Internal Revenue Bulletin: 2004-2 |
January 12, 2004 |
Table of Contents
This revenue procedure prescribes the loss payment patterns and discount factors for the 2003 accident year. These factors will be used for computing discounted unpaid losses under § 846 of the Internal Revenue Code. See Rev. Proc. 2003-17, 2003-6 I.R.B. 427, for background concerning the loss payment patterns and application of the discount factors.
This revenue procedure applies to any taxpayer that is required to discount its unpaid losses under § 846 for a line of business using discount factors published by the Secretary.
.01 The following tables present separately for each line of business the discount factors under § 846 for accident year 2003. 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 loss payments 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 unpaid losses on the affected lines of business in accordance with the discounting patterns that would have applied to those unpaid losses based on their classification on the 2000 annual statement. See Rev. Proc. 2003-17, 2003-6 I.R.B. 427, section 2, for additional background on discounting under section 846 and the use of the Secretary's tables.
.03 Section V of Notice 88-100, 1988-2 C.B. 439, sets forth a composite method for computing discounted unpaid losses for accident years that are not separately reported on the annual statement. The tables separately provide discount factors for taxpayers who elect to use the composite method of section V of Notice 88-100. See Rev. Proc. 2002-74, 2002-2 C.B. I.R.B. 980.
.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 unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at 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 unpaid losses that are incurred in this line of business and that are outstanding at the end of the 2003 tax year. | |||||
| Auto Physical Damage | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated CumulativeLosses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 89.6468 | 89.6468 | 10.3532 | 10.0680 | 97.2455 |
| 2004 | 99.6845 | 10.0377 | 0.3155 | 0.2998 | 95.0251 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2005 and later years | 0.1578 | 0.1578 | 0.1538 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 97.4648 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2005 tax year. | |||||
| Commercial Auto/Truck Liability/Medical | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated CumulativeLosses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 28.8244 | 28.8244 | 71.1756 | 64.4355 | 90.5304 |
| 2004 | 54.9871 | 26.1626 | 45.0129 | 40.9881 | 91.0586 |
| 2005 | 72.8039 | 17.8168 | 27.1961 | 24.8680 | 91.4393 |
| 2006 | 85.0572 | 12.2533 | 14.9428 | 13.6065 | 91.0568 |
| 2007 | 91.6276 | 6.5704 | 8.3724 | 7.5822 | 90.5618 |
| 2008 | 94.9514 | 3.3239 | 5.0486 | 4.5715 | 90.5501 |
| 2009 | 97.0453 | 2.0938 | 2.9547 | 2.6641 | 90.1639 |
| 2010 | 98.1574 | 1.1121 | 1.8426 | 1.6635 | 90.2768 |
| 2011 | 98.7370 | 0.5796 | 1.2630 | 1.1564 | 91.5620 |
| 2012 | 99.1070 | 0.3700 | 0.8930 | 0.8378 | 93.8128 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2013 | 0.3700 | 0.5230 | 0.5023 | 96.0372 | |
| 2014 and later years | 0.3700 | 0.1530 | 0.1492 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 96.3144 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2013 tax year. | |||||
| Composite | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 40.9985 | 40.9985 | 59.0015 | 52.3463 | 88.7203 |
| 2004 | 65.8439 | 24.8454 | 34.1561 | 29.6133 | 86.6999 |
| 2005 | 77.5023 | 11.6583 | 22.4977 | 19.2123 | 85.3966 |
| 2006 | 84.6221 | 7.1198 | 15.3779 | 12.9198 | 84.0151 |
| 2007 | 90.2455 | 5.6234 | 9.7545 | 7.8309 | 80.2805 |
| 2008 | 92.2780 | 2.0325 | 7.7220 | 6.1583 | 79.7500 |
| 2009 | 94.3974 | 2.1195 | 5.6026 | 4.3083 | 76.8980 |
| 2010 | 95.2526 | 0.8552 | 4.7474 | 3.6579 | 77.0504 |
| 2011 | 96.2792 | 1.0266 | 3.7208 | 2.7973 | 75.1817 |
| 2012 | 96.4323 | 0.1531 | 3.5677 | 2.7877 | 78.1369 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2013 | 0.1531 | 3.4145 | 2.7774 | 81.3423 | |
| 2014 | 0.1531 | 3.2614 | 2.7667 | 84.8321 | |
| 2015 | 0.1531 | 3.1083 | 2.7554 | 88.6476 | |
| 2016 | 0.1531 | 2.9551 | 2.7435 | 92.8384 | |
| 2017 and later years | 0.1531 | 2.8020 | 2.7310 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 87.9561 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2013 tax year. | |||||
| Fidelity/Surety | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 38.3328 | 38.3328 | 61.6672 | 57.1422 | 92.6623 |
| 2004 | 58.8485 | 20.5156 | 41.1515 | 39.1043 | 95.0251 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2005 and later years | 20.5758 | 20.5758 | 20.0541 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 97.4648 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2005 tax year. | |||||
| Financial Guaranty/Mortgage Guaranty | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 4.0723 | 4.0723 | 95.9277 | 89.2327 | 93.0207 |
| 2004 | 40.7639 | 36.6916 | 59.2361 | 56.2892 | 95.0251 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2005 and later years | 29.6180 | 29.6180 | 28.8672 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 97.4648 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2005 tax year. | |||||
| International (Composite) | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 40.9985 | 40.9985 | 59.0015 | 52.3463 | 88.7203 |
| 2004 | 65.8439 | 24.8454 | 34.1561 | 29.6133 | 86.6999 |
| 2005 | 77.5023 | 11.6583 | 22.4977 | 19.2123 | 85.3966 |
| 2006 | 84.6221 | 7.1198 | 15.3779 | 12.9198 | 84.0151 |
| 2007 | 90.2455 | 5.6234 | 9.7545 | 7.8309 | 80.2805 |
| 2008 | 92.2780 | 2.0325 | 7.7220 | 6.1583 | 79.7500 |
| 2009 | 94.3974 | 2.1195 | 5.6026 | 4.3083 | 76.8980 |
| 2010 | 95.2526 | 0.8552 | 4.7474 | 3.6579 | 77.0504 |
| 2011 | 96.2792 | 1.0266 | 3.7208 | 2.7973 | 75.1817 |
| 2012 | 96.4323 | 0.1531 | 3.5677 | 2.7877 | 78.1369 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2013 | 0.1531 | 3.4145 | 2.7774 | 81.3423 | |
| 2014 | 0.1531 | 3.2614 | 2.7667 | 84.8321 | |
| 2015 | 0.1531 | 3.1083 | 2.7554 | 88.6476 | |
| 2016 | 0.1531 | 2.9551 | 2.7435 | 92.8384 | |
| 2017 and later | 0.1531 | 2.8020 | 2.7310 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 87.9561 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2013 tax year. | |||||
| Medical Malpractice —Claims-Made | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 7.3447 | 7.3447 | 92.6553 | 80.8929 | 87.3052 |
| 2004 | 29.0191 | 21.6744 | 70.9809 | 62.9178 | 88.6404 |
| 2005 | 53.3108 | 24.2917 | 46.6892 | 41.3100 | 88.4786 |
| 2006 | 69.1517 | 15.8409 | 30.8483 | 27.2341 | 88.2838 |
| 2007 | 82.0981 | 12.9464 | 17.9019 | 15.3861 | 85.9469 |
| 2008 | 86.3995 | 4.3014 | 13.6005 | 11.7837 | 86.6415 |
| 2009 | 89.7111 | 3.3116 | 10.2889 | 9.0069 | 87.5404 |
| 2010 | 92.4688 | 2.7577 | 7.5312 | 6.6522 | 88.3283 |
| 2011 | 94.5163 | 2.0475 | 5.4837 | 4.9020 | 89.3920 |
| 2012 | 95.7635 | 1.2471 | 4.2365 | 3.8807 | 91.6012 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2013 | 1.2471 | 2.9894 | 2.8056 | 93.8535 | |
| 2014 | 1.2471 | 1.7422 | 1.6739 | 96.0782 | |
| 2015 and later years | 1.2471 | 0.4951 | 0.4825 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 94.5587 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2013 tax year. | |||||
| Medical Malpractice —Occurrence | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 0.8316 | 0.8316 | 99.1684 | 80.5880 | 81.2638 |
| 2004 | 7.4573 | 6.6257 | 92.5427 | 78.0369 | 84.3253 |
| 2005 | 23.5575 | 16.1002 | 76.4425 | 65.6305 | 85.8560 |
| 2006 | 41.0062 | 17.4487 | 58.9938 | 51.1867 | 86.7661 |
| 2007 | 55.5832 | 14.5770 | 44.4168 | 38.9280 | 87.6425 |
| 2008 | 68.9413 | 13.3581 | 31.0587 | 27.2740 | 87.8142 |
| 2009 | 78.2095 | 9.2682 | 21.7905 | 19.2020 | 88.1210 |
| 2010 | 82.8727 | 4.6632 | 17.1273 | 15.4294 | 90.0869 |
| 2011 | 86.3178 | 3.4451 | 13.6822 | 12.7078 | 92.8788 |
| 2012 | 91.0834 | 4.7656 | 8.9166 | 8.4880 | 95.1933 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2013 and later years | 4.7656 | 4.1510 | 4.0457 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 97.4648 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2013 tax year. | |||||
| Miscellaneous Casualty | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 79.7790 | 79.7790 | 20.2210 | 19.3443 | 95.6645 |
| 2004 | 94.9417 | 15.1627 | 5.0583 | 4.8067 | 95.0251 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2005 and later years | 2.5292 | 2.5292 | 2.4650 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 97.4648 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2005 tax year. | |||||
| Multiple Peril Lines (Homeowners/Farmowners, Commercial Multiple Peril, and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery)) | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 59.7445 | 59.7445 | 40.2555 | 36.6385 | 91.0149 |
| 2004 | 81.0347 | 21.2902 | 18.9653 | 16.7253 | 88.1893 |
| 2005 | 87.3325 | 6.2978 | 12.6675 | 11.1451 | 87.9825 |
| 2006 | 91.0659 | 3.7334 | 8.9341 | 7.9020 | 88.4479 |
| 2007 | 95.1781 | 4.1122 | 4.8219 | 4.0993 | 85.0140 |
| 2008 | 95.7605 | 0.5824 | 4.2395 | 3.7177 | 87.6937 |
| 2009 | 97.0539 | 1.2933 | 2.9461 | 2.5867 | 87.7996 |
| 2010 | 97.6441 | 0.5903 | 2.3559 | 2.1174 | 89.8774 |
| 2011 | 98.7037 | 1.0596 | 1.2963 | 1.1418 | 88.0851 |
| 2012 | 98.6217 | -0.0821 | 1.3783 | 1.2862 | 93.3151 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2013 | 0.5226 | 0.8558 | 0.8178 | 95.5652 | |
| 2014 and later years | 0.5226 | 0.3332 | 0.3247 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 96.3076 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2013 tax year. | |||||
| Other (Including Credit) | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 69.1729 | 69.1729 | 30.8271 | 29.4135 | 95.4143 |
| 2004 | 91.2168 | 22.0439 | 8.7832 | 8.3463 | 95.0251 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2005 and later years | 4.3916 | 4.3916 | 4.2803 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 97.4648 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2005 tax year. | |||||
| Other Liability — Claims-Made | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 14.9618 | 14.9618 | 85.0382 | 72.6837 | 85.4719 |
| 2004 | 36.2113 | 21.2494 | 63.7887 | 54.7120 | 85.7706 |
| 2005 | 54.2876 | 18.0763 | 45.7124 | 39.0488 | 85.4227 |
| 2006 | 64.2163 | 9.9288 | 35.7837 | 30.9196 | 86.4071 |
| 2007 | 73.2732 | 9.0569 | 26.7268 | 23.2566 | 87.0162 |
| 2008 | 80.5748 | 7.3016 | 19.4252 | 16.9907 | 87.4675 |
| 2009 | 87.6200 | 7.0452 | 12.3800 | 10.6577 | 86.0880 |
| 2010 | 89.9155 | 2.2955 | 10.0845 | 8.8641 | 87.8987 |
| 2011 | 93.3946 | 3.4791 | 6.6054 | 5.7616 | 87.2268 |
| 2012 | 94.6170 | 1.2223 | 5.3830 | 4.8111 | 89.3763 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2013 | 1.2223 | 4.1607 | 3.8106 | 91.5850 | |
| 2014 | 1.2223 | 2.9383 | 2.7572 | 93.8366 | |
| 2015 | 1.2223 | 1.7160 | 1.6484 | 96.0612 | |
| 2016 and later years | 1.2223 | 0.4936 | 0.4811 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 92.3191 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2013 tax year. | |||||
| Other Liability — Occurrence | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated Cumulative Losses Paid (%) | Estimated Losses Paid Each Year (%) | Unpaid Losses at Year End (%) | DiscountedUnpaid Losses at Year End (%) | Discount Factors (%) |
| 2003 | 19.1133 | 19.1133 | 80.8867 | 66.7947 | 82.5780 |
| 2004 | 36.4434 | 17.3301 | 63.5566 | 52.5339 | 82.6568 |
| 2005 | 52.1648 | 15.7215 | 47.8352 | 39.1720 | 81.8895 |
| 2006 | 63.2383 | 11.0734 | 36.7617 | 29.8749 | 81.2663 |
| 2007 | 72.0780 | 8.8397 | 27.9220 | 22.3797 | 80.1505 |
| 2008 | 75.9021 | 3.8241 | 24.0979 | 19.6355 | 81.4821 |
| 2009 | 82.9305 | 7.0284 | 17.0695 | 13.4590 | 78.8484 |
| 2010 | 85.1441 | 2.2136 | 14.8559 | 11.8972 | 80.0837 |
| 2011 | 89.3006 | 4.1565 | 10.6994 | 8.2595 | 77.1961 |
| 2012 | 89.9898 | 0.6892 | 10.0102 | 7.9877 | 79.7952 |
| Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses that are incurred in this line of business in the 2003 accident year and that are outstanding at the end of the tax year shown. | |||||
| 2013 | 0.6892 | 9.3210 | 7.7015 | 82.6250 | |
| 2014 | 0.6892 | 8.6318 | 7.4002 | 85.7320 | |
| 2015 | 0.6892 | 7.9426 | 7.0830 | 89.1783 | |
| 2016 | 0.6892 | 7.2533 | 6.7492 | 93.0492 | |
| 2017 and later years | 0.6892 | 6.5641 | 6.3977 | 97.4648 | |
| Taxpayers that use the composite method of Notice 88-100 should use 87.9049 percent to discount unpaid losses that are incurred in this line of business in 2003 and prior years and that are outstanding at the end of the 2013 tax year. | |||||
| Private Passenger Auto Liability/Medical | |||||
|---|---|---|---|---|---|
| Tax Year | Estimated CumulativeLosses Paid(%) | ||||