losses incurred
(A)The term “losses incurred” means losses incurred during the taxable year on insurance contracts computed as follows: (i)To losses paid during the taxable year, deduct salvage and reinsurance recovered during the taxable year. (ii)To the result so obtained, add all unpaid losses on life insurance contracts plus all discounted unpaid losses (as defined in section 846) outstanding at the end of the taxable year and deduct all unpaid losses on life insurance contracts plus all discounted unpaid losses outstanding at the end of the preceding taxable year. (iii)To the results so obtained, add estimated salvage and reinsurance recoverable as of the end of the preceding taxable year and deduct estimated salvage and reinsurance recoverable as of the end of the taxable year. (B)The amount which would (but for this subparagraph) be taken into account under subparagraph (A) shall be reduced by an amount equal to the applicable percentage of the sum of— (i)tax-exempt interest received or accrued during such taxable year, (ii)the aggregate amount of deductions provided byfor— (I)dividends (other than 100 percent dividends) received during the taxable year, and (II)100 percent dividends received during the taxable year to the extent attributable (directly or indirectly) to prorated amounts, and (iii)the increase for the taxable year in policy cash values (within the meaning of section 805(a)(4)(F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies. (C) (i)Except as provided in clause (ii), subparagraph (B) shall not apply to any dividend or interest received or accrued on any stock or obligation acquired before. (ii)For purposes of clause (i), the portion of any 100 percent dividend which is attributable to prorated amounts shall be treated as received with respect to stock acquired on the later of— (I)the date the payor acquired the stock or obligation to which the prorated amounts are attributable, or (II)the 1st day on which the payor and payee were members of the same affiliated group (as defined in). (D)For purposes of this paragraph—