Corporate Owned Life Insurance (COLI)
Complex Valuation and Risk Analysis
Xcel Energy v. United States of America was slated to become the fifth Corporate Owned Life Insurance (COLI) case to reach trial. Among the hotly contested issues was the pre-tax profitablity and valuation of life insurance policies extending out over 40 years. Finance experts for the taxpayer argued that the policies contributed hundreds of millions in value even absent the contested tax deductions on policy loan interest. Testifying for the United States, CFP’s Dr. Fenn countered that the policies had negative value absent the disputed tax deductions, and that the taxpayer’s experts had employed grossly flawed discount rate and valuation assumptions. CFP also performed complex simulations for Nobel Prize winner Joseph Stiglitz, who testified that there was no aggregate transfer of risk to the life insurance company. The parties settled following the completion of expert and fact discovery.