659 AY+11 N/A 2.1147 9.0395 7.9677 88.1435 AY+12 N/A 2.1147 6.9247 6.2914 90.8543 AY+13 N/A 2.1147 4.8100 4.5090 93.7427 AY+14 N/A 2.1147 2.6953 2.6138 96.9777

January 26, 1998 14 1998–4 I.R.B.

The discount factor for AY+15 and subsequent years equals 96.9777 percent.

Private Passenger Auto Liability/Medical

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 37.9339 37.9339 62.0661 56.2405 90.6139 AY+ 1 67.7044 29.7705 32.2956 29.1023 90.1122 AY+ 2 81.5316 13.8272 18.4684 16.6864 90.3507 AY+ 3 89.8898 8.3583 10.1102 9.1239 90.2445 AY+ 4 94.6531 4.7633 5.3469 4.7897 89.5789 AY+ 5 97.1265 2.4734 2.8735 2.5424 88.4775 AY+ 6 98.4587 1.3322 1.5413 1.3296 86.2663 AY+ 7 98.9811 0.5224 1.0189 0.8751 85.8870 AY+ 8 99.2330 0.2519 0.7670 0.6707 87.4508 AY+ 9 99.4067 0.1737 0.5933 0.5341 90.0213 AY+10 N/A 0.1737 0.4196 0.3888 92.6584 AY+11 N/A 0.1737 0.2460 0.2344 95.2808 AY+12 N/A 0.1737 0.0723 0.0701 96.9777

The discount factor for AY+13 and subsequent years equals 96.9777 percent.

Products Liability — Claims-Made

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 4.9750 4.9750 95.0250 75.3005 79.2428 AY+ 1 15.1072 10.1322 84.8928 69.6191 82.0082 AY+ 2 30.9560 15.8488 69.0440 57.6832 83.5456 AY+ 3 38.2420 7.2860 61.7580 53.8215 87.1490 AY+ 4 68.6101 30.3681 31.3899 25.9138 82.5548 AY+ 5 78.5966 9.9865 21.4034 17.2565 80.6250 AY+ 6 88.3971 9.8005 11.6029 8.2429 71.0419 AY+ 7 93.2957 4.8986 6.7043 3.7135 55.3889 AY+ 8 88.3815 –4.9142 11.6185 9.0158 77.5989 AY+ 9 89.6105 1.2290 10.3895 8.3192 80.0734 AY+10 N/A 1.2290 9.1604 7.5785 82.7304 AY+11 N/A 1.2290 7.9314 6.7908 85.6198 AY+12 N/A 1.2290 6.7024 5.9534 88.8249 AY+13 N/A 1.2290 5.4733 5.0629 92.5009 AY+14 N/A 1.2290 4.2443 4.1160 96.9777

The discount factor for AY+15 and subsequent years equals 96.9777 percent.

1998–4 I.R.B 15 January 26, 1998

Products Liability — Occurrence

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 9.0653 9.0653 90.9347 68.4900 75.3178 AY+ 1 14.9035 5.8382 85.0965 66.8052 78.5053 AY+ 2 29.2591 14.3555 70.7409 56.2311 79.4888 AY+ 3 45.6462 16.3871 54.3538 42.8927 78.9139 AY+ 4 57.5945 11.9483 42.4055 33.2872 78.4972 AY+ 5 63.8634 6.2689 36.1366 28.9300 80.0572 AY+ 6 75.2266 11.3632 24.7734 19.0439 76.8723 AY+ 7 78.2679 3.0413 21.7321 17.1133 78.7466 AY+ 8 78.1898 –0.0781 21.8102 18.2771 83.8007 AY+ 9 81.8722 3.6825 18.1278 15.6368 86.2591 AY+10 N/A 3.6825 14.4453 12.8294 88.8138 AY+11 N/A 3.6825 10.7628 9.8443 91.4657 AY+12 N/A 3.6825 7.0803 6.6702 94.2072 AY+13 N/A 3.6825 3.3979 3.2952 96.9777

The discount factor for AY+14 and subsequent years equals 96.9777 percent.

Reinsurance A (Nonproportional Property)

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 27.1668 27.1668 72.8332 64.5830 88.6725 AY+ 1 68.7008 41.5340 31.2992 25.8427 82.5667 AY+ 2 70.0362 1.3354 29.9638 26.1015 87.1103 AY+ 3 87.5338 17.4976 12.4662 9.7109 77.8976 AY+ 4 90.2132 2.6794 9.7868 7.5627 77.2743 AY+ 5 91.3751 1.1619 8.6249 6.8433 79.3434 AY+ 6 94.3845 3.0095 5.6155 4.1732 74.3169 AY+ 7 93.3293 –1.0552 6.6707 5.5255 82.8327 AY+ 8 N/A 1.0387 5.6320 4.8042 85.3021 AY+ 9 N/A 1.0387 4.5932 4.0372 87.8942 AY+10 N/A 1.0387 3.5545 3.2216 90.6354 AY+11 N/A 1.0387 2.5158 2.3545 93.5882 AY+12 N/A 1.0387 1.4771 1.4324 96.9777

The discount factor for AY+13 and subsequent years equals 96.9777 percent.

January 26, 1998 16 1998–4 I.R.B.

Reinsurance B (Nonproportional Liability)

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 6.6962 6.6962 93.3038 68.4343 73.3457 AY+ 1 22.3944 15.6982 77.6056 56.5788 72.9055 AY+ 2 32.6486 10.2542 67.3514 49.5864 73.6235 AY+ 3 50.2234 17.5748 49.7766 34.6027 69.5161 AY+ 4 53.5839 3.3605 46.4161 33.3279 71.8024 AY+ 5 55.6838 2.0999 44.3162 33.2721 75.0790 AY+ 6 63.6144 7.9306 36.3856 27.2005 74.7564 AY+ 7 66.4211 2.8066 33.5789 26.0282 77.5135 AY+ 8 N/A 2.8066 30.7723 24.7817 80.5325 AY+ 9 N/A 2.8066 27.9656 23.4563 83.8753 AY+10 N/A 2.8066 25.1590 22.0469 87.6304 AY+11 N/A 2.8066 22.3524 20.5484 91.9294 AY+12 N/A 2.8066 19.5457 18.9550 96.9777

The discount factor for AY+13 and subsequent years equals 96.9777 percent.

Reinsurance C (Financial Lines)

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 11.4622 11.4622 88.5378 76.8398 86.7875 AY+ 1 44.5791 33.1169 55.4209 47.5547 85.8065 AY+ 2 63.9134 19.3343 36.0866 30.6281 84.8740 AY+ 3 65.6185 1.7051 34.3815 30.8086 89.6082 AY+ 4 79.9778 14.3593 20.0222 17.9520 89.6607 AY+ 5 88.9152 8.9374 11.0848 9.8725 89.0632 AY+ 6 91.2490 2.3338 8.7510 8.0909 92.4566 AY+ 7 94.7645 3.5155 5.2355 4.9780 95.0811 AY+ 8 N/A 3.5155 1.7200 1.6680 96.9777

The discount factor for AY+9 and subsequent years equals 96.9777 percent.

Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Glass, Burglary and Theft)

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 57.4895 57.4895 42.5105 40.4210 95.0847 AY+ 1 90.5193 33.0297 9.4807 8.9205 94.0911 AY+ 2 N/A 4.7404 4.7404 4.5971 96.9777

The discount factor for AY+3 and subsequent years equals 96.9777 percent.

1998–4 I.R.B 17 January 26, 1998

Workers’ Compensation

Discounted Cumulative Estimated Unpaid Unpaid Losses Losses Paid Losses at Losses at Discount Tax Year Paid Each Year Year End Year End Factor (%) (%) (%) (%) (%)

AY+ 0 23.6461 23.6461 76.3539 62.1544 81.4030 AY+ 1 44.8166 21.1705 55.1834 44.2585 80.2025 AY+ 2 57.9652 13.1486 42.0348 33.5016 79.6998 AY+ 3 72.0542 14.0889 27.9458 21.0943 75.4828 AY+ 4 80.5542 8.5000 19.4458 13.6646 70.2704 AY+ 5 84.8876 4.3334 15.1124 10.0611 66.5754 AY+ 6 87.1173 2.2297 12.8827 8.3988 65.1946 AY+ 7 88.2647 1.1473 11.7353 7.7473 66.0173 AY+ 8 88.5404 0.2757 11.4596 7.9534 69.4041 AY+ 9 88.8062 0.2658 11.1938 8.1828 73.1011 AY+10 N/A 0.2658 10.9279 8.4266 77.1108 AY+11 N/A 0.2658 10.6621 8.6859 81.4653 AY+12 N/A 0.2658 10.3963 8.9616 86.2002 AY+13 N/A 0.2658 10.1304 9.2548 91.3560 AY+14 N/A 0.2658 9.8646 9.5665 96.9777

The discount factor for AY+15 and subsequent years equals 96.9777 percent.