SEC. 4. APPLICATION

.01 The following tables present separately for each line of business the discount factors under § 832 for the 2005 accident year. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2005, which is 4.44 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. 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.

Tables of Factors to be Used to Discount Salvage Recoverable With Respect to Losses Incurred in Accident Year 2005

(Interest rate: 4.44 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 97.8513 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2005 accident year as of the end of the 2005 and later taxable years.

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount all salvage recoverable in this line of business as of the end of the 2005 taxable year.

Auto Physical Damage

Tax Year

Discount Factors (%)

2005 96.8175 2006 95.7713

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 2005 accident year.

2007 and later years

97.8513

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2007 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Commercial Auto/Truck Liability/Medical

Tax Year

Discount Factors (%)

2005 91.3239 2006 91.0477 2007 90.8320 2008 91.3071 2009 91.8090 2010 91.2746 2011 92.4705 2012 93.5064 2013 93.7878 2014 95.8004

2005–49 I.R.B. 1090 December 5, 2005

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 2005 accident year.

Composite

Taxpayers that use the composite method of Notice 88–100 should use 92.9728 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 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 2005 accident year.

2007 and later years

97.8513

2015 and later years

97.8513

Discount Factors (%)

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Composite

Tax Year

2005 93.6793 2006 95.7713

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 2005 accident year.

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2007 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

International (Composite)

Discount Factors (%)

Tax Year

Discount Factors (%)

Tax Year

2005 91.2231 2006 89.9591 2007 89.4423 2008 88.8551 2009 87.7165 2010 87.7929 2011 87.5509 2012 87.5159 2013 87.6545 2014 89.4906

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 2005 accident year.

2015 91.3750 2016 93.3052 2017 95.2703 2018 97.2162 2019 and later 97.8513 years

2007 and later years

97.8513

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2007 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Financial Guaranty/Mortgage Guaranty

2005 91.2231 2006 89.9591 2007 89.4423 2008 88.8551 2009 87.7165 2010 87.7929 2011 87.5509 2012 87.5159 2013 87.6545 2014 89.4906

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 2005 accident year.

2015 91.3750 2016 93.3052 2017 95.2703 2018 97.2162 2019 and later 97.8513 years

Tax Year

Discount Factors (%)

2005 95.0705 2006 95.7713

December 5, 2005 1091 2005–49 I.R.B.

International (Composite)

Taxpayers that use the composite method of Notice 88–100 should use 92.9728 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Medical Malpractice — Claims-Made

Medical Malpractice — Occurrence

Miscellaneous Casualty

97.8513

2007 and later years

Tax Year

Discount Factors (%)

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2007 taxable year with respect to losses incurred in this line of business in 2005 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 (%)

2005 86.4755 2006 81.7167 2007 86.5261 2008 84.1162 2009 85.1368 2010 79.5241 2011 89.5664 2012 92.5368 2013 96.0623 2014 97.8513

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 2005 accident year.

2005 82.3660 2006 83.5715 2007 87.2656 2008 88.7913 2009 76.0729 2010 86.2799 2011 91.5010 2012 94.5994 2013 96.3703 2014 97.8513

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 2005 accident year.

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Miscellaneous Casualty

Tax Year

Discount Factors (%)

2015 and later years

97.8513

2015 and later years

97.8513

Discount Factors (%)

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Tax Year

2005 96.3339 2006 95.7713

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 2005 accident year.

2005 92.1974 2006 90.4717 2007 91.2273 2008 90.9380 2009 90.5278 2010 91.7899 2011 91.8465 2012 92.0455 2013 93.6189 2014 95.6204

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 2005 accident year.

2015 97.6492 2016 and later 97.8513 years

Taxpayers that use the composite method of Notice 88–100 should use 97.6503 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

2005–49 I.R.B. 1092 December 5, 2005

Other (Including Credit)

Private Passenger Auto Liability/Medical

Tax Year

Discount Factors (%)

Tax Year

Discount Factors (%)

2005 96.5291 2006 95.7713

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 2005 accident year.

Other Liability — Claims-Made

2015 94.1004 2016 96.0538 2017 and later 97.8513 years

Taxpayers that use the composite method of Notice 88–100 should use 95.1292 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Other Liability — Occurrence

2007 and later years

97.8513

Tax Year

Discount Factors (%)

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2007 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Other Liability — Claims-Made

2005 94.1806 2006 93.9873 2007 93.7150 2008 92.9128 2009 92.6982 2010 91.6917 2011 91.6408 2012 91.7062 2013 92.8870 2014 94.8239

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 2005 accident year.

2015 96.7269 2016 and later 97.8513 years

Taxpayers that use the composite method of Notice 88–100 should use 96.9284 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Tax Year

Discount Factors (%)

2005 90.7061 2006 81.3335 2007 67.4471 2008 88.0410 2009 84.4392 2010 83.6931 2011 89.9416 2012 93.4492 2013 90.2612 2014 92.1610

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 2005 accident year.

2005 85.5304 2006 86.9478 2007 88.0380 2008 84.7457 2009 88.1991 2010 90.6498 2011 91.0248 2012 93.0642 2013 94.3646 2014 96.2845

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 2005 accident year.

2015 and later years

97.8513

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

December 5, 2005 1093 2005–49 I.R.B.

Products Liability — Claims-Made

Reinsurance A (Nonproportional Assumed Property)

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Reinsurance B (Nonproportional Assumed Liability)

Tax Year

Discount Factors (%)

2005 86.9346 2006 86.9867 2007 88.6095 2008 14.1032 2009 80.6321 2010 86.8941 2011 91.3609 2012 95.4486 2013 30.7119 2014 95.8584

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 2005 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 2005 accident year.

2015 90.2160 2016 92.1163 2017 94.0579 2018 96.0181 2019 and later 97.8513 years

Taxpayers that use the composite method of Notice 88–100 should use 93.2359 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Reinsurance A (Nonproportional Assumed Property)

Tax Year

Discount Factors (%)

2015 and later years

97.8513

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Products Liability — Occurrence

2005 86.3118 2006 83.4802 2007 87.5160 2008 91.1738 2009 91.8031 2010 93.5092 2011 95.2399 2012 96.4668 2013 97.0401 2014 97.8513

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 2005 accident year.

Tax Year

Discount Factors (%)

2005 85.7554 2006 83.4923 2007 86.6760 2008 84.5425 2009 77.7160 2010 81.2321 2011 80.6015 2012 82.8262 2013 77.8936 2014 85.2736

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 2005 accident year.

2015 87.3145 2016 89.5053 2017 91.9023 2018 94.6103 2019 and later 97.8513 years

Taxpayers that use the composite method of Notice 88–100 should use 89.5188 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

Tax Year

Discount Factors (%)

2005 81.4063 2006 83.9954 2007 84.6302 2008 87.2364 2009 84.7065 2010 88.1295 2011 91.1267 2012 91.8405 2013 86.5573 2014 88.3625

2015 and later years

97.8513

2005–49 I.R.B. 1094 December 5, 2005

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 (%)

2005 85.5377 2006 86.2730 2007 89.6741 2008 87.1586 2009 90.2843 2010 83.5843 2011 86.7077 2012 93.3620 2013 94.6849 2014 96.5870

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 2005 accident year.

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2007 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

2005 94.0942 2006 95.7713

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 2005 accident year.

2007 and later years

97.8513

2005 86.3894 2006 87.6481 2007 88.0853 2008 88.0120 2009 87.3618 2010 88.1750 2011 87.9837 2012 88.1613 2013 88.9764 2014 90.8396

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 2005 accident year.

2015 92.7444 2016 94.6769 2017 96.5791 2018 and later 97.8513 years

Taxpayers that use the composite method of Notice 88–100 should use 94.0730 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 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).

2015 and later years

97.8513

Taxpayers that use the composite method of Notice 88–100 should use 97.8513 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2005 and prior years.

December 5, 2005 1095 2005–49 I.R.B.