Acceptance Insurance Companies Inc. underwrites and sells specialty property and casualty insurance. The company is the third largest writer of crop insurance products in the United States. In its 1998 10-K report to the SEC, it discloses the following information on the loss reserves created for claims originating in 1990:

Cumulative net liability paid through: 12/31/90 One year later 40.6 Two years later 70.8 Three years later 88.5 Four years later 101.2 Five years later 107.5 Six years later 109.7 Seven years later 111.4 Eight years later 111.8 Net reserves reestimated as of:
One year later 100.3 Two years later 102.3 Three years later 107.4 Four years later 110.7 Five years later 112.7 Six years later 112.0 Seven years later 112.5 Eight years later 113.4 Net cumulative redundancy (deficiency) –13.4 What was the initial estimate for loss reserves originating in 1990? How has the firm updated its estimate of this obligation over time? What liability remains for 1990 claims? As a financial analyst, what questions would you have for the CFO on its 1990 liability?
Funding Status (in millions) 1998 1997 Fair value of plan assets $503 $448 Benefit obligation (543) (475)
Plan assets in excess of (less than) benefit obligation (40) (27)
Unrecognized net experience (gain) loss (255) (268)
Unrecognized prior service cost (benefit) related to plan changes (144) (154)
Prepaid (accrued) costs $(439) $(449)
Cumulative net liability paid through: 12/31/90 One year later 40.6 Two years later 70.8 Three years later 88.5 Four years later 101.2 Five years later 107.5 Six years later 109.7 Seven years later 111.4 Eight years later 111.8 Net reserves reestimated as of:
One year later 100.3 Two years later 102.3 Three years later 107.4 Four years later 110.7 Five years later 112.7 Six years later 112.0 Seven years later 112.5 Eight years later 113.4 Net cumulative redundancy (deficiency) –13.4 184 Liability and Equity Analysis 5-19 Part 2 Business Analysis and Valuation Tools.

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