SECTION 4. APPLICATION

.01 The following tables present separately for each line of business the discount factors under § 832 for the 2004 accident year. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2004, which is 4.82 percent, and by assuming all estimated salvage is recovered in the middle of each calendar year. See

Rev. Proc. 2003–18, 2003–1 C.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. 419, 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.

Tables of Factors to be Used to Discount Salvage Recoverable With Respect to Losses Incurred in Accident Year 2004

(Interest rate: 4.82 percent)

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 97.6738 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2004 accident year as of the end of the 2004 and later taxable years.

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount all salvage recoverable in this line of business as of the end of the 2004 taxable year.

Auto Physical Damage

Tax Year

Discount Factors (%)

2004 96.5590 2005 95.4281

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 2004 accident year.

2006 and later years

97.6738

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2006 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Commercial Auto/Truck Liability/Medical

Tax Year

Discount Factors (%)

2004 90.6645 2005 90.3669 2006 90.1327 2007 90.6408 2008 91.1785 2009 90.5988 2010 91.8814 2011 92.9935 2012 93.2915 2013 95.4594

2004–49 I.R.B. 918 December 6, 2004

Commercial Auto/Truck Liability/Medical

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 2004 accident year.

Composite

Taxpayers that use the composite method of Notice 88–100 should use 91.9391 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Fidelity/Surety

Financial Guaranty/Mortgage Guaranty

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 2004 accident year.

2006 and later years

97.6738

2014 and later years

97.6738

Discount Factors (%)

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Composite

Tax Year

2004 93.1746 2005 95.4281

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 2004 accident year.

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2006 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

International (Composite)

Discount Factors (%)

Tax Year

Discount Factors (%)

Tax Year

2004 90.5683 2005 89.2161 2006 88.6645 2007 88.0367 2008 86.8142 2009 86.8926 2010 86.6271 2011 86.5809 2012 86.7177 2013 88.6805

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 2004 accident year.

2014 90.6998 2015 92.7729 2016 94.8883 2017 96.9880 2018 and later 97.6738 years

2006 and later years

97.6738

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2006 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Financial Guaranty/Mortgage Guaranty

2004 90.5683 2005 89.2161 2006 88.6645 2007 88.0367 2008 86.8142 2009 86.8926 2010 86.6271 2011 86.5809 2012 86.7177 2013 88.6805

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 2004 accident year.

2014 90.6998 2015 92.7729 2016 94.8883 2017 96.9880 2018 and later 97.6738 years

Tax Year

Discount Factors (%)

2004 94.6749 2005 95.4281

December 6, 2004 919 2004–49 I.R.B.

International (Composite)

Taxpayers that use the composite method of Notice 88–100 should use 91.9391 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Medical Malpractice — Claims-Made

Medical Malpractice — Occurrence

Miscellaneous Casualty

97.6738

2006 and later years

Tax Year

Discount Factors (%)

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2006 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

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

Tax Year

Discount Factors (%)

2004 85.5093 2005 80.4030 2006 85.5474 2007 82.9525 2008 84.0312 2009 77.9665 2010 88.7516 2011 91.9419 2012 95.7422 2013 97.6738

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 2004 accident year.

2004 81.0996 2005 82.3752 2006 86.3279 2007 87.9623 2008 74.2782 2009 85.2215 2010 90.8308 2011 94.1660 2012 96.0748 2013 97.6738

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 2004 accident year.

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Miscellaneous Casualty

Tax Year

Discount Factors (%)

2014 and later years

97.6738

2014 and later years

97.6738

Discount Factors (%)

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Tax Year

2004 96.0374 2005 95.4281

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 2004 accident year.

2004 91.6039 2005 89.7492 2006 90.5601 2007 90.2475 2008 89.8022 2009 91.1562 2010 91.2128 2011 91.4205 2012 93.1099 2013 95.2655

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 2004 accident year.

2014 97.4556 2015 and later 97.6738 years

Taxpayers that use the composite method of Notice 88–100 should use 97.4560 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

2004–49 I.R.B. 920 December 6, 2004

Other (Including Credit)

Private Passenger Auto Liability/Medical

Tax Year

Discount Factors (%)

Tax Year

Discount Factors (%)

2004 96.2479 2005 95.4281

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 2004 accident year.

Other Liability — Claims-Made

2014 93.6283 2015 95.7330 2016 and later 97.6738 years

Taxpayers that use the composite method of Notice 88–100 should use 94.7277 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Other Liability — Occurrence

2006 and later years

97.6738

Tax Year

Discount Factors (%)

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2006 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Other Liability — Claims-Made

2004 93.7245 2005 93.5180 2006 93.2272 2007 92.3657 2008 92.1360 2009 91.0524 2010 90.9939 2011 91.0582 2012 92.3235 2013 94.4076

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 2004 accident year.

2014 96.4598 2015 and later 97.6738 years

Taxpayers that use the composite method of Notice 88–100 should use 96.6736 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Tax Year

Discount Factors (%)

2004 90.0420 2005 80.0175 2006 65.1028 2007 87.1628 2008 83.2875 2009 82.4626 2010 89.1681 2011 92.9417 2012 89.5057 2013 91.5434

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 2004 accident year.

2004 84.4755 2005 85.9883 2006 87.1531 2007 83.6055 2008 87.3020 2009 89.9297 2010 90.3252 2011 92.5157 2012 93.9128 2013 95.9821

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 2004 accident year.

2014 and later years

97.6738

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

December 6, 2004 921 2004–49 I.R.B.

Products Liability — Claims-Made

Reinsurance A (Nonproportional Assumed Property)

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Reinsurance B (Nonproportional Assumed Liability)

Tax Year

Discount Factors (%)

2004 85.9966 2005 86.0537 2006 87.7977 2007 7.9001 2008 79.1822 2009 85.8894 2010 90.6864 2011 95.0912 2012 25.2668 2013 95.5221

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 2004 accident year.

Products Liability — Occurrence

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 2004 accident year.

2014 89.4572 2015 91.4954 2016 93.5825 2017 95.6945 2018 and later 97.6738 years

Taxpayers that use the composite method of Notice 88–100 should use 92.6255 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Reinsurance A (Nonproportional Assumed Property)

Tax Year

Discount Factors (%)

2014 and later years

97.6738

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Products Liability — Occurrence

2004 85.3031 2005 82.2450 2006 86.5640 2007 90.4906 2008 91.1611 2009 92.9938 2010 94.8571 2011 96.1798 2012 96.7980 2013 97.6738

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 2004 accident year.

Tax Year

Discount Factors (%)

2004 84.7610 2005 82.3424 2006 85.7505 2007 83.4780 2008 76.1754 2009 79.9172 2010 79.2255 2011 81.5908 2012 76.2736 2013 84.1702

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 2004 accident year.

2014 86.3467 2015 88.6896 2016 91.2606 2017 94.1745 2018 and later 97.6738 years

Taxpayers that use the composite method of Notice 88–100 should use 87.7819 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

Tax Year

Discount Factors (%)

2004 80.0842 2005 82.8436 2006 83.5123 2007 86.2999 2008 83.5735 2009 87.2379 2010 90.4562 2011 91.2267 2012 85.5469 2013 87.4740

2014 and later years

97.6738

2004–49 I.R.B. 922 December 6, 2004

Reinsurance C (Nonproportional Assumed Financial Lines)

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

Workers’ Compensation

Discount Factors (%)

Tax Year

Tax Year

Discount Factors (%)

Tax Year

Discount Factors (%)

2004 84.4808 2005 85.2596 2006 88.9070 2007 86.2016 2008 89.5553 2009 82.3408 2010 85.6757 2011 92.8358 2012 94.2578 2013 96.3087

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 2004 accident year.

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2006 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

2004 93.6220 2005 95.4281

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 2004 accident year.

2006 and later years

97.6738

2004 85.3979 2005 86.7440 2006 87.2113 2007 87.1308 2008 86.4289 2009 87.2964 2010 87.0843 2011 87.2655 2012 88.1306 2013 90.1258

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 2004 accident year.

2014 92.1703 2015 94.2492 2016 96.3002 2017 and later 97.6738 years

Taxpayers that use the composite method of Notice 88–100 should use 93.3819 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 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).

2014 and later years

97.6738

Taxpayers that use the composite method of Notice 88–100 should use 97.6738 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2004 and prior years.

December 6, 2004 923 2004–49 I.R.B.