SECTION 4. APPLICATION

.01 The following tables present separately for each line of business the discount factors under § 832 for the 2003 accident year. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2003, which is 5.27 percent, and by assuming all estimated salvage is recovered in the middle of each calendar year. See Rev. Proc. 2003–18, 2003–6 I.R.B. 439, for background regarding the tables.

.02 These tables must be used by taxpayers irrespective of whether they elected to discount unpaid losses using their own historical experience under § 846.

.03 Section V of Notice 88–100, 1988–2 C.B. 439, provides a composite discount factor to be used in determining the discounted unpaid losses for accident years that are not separately reported on the NAIC Annual Statement. The tables separately provide discount factors for taxpayers who elect to use the composite method. Rev. Proc. 2002–74, 2002–2 C.B. 980, clarifies that for certain insurance companies subject to tax under § 831 the composite method for discounting unpaid losses set forth in Notice 88–100, section V, 1988–2 C.B. 439, is permitted but not required. This revenue procedure further provides alternative methods for computing discounted unpaid losses that are permitted for insurance companies not using the composite method, and sets forth a procedure for insurance companies to obtain automatic consent of the Commissioner to change to one of the methods described in Rev. Proc. 2002–74.

.04 Tables.

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

Taxpayers that do not use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2003 accident year as of the end of the 2003 and later taxable years.

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount all salvage recoverable in this line of business as of the end of the 2003 taxable year.

Auto Physical Damage

Auto Physical Damage

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2005 and later years

97.4648

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2005 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Commercial Auto/Truck Liability/Medical

Discount

Factors

Tax Year

(%)

2003 89.8985 2004 89.5760 2005 89.3200 2006 89.8660 2007 90.4447 2008 89.8117 2009 91.1941 2010 92.3941 2011 92.7106 2012 95.0592

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

97.4648

Tax Year

Discount Factors (%)

2013 and later years

2003 96.2554 2004 95.0251

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

January 12, 2004 288 2004-2 I.R.B.

Composite

Tax Year

Discount

Factors

(%)

Discount

Factors

(%)

Financial Guaranty/Mortgage Guaranty

Fidelity/Surety

Tax Year

2005 and later years

97.4648

2003 89.8098 2004 88.3565 2005 87.7654 2006 87.0910 2007 85.7719 2008 85.8519 2009 85.5584 2010 85.4976 2011 85.6301 2012 87.7378

Taxpayers that do not use the composite method of Notice 88–100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2013 89.9120 2014 92.1502 2015 94.4404 2016 96.7198 2017 and later 97.4648 years

Taxpayers that use the composite method of Notice 88–100 should use 91.2442 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

2003 94.2115 2004 95.0251

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2003 92.5838 2004 95.0251

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2005 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

International (Composite)

Discount

Factors

2005 and later years

97.4648

Tax Year

(%)

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2005 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Financial Guaranty/Mortgage Guaranty

Discount

Factors

Tax Year

(%)

2003 89.8098 2004 88.3565 2005 87.7654 2006 87.0910 2007 85.7719 2008 85.8519 2009 85.5584 2010 85.4976 2011 85.6301 2012 87.7378

Taxpayers that do not use the composite method of Notice 88–100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2004-2 I.R.B. 289 January 12, 2004

International (Composite)

2013 89.9120 2014 92.1502 2015 94.4404 2016 96.7198 2017 and later 97.4648 years

Taxpayers that use the composite method of Notice 88–100 should use 91.2442 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Medical Malpractice — Claims-Made

Discount

Factors

2003 79.6421 2004 80.9952 2005 85.2445 2006 87.0038 2007 72.1989 2008 83.9897 2009 90.0478 2010 93.6582 2011 95.7277 2012 97.4648

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

Tax Year

Medical Malpractice — Occurrence

Discount

Factors

Miscellaneous Casualty

2005 and later years

97.4648

Tax Year

(%)

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2005 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

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

Discount

Factors

(%)

Tax Year

(%)

2003 84.3980 2004 78.8909 2005 84.4191 2006 81.6093 2007 82.7520 2008 76.1578 2009 87.8015 2010 91.2457 2011 95.3664 2012 97.4648

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2013 and later years

97.4648

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Miscellaneous Casualty

Discount

Factors

Tax Year

(%)

2013 and later years

97.4648

2003 90.9145 2004 88.9102 2005 89.7851 2006 89.4452 2007 88.9585 2008 90.4184 2009 90.4744 2010 90.6908 2011 92.5143 2012 94.8490

Taxpayers that do not use the composite method of Notice 88–100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2013 97.2277 2014 and later 97.4648 years

Taxpayers that use the composite method of Notice 88–100 should use 97.2293 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

2003 95.6896 2004 95.0251

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

January 12, 2004 290 2004-2 I.R.B.

Discount

Factors

(%)

Other (Including Credit)

Discount

Factors

Private Passenger Auto Liability/Medical

Tax Year

Tax Year

(%)

2003 95.9179 2004 95.0251

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

Other Liability — Claims-Made

2013 93.0754 2014 95.3564 2015 and later 97.4648 years

Taxpayers that use the composite method of Notice 88–100 should use 93.8216 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Other Liability — Occurrence

Discount

Factors

2005 and later years

97.4648

Tax Year

(%)

2003 93.1921 2004 92.9705 2005 92.6585 2006 91.7286 2007 91.4818 2008 90.3084 2009 90.2405 2010 90.3023 2011 91.6647 2012 93.9196

Taxpayers that do not use the composite method of Notice 88–100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2013 96.1460 2014 and later 97.4648 years

Taxpayers that use the composite method of Notice 88–100 should use 96.3834 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Products Liability — Claims-Made

Discount

Factors

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2005 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Other Liability — Claims-Made

Discount

Factors

Tax Year

(%)

2003 89.2780 2004 78.5075 2005 62.4035 2006 86.1485 2007 81.9557 2008 81.0354 2009 88.2681 2010 92.3506 2011 88.6256 2012 90.8220

Taxpayers that do not use the composite method of Notice 88–100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2003 83.2582 2004 84.8797 2005 86.1298 2006 82.2849 2007 86.2602 2008 89.0916 2009 89.5094 2010 91.8747 2011 93.3837 2012 95.6270

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2013 and later years

97.4648

(%)

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Tax Year

2003 84.9166 2004 84.9800 2005 86.8647 2006 0.7583 2007 77.5029 2008 84.7211 2009 89.8996 2010 94.6740 2011 18.9104 2012 95.1273

2004-2 I.R.B. 291 January 12, 2004

Products Liability — Claims-Made

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

Reinsurance B (Nonproportional

Assumed Liability)

Discount

Factors

Tax Year

(%)

2013 and later years

97.4648

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Products Liability — Occurrence

Discount

Factors

Products Liability — Occurrence

Taxpayers that use the composite method of Notice 88–100 should use 91.4228 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Reinsurance A (Nonproportional Assumed Property)

Discount

Factors

Tax Year

(%)

Tax Year

(%)

2003 78.5645 2004 81.5171 2005 82.2229 2006 85.2182 2007 82.2629 2008 86.2042 2009 89.6780 2010 90.5149 2011 84.3756 2012 86.4415

Taxpayers that do not use the composite method of Notice 88–100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2013 88.5733 2014 90.7701 2015 93.0258 2016 95.3146 2017 and later 97.4648 years

2003 84.1377 2004 80.8145 2005 85.4580 2006 89.6948 2007 90.4119 2008 92.3911 2009 94.4085 2010 95.8429 2011 96.5134 2012 97.4648

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2003 83.2609 2004 84.0880 2005 88.0193 2006 85.0937 2007 88.7104 2008 80.8979 2009 84.4733 2010 92.2206 2011 93.7574 2012 95.9818

2013 and later years

97.4648

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

2003 83.6204 2004 81.0240 2005 84.6899 2006 82.2606 2007 74.4127 2008 78.4098 2009 77.6451 2010 80.1689 2011 74.4036 2012 82.8920

Taxpayers that do not use the composite method of Notice 88–100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2013 85.2223 2014 87.7390 2015 90.5105 2016 93.6633 2017 and later 97.4648 years

Taxpayers that use the composite method of Notice 88–100 should use 88.3351 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Reinsurance C (Nonproportional Assumed Financial Lines)

Discount

Factors

Tax Year

(%)

January 12, 2004 292 2004-2 I.R.B.

Reinsurance C (Nonproportional Assumed Financial Lines)

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

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

Taxpayers that do not use the composite method of Notice 88–100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

97.4648

2013 and later years

97.4648

2005 and later years

Workers’ Compensation

2011 87.1469 2012 89.2936

Taxpayers that do not use the composite method of Notice 88–100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2003 accident year.

2013 91.4992 2014 93.7481 2015 95.9726 2016 and later 97.4648 years

Taxpayers that use the composite method of Notice 88–100 should use 92.2314 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

DRAFTING INFORMATION

The principal author of this revenue procedure is Katherine A. Hossofsky of the Office of the Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure, contact Ms. Hossofsky at (202) 622–8435 (not a toll-free call).

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

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

Discount

Factors

Taxpayers that use the composite method of Notice 88–100 should use 97.4648 percent to discount salvage recoverable as of the end of the 2005 taxable year with respect to losses incurred in this line of business in 2003 and prior years.

Workers’ Compensation

Discount

Factors

Tax Year

(%)

Tax Year

(%)

2003 93.0692 2004 95.0251

2003 84.2536 2004 85.6999 2005 86.2016 2006 86.1127 2007 85.3503 2008 86.2797 2009 86.0424 2010 86.2260

2004-2 I.R.B. 293 January 12, 2004